International investment regimes: De jure policies, de facto practices and MNC strategic choices

Abstract

This dissertation addresses the adoption and development of effective property rights regimes in the global system of countries and the influence of these regimes on multinational corporations\u27 (MNCs) investment choices. I argue that formal property rights regimes and de facto practices adopted by a country are influenced by those of other countries within the global system even in the presence of decoupling (i.e. the divergence of de facto practices from de jure policies). Further, location choices of MNCs are influenced by the development of effective property rights regimes in host countries while firm level characteristics alter their sensitivity to these regimes. I present evidence from three related empirical studies. Chapter 2 establishes the interdependent nature of policy adoption in a dyadic context by observing the signing of Bilateral Investment Treaties (BITs). Domestic factors as well as international diffusion pressures of competition and emulation explain patterns of BIT signing while their relative impacts shift between early periods of policy innovation and later periods of policy institutionalization. Chapter 3 confirms the persistence of global diffusion pressures after adoption through an examination of Intellectual Property protection in countries around the world. De facto practices of a country are also influenced by the practices of other countries in the global system. In addition, the international pressures influencing policy adoption have a lasting effect and alter subsequent behavior of domestic constituents. Chapter 4 studies the location choices of MNCs in the information services industry to establish the dependence of firms\u27 location choices on the development of a host country\u27s property rights regimes. Observed patterns of MNC location choices may be explained by the current and expected future de facto property rights protection. This relationship is moderated by the extent of a firm\u27s international operations as it provides an alternate mechanism for protecting their assets. Together, the results provide evidence of the globally interdependent nature of the adoption and development of property rights regimes and the importance of these regimes in explaining MNC investment choices