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

Oleg Gurshev and Sarhad Hamza ()
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Sarhad Hamza: University of Warsaw, University of Raparin, Postal: University of Warsaw, Faculty of Economic Sciences, Department of Macroeconomics and, International Trade Theory, ul. Długa 44/50, Level 1, Room 04, 00-241 Warszawa, Poland.

Journal of Economic Integration, 2021, vol. 36, issue 2, 203-226

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.

Keywords: Foreign Direct Investment; Multinational Enterprises; United Kingdom; BITs; Poisson Pseudo-Maximum Likelihood (search for similar items in EconPapers)
JEL-codes: F23 P33 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ris:integr:0825

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