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AbstractDuring the past few decades governments have signed nearly 2,700 bilateral investment treaties (BITs) with one another in an attempt to attract greater levels of foreign direct investment (FDI). By signing BITs, which contain strong enforcement provisions, investment-seeking governments are thought to more credibly commit to protecting whatever FDI they receive, which in turn should lead to increased confidence among investors and ultimately greater FDI inflows. Our unique argument is that the ability of BITs to increase FDI is contingent on the subsequent good behavior of the governments who sign them. BITs should increase FDI only if governments actually follow through on their BIT commitments; that is, if they comply with the treaties. BITs allow investors to pursue alleged treaty violations through arbitration venues like the International Centre for the Settlement of Investment Disputes (ICSID), a heavily utilized and widely observed arbitral institution that is part of the World Bank. Being taken before ICSID, then, conveys negative information about a host country's behavior to the broader investment community, which could result in a sizeable loss of future FDI into that country. We test these contingent effects of BITs using cross-sectional, time-series analyses on all non-OECD countries during a period spanning 1984–2007. We find that BITs do increase FDI into countries that sign them, but only if those countries are not subsequently challenged before ICSID. On the other hand, governments suffer notable losses of FDI when they are taken before ICSID and suffer even greater losses when they lose an ICSID dispute.

This paper analyses the determinants of Chinese direct investment (DI) in the European Union (EU). Evidence is based on panel Poisson models drawing on two investment monitors for individual projects. We distinguish between the numbers of greenfield investments (GIs) and mergers and acquisitions (M&As). The findings indicate that market size and trade relationships with China are the primary factors driving Chinese DI in the EU. In contrast, more business-friendly institutions do not foster DI. Chinese enterprises might be risk averse, in other words prefer to choose their activities in regions with less competitive markets. The striking difference between GIs and M&As is related to unit labour costs. Higher costs make the host country less attractive for the establishment of new firms, but do not affect the involvement in existing firms. The sectoral dispersion of Chinese DI in the EU has not changed much since the global financial crisis of 2008. Most relevant shifts have occurred in research and development (R&D), where low-income EU countries have gained in attractiveness.

Outward foreign direct investment (OFDI) from Colombia has increased considerably in the past decade, with its stock growing from US$ 3 billion in 2000 to US$ 23 billion in 2010. This growth reflects the internationalization of the Colombian economy following policy reforms and economic liberalization in the 1990s. The 2000s were characterized by enhanced national security and reforms to the investment framework that have attracted unprecedented levels of inward FDI and facilitated the growth of small and medium-sized enterprises (SMEs). A considerable rise in domestic mergers and acquisitions (M&As) in the past decade has contributed to the development of Colombian multinational enterprises (MNEs) and to increased OFDI from Colombia. In 2010, outflows showed a twenty-fold increase from their value in 2000, including an increase in OFDI to export markets, helped by greater government support for OFDI, for example by the conclusion of more international investment agreements. The rise of Colombian MNEs, or "translatinas" (i.e. Latin American MNEs whose OFDI is primarily within Latin America), reflects Colombia's nascent structural transformation into a knowledge-based economy.

Analyzing the motivating forces behind the trend toward Japanese direct overseas production, this work examines the appreciation of the yen, rising labor and energy costs, environmental decay, shortages of industrial sites, and critical dependence on overseas resources as factors in prompting Japanese firms to transfer production facilities abroad. Originally published in 1982. The Princeton Legacy Library uses the latest print-on-demand technology to again make available previously out-of-print books from the distinguished backlist of Princeton University Press. These pa

The paper models the multinational choice between foreign direct investment in and exporting to a domestic market as an equilibrium outcome of strategic play between domestic and foreign firms. Two cases are considered, one in which the domestic firm can precommit to output levels (as, for example, through investment in a distribution network), and one in which such precommitment is not possible. The domestic firm's strategy in the case of precommitment includes aggressive efforts to deter or divert foreign investment and results in fewer observed equilibria with foreign investment than would otherwise occur. Tariffs designed to switch the foreign decision from exporting to direct investment may lead instead to monopolization of the market by the domestic firm.

A large number of countries have enacted laws aimed at making it easier for firms to invest in their country, while many countries offer various monetary incentives and tax incentives to encourage inward Foreign Direct Investment (FDI). The desire to attract FDI is due not only to the fact that FDI brings in new investment boosting national income and employment, but also due to the expectation that inward FDI would also provide additional spillover benefits to the local economy that can result in higher productivity growth and increased export growth. This study aims to examine the impact of foreign direct investment on innovation in developing countries. The estimation of a panel threshold model on a sample of 54 developing countries for the 1980-2009 period shows the presence of non linear effects in the relationship between FDI and innovation. We find a threshold value of technological development below which FDI has a negative impact on innovation and above which FDI has a significant positive impact on innovation. We conclude that it is not enough for economic policy to attract foreign investments, it is still necessary to support domestic firms to build an absorptive capacity allowing them to enjoy the benefits of multinational firms.