quality receive higher FDI inflows, although this may also be an endogenous result driven by the emerging markets in the sample. Interestingly, this holds when using an alternative measure of institutional quality, POLCON V; addressing this endogeneity hypothesis would be an interesting extension, although one not made here as it extends beyond the scope of this paper. The lack of industry specific bilateral FDI data may prove to be a major downside. For example, service industries more reliant on Mode 3 delivery, defined as a commercial presence in foreign countries through branches or subsidiaries, will inevitably be more exposed to the status of protection of their assets (UN, 2010). As such, countries reliant on FDI from the service sector, such as the UK which receives roughly 60% of its inward FDI in the service sector, ought to have a greater incentive to sign BITs to safeguard investment (ONS, 2014). Antràs and Yeaple (2013) note that activity is relatively higher in capital and R&D intensive Controlling for FDI inflows by industry would likely give more results with regards to the importance of preferential trade Being able to further differentiate between various industries would give a much better idea how susceptible a particular country's FDI is to ISDS provisions, given its relative reliance on some industries over others (Antràs and Helpman, 2008). As a robustness test, the model is adapted to include country-year fixed Country and time invariant variables are dropped from the model, GDP as well as Polity scores. However, country –year fixed effects may address some of the heterogeneity in previous calculations, for example from exchange rate fluctuations or economic crises. These results are shown in table 4. The statistical and economic significance of including all ISDS protection provisions on FDI inflows remains. However, the estimates of weak BITs are no longer statistically significant as influencing FDI
quality receive higher FDI inflows, although this may also be an endogenous result driven by the emerging markets in the sample. Interestingly, this holds when using an alternative measure of institutional quality, POLCON V; addressing this endogeneity hypothesis would be an interesting extension, although one not made here as it extends beyond the scope of this paper. The lack of industry specific bilateral FDI data may prove to be a major downside. For example, service industries more reliant on Mode 3 delivery, defined as a commercial presence in foreign countries through branches or subsidiaries, will inevitably be more exposed to the status of protection of their assets (UN, 2010). As such, countries reliant on FDI from the service sector, such as the UK which receives roughly 60% of its inward FDI in the service sector, ought to have a greater incentive to sign BITs to safeguard investment (ONS, 2014). Antràs and Yeaple (2013) note that activity is relatively higher in capital and R&D intensive Controlling for FDI inflows by industry would likely give more results with regards to the importance of preferential trade Being able to further differentiate between various industries would give a much better idea how susceptible a particular country's FDI is to ISDS provisions, given its relative reliance on some industries over others (Antràs and Helpman, 2008). As a robustness test, the model is adapted to include country-year fixed Country and time invariant variables are dropped from the model, GDP as well as Polity scores. However, country –year fixed effects may address some of the heterogeneity in previous calculations, for example from exchange rate fluctuations or economic crises. These results are shown in table 4. The statistical and economic significance of including all ISDS protection provisions on FDI inflows remains. However, the estimates of weak BITs are no longer statistically significant as influencing FDI
Foreign-investment-and-shared-sovereignty.docx