A BIT Far? : Geography, International Economic Agreements, and Foreign Direct Investment - Evidence from Emerging Markets

Gomez-Mera, Laura ; Varela, Gonzalo J.

World Bank, Washington, DC

关键词: FOREIGN DIRECT INVESTMENT;    BILATERAL INVESTMENT TREATY;    PREFERENTIAL TRADE AGREEMENT;    DISTANCE;    EMERGING MARKET MULTINATIONALS;   

DOI  :  10.1596/1813-9450-8185
RP-ID  :  WPS8185

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

How do international economic agreementsinfluence the investment patterns of firms from emergingeconomies? This paper studies the ways in which bilateralinvestment treaties and preferential trade agreementsinteract with geographic and cultural distance to influencefirms' investment patterns. How does geographic andcultural proximity affect the impact of internationaleconomic agreements on foreign direct investment flows? Thisquestion is answered using data from an original survey of700 firms from four emerging (or newly-emerged) economies:Brazil, India, the Republic of Korea, and South Africa. Thefindings suggest that bilateral investment treaties andpreferential trade agreements increase the likelihood offoreign direct investment. Yet, the effects of theseagreements on foreign direct investment depend on thedistance between the origin and potential destinationcountries. Moreover, trade and investment agreements appearto interact differently with distance. By providingguarantees to investors and signaling credible commitmentfrom host governments, bilateral investment treatiesmitigate the higher uncertainty and transaction costsassociated with investing in faraway, unfamiliar markets. Bycontrast, the investment attraction effectiveness ofpreferential trade agreements fades with distance.