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

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

How do international economic agreements influence the investment patterns of firms from emerging economies? This paper studies the ways in which bilateral investment treaties and preferential trade agreements interact with geographic and cultural...

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Main Authors: Gomez-Mera, Laura, Varela, Gonzalo J.
Format: Working Paper
Language:English
en_US
Published: World Bank, Washington, DC 2017
Subjects:
FOREIGN DIRECT INVESTMENT
BILATERAL INVESTMENT TREATY
PREFERENTIAL TRADE AGREEMENT
DISTANCE
EMERGING MARKET MULTINATIONALS
Online Access:http://documents.worldbank.org/curated/en/734061504793009047/A-bit-far-geography-international-economic-agreements-and-foreign-direct-investment-evidence-from-emerging-markets
http://hdl.handle.net/10986/28362
id okr-10986-28362
recordtype oai_dc
spelling okr-10986-283622021-06-08T14:42:48Z A BIT Far? : Geography, International Economic Agreements, and Foreign Direct Investment - Evidence from Emerging Markets Gomez-Mera, Laura Varela, Gonzalo J. FOREIGN DIRECT INVESTMENT BILATERAL INVESTMENT TREATY PREFERENTIAL TRADE AGREEMENT DISTANCE EMERGING MARKET MULTINATIONALS How do international economic agreements influence the investment patterns of firms from emerging economies? This paper studies the ways in which bilateral investment treaties and preferential trade agreements interact with geographic and cultural distance to influence firms' investment patterns. How does geographic and cultural proximity affect the impact of international economic agreements on foreign direct investment flows? This question is answered using data from an original survey of 700 firms from four emerging (or newly-emerged) economies: Brazil, India, the Republic of Korea, and South Africa. The findings suggest that bilateral investment treaties and preferential trade agreements increase the likelihood of foreign direct investment. Yet, the effects of these agreements on foreign direct investment depend on the distance between the origin and potential destination countries. Moreover, trade and investment agreements appear to interact differently with distance. By providing guarantees to investors and signaling credible commitment from host governments, bilateral investment treaties mitigate the higher uncertainty and transaction costs associated with investing in faraway, unfamiliar markets. By contrast, the investment attraction effectiveness of preferential trade agreements fades with distance. 2017-09-21T18:31:32Z 2017-09-21T18:31:32Z 2017-09 Working Paper http://documents.worldbank.org/curated/en/734061504793009047/A-bit-far-geography-international-economic-agreements-and-foreign-direct-investment-evidence-from-emerging-markets http://hdl.handle.net/10986/28362 English en_US Policy Research Working Paper;No. 8185 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper Africa East Asia and Pacific Latin America & Caribbean South Asia
repository_type Digital Repository
institution_category Foreign Institution
institution Digital Repositories
building World Bank Open Knowledge Repository
collection World Bank
language English
en_US
topic FOREIGN DIRECT INVESTMENT
BILATERAL INVESTMENT TREATY
PREFERENTIAL TRADE AGREEMENT
DISTANCE
EMERGING MARKET MULTINATIONALS
spellingShingle FOREIGN DIRECT INVESTMENT
BILATERAL INVESTMENT TREATY
PREFERENTIAL TRADE AGREEMENT
DISTANCE
EMERGING MARKET MULTINATIONALS
Gomez-Mera, Laura
Varela, Gonzalo J.
A BIT Far? : Geography, International Economic Agreements, and Foreign Direct Investment - Evidence from Emerging Markets
geographic_facet Africa
East Asia and Pacific
Latin America & Caribbean
South Asia
relation Policy Research Working Paper;No. 8185
description How do international economic agreements influence the investment patterns of firms from emerging economies? This paper studies the ways in which bilateral investment treaties and preferential trade agreements interact with geographic and cultural distance to influence firms' investment patterns. How does geographic and cultural proximity affect the impact of international economic agreements on foreign direct investment flows? This question is answered using data from an original survey of 700 firms from four emerging (or newly-emerged) economies: Brazil, India, the Republic of Korea, and South Africa. The findings suggest that bilateral investment treaties and preferential trade agreements increase the likelihood of foreign direct investment. Yet, the effects of these agreements on foreign direct investment depend on the distance between the origin and potential destination countries. Moreover, trade and investment agreements appear to interact differently with distance. By providing guarantees to investors and signaling credible commitment from host governments, bilateral investment treaties mitigate the higher uncertainty and transaction costs associated with investing in faraway, unfamiliar markets. By contrast, the investment attraction effectiveness of preferential trade agreements fades with distance.
format Working Paper
author Gomez-Mera, Laura
Varela, Gonzalo J.
author_facet Gomez-Mera, Laura
Varela, Gonzalo J.
author_sort Gomez-Mera, Laura
title A BIT Far? : Geography, International Economic Agreements, and Foreign Direct Investment - Evidence from Emerging Markets
title_short A BIT Far? : Geography, International Economic Agreements, and Foreign Direct Investment - Evidence from Emerging Markets
title_full A BIT Far? : Geography, International Economic Agreements, and Foreign Direct Investment - Evidence from Emerging Markets
title_fullStr A BIT Far? : Geography, International Economic Agreements, and Foreign Direct Investment - Evidence from Emerging Markets
title_full_unstemmed A BIT Far? : Geography, International Economic Agreements, and Foreign Direct Investment - Evidence from Emerging Markets
title_sort bit far? : geography, international economic agreements, and foreign direct investment - evidence from emerging markets
publisher World Bank, Washington, DC
publishDate 2017
url http://documents.worldbank.org/curated/en/734061504793009047/A-bit-far-geography-international-economic-agreements-and-foreign-direct-investment-evidence-from-emerging-markets
http://hdl.handle.net/10986/28362
_version_ 1764466710278045696

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