Publication Type: Conference Paper/Unpublished Manuscript
Abstract: Common knowledge amongst policy makers holds that 'trade promoting' measures such as bilateral investment treaties (BITs) and intellectual property rights (IPRs) are beneficial for economic growth because they promote foreign direct investment (e.g. Schrader 1994; Sek 1994). While many scholars also support this position, others argue otherwise. Helpman (1993), for instance, argues that the extension of intellectual property rights to developing countries should ultimately harm their long-term growth prospects. Elkins, Guzman, and Simmons (2004) note their skepticism that the proliferation of bilateral investment treaties will bring gains to the developing countries that have increasingly agreed to such arrangements.Behind this common wisdom there remains much uncertainty about whether these policy measures attain their supposed benefits: increased foreign direct investment (FDI). Existing empirical works have reached conflicting conclusions, with some works suggesting BITs (Neymayer & Spess 2005; Egger & Pfaffermayr 2004) and IPRs (Maskus 2000; Park & Ginarte 1997; Lee & Mansfield 1996) are associated with increased FDI and others reaching opposite conclusions (Tobin & Rose-Ackerman 2005; Hallward-Driemeier 2003; May 2002).In this paper I attempt to shed new light on this empirical controversy. I argue that the theoretical foundations of both policy measures suggest that each should operate through a similar mechanism. Given this symmetry, I suggest that existing research may suffer bias resulting from its singular focus on either BITs or IPRs. To remedy this situation, I simultaneously estimate the effects of the measures on FDI outcomes.The empirical model employs a constructed dataset covering more than 120 developing and transition countries for the years 1992 to 2004. The panel of data exhibits autoregressive, auto-correlative, and heteroskedastic tendencies. As such, the bulk of the paper's empirical portion is devoted to testing the robustness of findings to alternative specifications. Despite theses challenges, I find evidence that bilateral investment treaties are positively associated with FDI while intellectual property rights are negatively associated with FDI.The paper concludes by proposing that the empirics might be interpreted as suggestive of a trade-off between BITs and IPRs. I suggest how future research might test this hypothesis.ReferencesEgger, Peter, and Pfaffermayr, Michael. 2004. "The Impact of Bilateral Investment Treaties on Foreign Direct Investment." Journal of Comparative Economics 32:788-804.Elkins, Zachary, Guzman, Andrew, and Simmons, Beth. 2004. "Competing for Capital: The Diffusion of Bilateral Investment Treaties, 1960-2000." Draft, 6 March. Cambridge, MA: Harvard University.Hallward-Driemeier, Mary. 2003. "Do Bilateral Investment Treaties Attract Foreign Direct Investment?" World Bank Policy Research Working Paper 3121. Washington, D.C.: World Bank.Helpman, Elhanan. 1993. "Innovation, Imitation, and Intellectual Property Rights." Econometrica 61(6):1247-1280.Lee, Jeong-Yeon, and Mansfield, Edwin. 1996. "Intellectual Property Protection and U.S. Foreign Direct Investment." The Review of Economics and Statistics 78(2): 181-186.Maskus, Keith E. 2000. "Intellectual Property Rights and Foreign Direct Investment." Centre for International Economic Studies Policy Discussion Paper No. 0022. Adelaide, Australia: University of Adelaide.May, Christopher. 2002. "Unacceptable Costs: The Consequences of Making Knowledge Property in a Global Society." Global Society 16(2):123-144.Neumayer, Eric, and Spess, Laura. 2005. "Do Bilateral Investment Treaties Increase Foreign Direct Investment to Developing Countries?" Draft, May. London: London School of Economics.Park, Walter G., and Ginarte, Juan Carlos. 1997. "Intellectual Property Rights and Economic Growth." Contemporary Economic Policy 15(3):51-62.Schrader, Dorothy. 1994. Intellectual Property Provisions of the GATT 1994: 'The TRIPS Agreement.' Major Studies and Issues Briefs of the Congressional Research Service, 1994 Supplement, 16 March. Bethesda, MD: University Publications of America.Sek, Lenore. 1994. Intellectual Property Rights and the Uruguay Round of the Multilateral Trade Talks: Economic Effects. CRS Report for Congress, 30 August, 94-722 E. Washington, D.C.: Library of Congress.Tobin, Jennifer, and Rose-Ackerman, Susan. 2005. "Foreign Direct Investment and the Business Environment in Developing Countries: The Impact of Bilateral Investment Treaties." Draft, January 3. New Haven, CT: Yale University.

