Essays on Transnational Commercial Arbitration Institutions in the Politics of FDI
Abstract
Why do some countries with corrupt and dependent courts attract a substantial amount of foreign direct investment (FDI)? To address this puzzle, existing literature has widely discussed the effects of bilateral investment treaties (BITs) that provide legal forums as alternatives to domestic courts to settle investor-state disputes. However, BITs do not resolve contractual disputes between private parties. This dissertation contributes to the scholarship by introducing an important omitted variable in the politics of FDI, the transnational commercial arbitration (TCA) institutions. Serving as an impartial and low-cost venue to resolve contractual disputes between foreign and domestic firms, TCA institutions can mitigate the contractual hazards of the host country. My focus on TCA institutions echoes the insights that both property rights institutions that constrain the opportunistic behavior of the government and contracting institutions that facilitate contract formation and contract enforcement among private actors are both essential for economic growth.
This dissertation mainly consists of three quantitative essays that examine the role of TCA
institutions in the politics of FDI. In the first essay, “Domestic Arbitration Institutions and Foreign Direct Investment”, I examine whether TCA institutions can attract FDI. Focusing on the within-country variation of China, I find that provinces with TCA institutions receive a higher level of FDI inflows. My second essay, “Bundling Institutions”, studies the interactive effects of BITs and TCA institutions. I find that a combination of BIT and TCA leads to an increase in FDI inflows, particularly for countries with a lower level of judicial independence. Moreover, these two sets of institutions are useful to attract FDI only when jointly present in the host country. The third essay, “The Effects of International Institutions on Cross-border Mergers and Acquisitions”, evaluates how BITs and TCA institutions affect the inflows of M&A investments that are susceptible to political risks but less so to contractual hazards. Using country-level data, I confirm that the number of M&A deals by U.S. firms is larger for countries that share a BIT with the U.S. but not so for those with a TCA institution.
Subject
commercial arbitrationforeign direct investment
international law and organization
international political economy
Citation
Yin, Weiwen (2020). Essays on Transnational Commercial Arbitration Institutions in the Politics of FDI. Doctoral dissertation, Texas A&M University. Available electronically from https : / /hdl .handle .net /1969 .1 /192356.