The Moderating Effect of Bilateral Investment Treaty Stringency on the Relationship between Political Instability and Subsidiary Ownership Choice

Williams, C.; Lukoianova (Vashchilko), T.; Martinez, C.A.

doi:10.1016/j.ibusrev.2016.05.002

The Moderating Effect of Bilateral Investment Treaty Stringency on the Relationship between Political Instability and Subsidiary Ownership Choice

Williams, C.; Lukoianova (Vashchilko), T.; Martinez, C.A.

Authors

C. Williams

T. Lukoianova (Vashchilko)

C.A. Martinez

Abstract

We investigate whether the degree to which a bilateral investment treaty (BIT) protects against expropriation (i.e., its “stringency”) influences the international strategy of multinational enterprises (MNEs) as they invest in countries with varying levels of political instability. We draw on institutional logic and insights from political economics to hypothesize that BIT stringency will moderate the established positive relationship between host country political instability and minority ownership. Analysis of a sample of 289 foreign investments made by AEX-listed Dutch MNEs in 34 countries between 2004 and 2013 provides support: a more stringent BIT will encourage the MNE to choose a majority stake as political instability rises. Robustness tests provide further support for our argument. The results have both managerial and policy implications relating to the role that BIT stringency plays in determining MNE strategy.

Citation

Williams, C., Lukoianova (Vashchilko), T., & Martinez, C. (2017). The Moderating Effect of Bilateral Investment Treaty Stringency on the Relationship between Political Instability and Subsidiary Ownership Choice. International Business Review, 26(1), 1-11. https://doi.org/10.1016/j.ibusrev.2016.05.002

Journal Article Type	Article
Acceptance Date	May 8, 2016
Online Publication Date	Jul 6, 2016
Publication Date	Feb 1, 2017
Deposit Date	May 11, 2016
Publicly Available Date	Jan 6, 2018
Journal	International Business Review
Print ISSN	0969-5931
Publisher	Elsevier
Peer Reviewed	Peer Reviewed
Volume	26
Issue	1
Pages	1-11
DOI	https://doi.org/10.1016/j.ibusrev.2016.05.002
Public URL	https://durham-repository.worktribe.com/output/1412614

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http://creativecommons.org/licenses/by-nc-nd/4.0/

Copyright Statement
© 2016 This manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/