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Journal of Economic Integration 2021 June;36(2) :203-226.
DOI: https://doi.org/10.11130/jei.2021.36.2.203
BITs, Colony Ties, and Offshore Centers: The Case of United Kingdom Outward FDI

Oleg Gurshev1 Sarhad Hamza12

1University of Warsaw, Poland
1,2University of Raparin, Iraq
Corresponding Author: Oleg Gurshev ,Email: o.gurshev@uw.edu.pl
Copyright ©2021 Journal of Economic Integration
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.

JEL Classification
F23: Multinational Firms; International Business
P33: International Trade, Finance, Investment, Business, and Aid
Keywords: Foreign Direct Investment | Multinational Enterprises | United Kingdom | BITs | Poisson Pseudo-Maximum Likelihood
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