Connecting the dots: how bilateral investment treaty networks influence inward foreign direct investment

Bilateral investment treaties (BITs) are widely acknowledged as instruments for attracting inward foreign direct investment (IFDI), yet their effectiveness remains contested. By using a sample of 64 countries along the Belt and Road Initiative, this study employs the Quadratic Assignment Procedure to analyse the impact of BITs on IFDI and further explores how these effects vary across IFDI subnetworks with distinct structural characteristics. Our analysis yields three key findings. First, the effect of BITs on IFDI declined over time – it was strong between 2012 and 2016 but weakened after 2017 due to the emergence of alternative institutions and evolving geopolitical factors. Second, the impact of formal BIT protections is prominent in low-cohesion networks. However, in high-cohesion systems, densely connected networks rely more on informal enforcement mechanisms. Third, strong expropriation clauses enhance investment, whereas investor-state dispute settlement provisions have a limited effect. These results indicate that policymakers should pursue targeted BIT strategies, prioritizing partners with central network positions or those embedded in highly active, low-cohesion communities; furthermore, a pronounced focus on strengthening substantive protections over indiscriminate treaty expansion is suggested. By linking clause-level treaty designs to network characteristics, this study contributes to a more nuanced understanding of heterogeneous IFDI outcomes.