Competing for Capital: The Diffusion of Bilateral Investment Treaties, 1960–2000

By Zachary Elkins, A. Guzman, Beth A. Simmons. International Organization, 2004

809 citations recorded by the source corpus.

Over the past forty-five years, bilateral investment treaties (BITs) have become the most important international legal mechanism for the encouragement and governance of foreign direct investment. The proliferation of BITs during the past two decades in particular has been phenomenal. These intergovernmental treaties typically grant extensive rights to foreign investors, including protection of contractual rights and the right to international arbitration in the event of an investment dispute. How can we explain the widespread adoption of BITs? We argue that the spread of BITs is driven by international competition among potential host countries—typically developing countries—for foreign direct investment. We propose a set of hypotheses that derive from such an explanation and develop a set of empirical tests that rely on network measures of economic competition as well as more indirect evidence of competitive pressures on the host to sign BITs. The evidence suggests that potential hosts are more likely to sign BITs when their competitors have done so. We find some evidence that coercion and learning play a role, but less support for cultural explanations based on emulation. Our main finding is that the diffusion of BITs is associated with competitive economic pressures among developing countries to capture a share of foreign investment. We are agnostic at this point about the benefits of this competition for development.For useful comments on earlier drafts of this article, we thank Bill Bernhard, Bear Braumoeller, Frank Dobbin, Robert Franzese, Jeffry Frieden, Geoffrey Garrett, Tom Ginsburg, Jude Hays, Lisa Martin, Bob Pahre, Mark Ramsayer, Steven Ratner, Susan Rose-Ackerman, and John Sides. For research assistance, we thank Elizabeth Burden, Raechel Groom, and Alexander Noonan.

Subfields: Economics and Econometrics, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/a8920eadd5ad89dd823efc133a29337f03df9123

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Citations in the corpus

Determinants of FDI in developed and developing countries: a quantitative analysis using GMM (2018, methodology): “Crisis dummy Real Measure of crisis effect on FDI inflows Data have been segregated by introducing crisis dummy Ersoy and Erol (2016), Desbordes and Wei (2017) Table II.”
Problems (and solutions) in the measurement of policy diffusion mechanisms (2015, background): “Tax competition is the prototypical example (Basinger and Hallerberg 2004; Cao 2010; Genschel and Schwarz 2011), although competitive dynamics can also be found in many other areas of economic policy, such as capital account and exchange rate policies (Simmons and Elkins 2004), bilateral investment ”
Empirical Modeling of Policy Diffusion in Federal States: The Dyadic Approach (2008, background): “Similarly, the relevant units of observations are dyads also when researchers study international trade flows and who trades with whom (Morrow, Siverson, and Tabares 1998), or why countries sign bilateral investment treaties (Elkins, Guzman, and Simmons 2006).”
Dyadic military conflict, security alliances, and bilateral FDI flows (2010, background): “10For the effects of FDI on conflict, GDP per capita, BIT, and trade, see, for example, Li (2008), Gartzke, Li, and Boehmer (2001), Henisz (2008), Elkins et al. (2006), and Amiti and Wakelin (2003), respectively.”
The Worldwide Diffusion of Market-Oriented Infrastructure Reform, 1977–1999 (2005, background): “Countries that compete with each other in the same product markets are likely to adopt similar patterns of behavior in order not to lose ground to others (Elkins et al. 2004; Guler et al. 2002; Polillo and Guillén 2005).”
FDI promotion through bilateral investment treaties: more than a bit? (2010, background): “This reasoning is based on the presumption that bilateral contractual arrangements, in contrast to unilateral measures, provide a credible commitment through which time-inconsistency problems can be overcome (e.g., Vandevelde 1998; Hallward-Driemeier 2003; Elkins et al. 2006).”
Brazil's liberal neo-developmentalism: New paradigm or edited orthodoxy? (2013, background): “3 Select examples from this ‘thin’ diffusion literature include Mukand and Rodrik (2002), Elkins and Simmons (2004), Elkins et al. (2006), Levi-Faur and Jordana (2005), Weyland (2006), Radaelli (2005), Swank (2008), Mesenguer and Gilardi (2009), Gilardi et al. (2010), Simmons et al. (2006, 2007,…”
Learning From Others (2009, methodology): “For instance, countries can be influenced by other countries with which they are in competition for capital (Elkins, Guzman, and Simmons 2006), or by the symbolic properties of policies rather than their effects (Polillo and Guillén 2005).”