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Home > China and the World Program's Podcast > Episode 3: "Bundling Institutions: How Institutions Influence The Location Of Foreign Direct Investment" - By CWP Fellow Weiwen Yin
Podcast: China and the World Program's Podcast
Episode:

Episode 3: "Bundling Institutions: How Institutions Influence The Location Of Foreign Direct Investment" - By CWP Fellow Weiwen Yin
Category: Government & Organizations
Duration: 01:08:00
Publish Date: 2020-12-14 22:17:01
Description: itunes pic
Abstract: Investing in host countries without independent courts, multinational corporations (MNCs) face two types of hazards, the risks of opportunistic expropriation by the government (political hazards) and the threat of contract breach by their domestic partners (contractual hazards). Existing literature focuses on how bilateral investment treaties (BITs) settle investor-state disputes and mitigate political risks for foreign firms. However, institutions that enforce private contracts, such as transnational commercial arbitration (TCA) institutions, remain understudied. TCA institutions provide impartial venues for foreign investors to resolve their disputes with domestic firms. Therefore, countries that have signed BITs and established TCA institutions can address both the political and contractual hazard concern for foreign investors even if their domestic courts are corrupt and dependent. Using dyadic-level data and a case study of China, I find that a combination of BIT and TCA leads to an increase in FDI inflows, particularly in countries with a lower level of judicial independence. Moreover, these two sets of international institutions are useful to attract FDI only when jointly present.
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