Publication Type: Conference Paper/Unpublished Manuscript
Abstract: This paper states the conditions under which states with high-quality investment environment send stronger signals through the design of international investment agreements than the states with low-quality investment environment. These signals are "trustw

Publication Type: Conference Paper/Unpublished Manuscript
Abstract: Research on corporate investment has been dominated by financial economics, which treats investment decisions as driven by financial and agency considerations. We develop an institutional perspective of foreign investment to better understand foreign investment in emerging economies. We propose that investors are bounded by the prevailing norms about sound corporate governance practices in their home countries, and that they transpose such cognitive frameworks to foreign countries to evaluate governance practices there. Given the distinct governance models in US and Japan, We examine how family ownership and control affect the investment decision of the US and Japanese investors in Taiwan’s business group-affiliated firms during 1988-1998. Consistent with our argument, we find that US investors are particularly likely to avoid member firms of Taiwanese business groups with both high family ownership and family chief director, and that Japanese investors tend to avoid high family ownership but are not bothered by the combination of high family ownership and family chief director. Contributions of this study to the research on globalization and foreign investment are discussed.

Publication Type: Conference Paper/Unpublished Manuscript
Abstract: This paper attempts to establish whether foreign direct investment (FDI) reacts to changing political conditions in host countries. More specifically, we explore the existence of partisan cycles in FDI investment performance. First, we develop a model that predicts that the incumbent government’s partisanship -i.e.: its allegiance to labor or capital- should affect foreign investors’ decision to flow into different sectors. Next, we analyze the pattern of direct investment to OECD countries disaggregated by sector from roughly 1985 through 2000. We find evidence of the existence of such partisan cycles in the patterns of direct investment performance across countries and over time at the industry level. In particular, we observe that in countries that are governed by parties of the left, FDI tends to flow into industries associated with the production of food, textiles, machinery, and vehicles, financial intermediation, mining and quarrying, and utilities, and out of sectors such as construction and transportation. We also find preliminary evidence of a positive correlation between foreign investment and economy wide change in wages under left-leaning incumbents, which is consistent with the assumptions around which we build our model. Our tentative conclusion is that foreign direct investment seems to respond to partisan cycles: when parties of opposite ideologies alternate in power, FDI responds by flowing into those sectors in the host country where foreign capital is a complement of the factor of production owned by the core constituent of the incumbent party, and out of those sectors where it substitutes for the factor of production owned by that constituent.

Publication Type: Conference Paper/Unpublished Manuscript
Abstract: Due to the potential for both immense payoffs and devastating losses created by the risky nature of capital investments, investors are assumed to search for the most stable and financially lucrative environments. It has been argued that third party enforcement and liberalizing economic reforms associated with multilateral trade agreements enhance investment stability and improve trade and investment flows into member nations, more than bilateral investment treaties (BITs). However, with the recent combined trends of the global increase in BIT numbers and enhancement of their relevance as international legal investment mechanisms, it appears as though the importance of BITs must be reassessed. Do multilateral corporations (MNCs) and international investors respond to national membership in BITs? Extant literature presents conflicting and inconclusive findings. However, previous studies evaluate BIT membership as a dichotomous variable and consider the structure of a BIT as a ‘black-box’. Therefore, one must also ask if variations in BIT design affect the amount MNCs are willing to invest. I plan to use pooled data for approximately 100 developing and developed nations from 1982 to 2004 to determine if BIT membership and variation leads to alterations in foreign direct investment (FDI) and portfolio investment (PI) flows. Specifically, I will be focusing on states that share investments with the United States and how mutual BIT memberships impact FDI and PI flows between the respective countries. Controlling for alternative explanations, I find evidence that BIT design dimensions have contrasting effects on the inward flows of various types of investments.