An Investigation of the Internal Dynamics of Bilateral Investment Treaties: Every BIT Counts

Abstract

To date, over 2,500 bilateral investment treaties (BITs) have been signed. The widespread use of BITs raises two questions that are addressed in this dissertation: (1) Do BITs increase foreign direct investment (FDI) to developing countries? And (2) what has driven the proliferation of BITs? This research advances the literature assessing BITs and FDI flows by developing BIT strength measures that evaluate various protections and guarantees provided by the treaties. It hypothesizes that stronger BITs, BITs that provide foreign investors more protections and guarantees, attract more investment flows to developing state treaty partners. The results of a time series model from 1985-2000 support the hypothesis. In regards to the second question, previous research argues that the proliferation of BITs is the product of competition for capital among developing states. This study hypothesizes that multinational corporations (MNCs) are driving the spread of BITs. The results from a time series logistic regression support the MNC hypothesis.