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BITs, Colony Ties, and Offshore Centers: The Case of United Kingdom Outward FDI

Author

Listed:
  • Gurshev, Oleg

    (University of Warsaw)

  • Hamza, Sarhad

    (University of Warsaw, University of Raparin)

Abstract

This paper empirically investigates the impact of bilateral investment treaties (BITs) on foreign direct investment (FDI) using data on British multinational firms’ outward FDI in a panel of 140 countries across 2009-2017. We apply the Knowledge-Capital model to demonstrate that BITs act as a market access mechanism to parent country multinational enterprises. Our core result confirms the negative impact of BIT membership on horizontal FDI in the host economy. This result is robust to changes in partner sample composition, hypothetical stock levels, and inclusion of trade policies. Our findings imply that factor cost advantages are unable to compensate for the adverse effect of BIT entry, which raises concerns regarding the potency of BIT-centered development policies.

Suggested Citation

  • Gurshev, Oleg & Hamza, Sarhad, 2021. "BITs, Colony Ties, and Offshore Centers: The Case of United Kingdom Outward FDI," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 36(2), pages 203-226.
    • Handle: RePEc:ris:integr:0825
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    Citations

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    Cited by:

    1. Andrzej Cieślik & Oleg Gurshev & Sarhad Hamza, 2022. "Between the Eurozone crisis and the Brexit: the decade of British outward FDI into Europe," Empirical Economics, Springer, vol. 63(3), pages 1159-1192, September.

    More about this item

    Keywords

    Foreign Direct Investment; Multinational Enterprises; United Kingdom; BITs; Poisson Pseudo-Maximum Likelihood;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • P33 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - International Trade, Finance, Investment, Relations, and Aid

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