Do BITs Really Work?: An Evaluation of Bilateral Investment Treaties and their Grand Bargain

Salacuse, Jeswald W.; Sullivan, Nicholas

doi:10.1093/acprof:oso/9780195388534.003.0005

Cited by 127 publications

(123 citation statements)

References 33 publications

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“…Salacuse and Sullivan (2005) refer to these expected benefits as the "grand bargain": Protection is promised to the investments made by the MNCs of the developed state in return for future investments in the LDC.…”

Section: Do Bits Attract Fdi To Ldcs?mentioning

confidence: 99%

“…Developed states sign BITs to protect investments in LDCs (Tobin & Rose-Ackerman, 2005;Salacuse & Sullivan, 2005). Structural changes in the international economy emanating from technological advances in communication and transportation, and economic liberalization in trade and finance, have prompted the MNCs of developed states to invest abroad in order to seek additional markets and resources, and achieve greater efficiency (Stopford & Strange, 1991).…”

Section: Developed States and The Grand Bargainmentioning

confidence: 99%

“…LDCs sign BITs to encourage foreign investment (Tobin & Rose-Ackerman, 2005;Neumayer & Spess, 2005;Salacuse & Sullivan, 2005;Elkins, Guzman, & Simmons, 2006). Investment from an MNC can be beneficial for an LDC's economic development.…”

Section: Developing States and The Grand Bargainmentioning

confidence: 99%

“…For instance, investments can provide capital, technology transfers, and increase the job skills of the local population. Indeed, Salacuse and Sullivan (2005) note, "developing countries sign BITs to promote foreign investment, thereby increasing the amount of capital and associated technology that flows to their territories" (p. 76). Neumayer and Spess (2005) go so far as to claim, "undoubtedly, BITs are so popular because policy makers in developing countries believe that signing them will increase FDI" (p. 1567).…”

Section: Developing States and The Grand Bargainmentioning

confidence: 99%

“…Developing states sign BITs to attract multinationals to their countries (Guzman, 1998). The multinationals from developed states have benefited from the legal protections provided by BITs (Salacuse & Sullivan 2005). However, the benefits received by developing states are still unclear.…”

Section: Introductionmentioning

confidence: 99%

See 4 more Smart Citations

Do Bilateral Investment Treaties Attract Foreign Direct Investment to Developing Countries? A Review of the Empirical Literature

Jacobs¹

2017

IRD

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States have signed over 3,000 bilateral investment treaties (BITs). BITs stipulate the terms and conditions by which foreign investors from one country must be treated in another. A series of empirical studies have asked the question, do BITs increase foreign direct investment to less developed countries? This paper reviews the literature. While the studies come to conflicting results, most studies suffer from the same methodological misstep-they fail to account for variation in treaties. The paper concludes that the most productive path forward for future research efforts includes using dyadic research designs that account for variation in BITs.

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Section: Do Bits Attract Fdi To Ldcs?mentioning

confidence: 99%

Section: Developed States and The Grand Bargainmentioning

confidence: 99%

Section: Developing States and The Grand Bargainmentioning

confidence: 99%

Section: Developing States and The Grand Bargainmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 3 more Smart Citations

Do Bilateral Investment Treaties Attract Foreign Direct Investment to Developing Countries? A Review of the Empirical Literature

Jacobs¹

2017

IRD

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Bilateral investment treaties and sovereign default risk: Evidence for emerging markets

Eichler,

Nauerth

2024

Int. J Fin Econ

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This paper analyses the impact of bilateral investment treaties (BITs) on sovereign default risk using monthly data for 29 emerging markets from 1996 to 2016. Under a BIT, foreign investors can use an international arbitration scheme to enforce compensation claims against the host country's government. We focus on the so far unexplored legal risk associated with BITs since a higher likelihood of government expropriations implicitly increases public debt. We do not find a significant unconditional effect of BITs on sovereign default risk (measured by the month‐over‐month percentage change in a country's Emerging Market Bond Index). Considering the heterogeneity of BITs and political risk, we find robust and strong negative effects of BITs on sovereign bond returns. In countries with high political risk of expropriation (measured by low executive constraints), we find that the implementation of BITs with strong investor protection is associated with a significantly negative impact on sovereign bond returns (−0.45 percentage points), which compares to roughly 11.7% of bond returns' monthly standard deviation.

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Firm non‐market capabilities and the effect of supranational institutional safeguards on the location choice of international investments

Albino-Pimentel

Dussauge

Shaver

2018

Strategic Management Journal

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Research Summary: We investigate the extent to which firms rely on supranational institutional safeguards versus their non‐market capabilities to offset the risks of investing abroad. We argue that firms with non‐market capabilities are insensitive to supranational institutional safeguards when choosing the location of their international investments. We show that supranational agreements between an investor's home and host nation, operationalized as bilateral investment treaties (BITs), increase the likelihood of investment, but there is substantial firm heterogeneity with respect to this relationship. Firms with various forms of non‐market capabilities are not sensitive to BITs, whereas other firms are more likely to invest under BITs. We advance the understanding of how firm non‐market capabilities can substitute for supranational institutional arrangements in addressing risks associated with host country institutional weaknesses. Managerial Summary: The risk of expropriation is one of the main concerns companies have when investing abroad. Because of this, many countries implement bilateral investment treaties (BITs) to safeguard foreign investments, alleviate foreign investor concerns, and promote investments. We show that only those companies without political competence or political connections favor countries with BITs when choosing where to invest. Companies with political competence or political connections, on the other hand, ignore BITs and apparently rely on their ability to influence governments whenever their foreign investments face expropriation threats. As a result, politically connected or competent companies can enter markets most of their competitors lacking these capabilities shy away from. They can, therefore, do business in environments in which they face less competition.

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Do BITs Really Work?: An Evaluation of Bilateral Investment Treaties and their Grand Bargain

Cited by 127 publications

References 33 publications

Do Bilateral Investment Treaties Attract Foreign Direct Investment to Developing Countries? A Review of the Empirical Literature

Do Bilateral Investment Treaties Attract Foreign Direct Investment to Developing Countries? A Review of the Empirical Literature

Bilateral investment treaties and sovereign default risk: Evidence for emerging markets

Firm non‐market capabilities and the effect of supranational institutional safeguards on the location choice of international investments

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