Promoting and Managing International Investment

Towards an Integrated Policy Approach

J Anthony VanDuzer, Patrick Leblond, J Anthony VanDuzer, Patrick Leblond

• Publisher: Routledge
• Year: 2020
• eBook ISBN: 9780429594694
• Topic: Law
• Subtopic: Law Theory & Practice
• Index: Law

This book provides an overview of international investment policy and policy-making, drawing upon perspectives from law, economics, international business, and political science.

International investment is a complex phenomenon with significant effects worldwide. Developing effective policies and strategies to attract investment in sufficient quantities and marshal it to contribute to sustainable development is a critical challenge for governments at all levels. This book's interdisciplinary approach provides fresh insights into the mix of policy options available to governments seeking investment to support their country's (or region's) development. As well as identifying ways to effectively design, implement, and assess policies to attract foreign investment, it explores how to manage foreign investment's effects. Various dimensions of international investment policy are discussed, including benefits and costs (economic, environmental, social, and political) of foreign investment, the significance of global value chains, state-owned enterprises and sovereign wealth funds, and the role of tax policy, investment promotion, and policy advocacy, location branding, investment treaties, and national security considerations.

Through its contributions to a new interdisciplinary understanding of international investment policy-making, this book will benefit students and scholars working in areas such as international business, international economic law, international economics, development economics, international development, and international political economy as well as being a valuable resource for policy-makers.

1 Introduction to international investment policy and rationale for an interdisciplinary approach

J Anthony VanDuzer,Patrick Leblond and Stephen Gelb

1. Introduction

International investment is a complex phenomenon with significant effects worldwide. It affects jobs, innovation, and productivity as well as communities and the environment. Developing effective policies and strategies to attract foreign investment in sufficient quantities and marshal it to contribute to sustainable development is a critical challenge for governments at all levels.

To help policy-makers take on this challenge, it is essential to understand international investment activity and investor decision-making. To effectively design, implement, and assess policies to attract foreign investment as well as to manage their effects, policy-makers must understand the variables that affect the feasibility, appropriateness and success of particular policy approaches in specific contexts. Our focus in this book is to develop a more integrated approach to studying international investment policy-making. We conceive of international investment policy-making as involving an interconnected set of issues related to policy choices about attracting foreign investment and how to deal with its effects, both positive and negative. This approach implies that we also need to analyse the process of policy formation, which means considering the actors (and their preferences) and the institutions that influence it. The goal is not to prescribe any particular policy, but rather to begin to flesh out the elements of an integrated framework for thinking about investment policy. As such, it aims to provide present and future policy-makers with a clear and more comprehensive understanding of international investment policy issues in order to ultimately improve decision-making.

Developing a more integrated approach to international investment policy-making requires combining the perspectives offered by different disciplines, if we understand a discipline as a system of thinking that is internally coherent in terms of the choice of objects of analysis, assumptions about their behaviour, and theories and propositions derived from these assumptions.¹ Despite its significance, international investment is largely examined in a partial and incomplete way by researchers working in different disciplines. Economics, management, law, and political science have approached the analysis of international investment activity independently of each other with distinct assumptions, theories, and propositions. Each emphasizes different aspects of the phenomenon, often those more amenable to explanation and analysis from within the discipline. Even at the level of how to define the subject matter of enquiry, disciplines diverge. As a result, the understanding of investment within each discipline is incomplete, both in terms of the questions asked and the conclusions reached.

1 Christian De Cock and Damian Doherty, ‘Management as an Academic Discipline?’ in Adrian Wilkinson, Steven J Armstrong, and Michael Lounsbury (eds), The Oxford Handbook of Management (Oxford University Press 2017) 461–480.

Examples of how disciplinary silos limit our understanding of international investment are easily identified. International business scholarship has focused on understanding the contextual elements that inform management decision-making in multinational enterprises. It has considered the significance in this regard of domestic property rights and political risk in host countries, but has largely ignored the impact of international investment treaties and other international institutions, subjects that have been substantially addressed in law and political science research.² Legal scholars studying international investment have focused narrowly on investment treaties and their interpretation without regard to the work of international business scholars and economists on how investors make decisions, the factors on which they base their decisions, the impact of foreign investment in host states, or how decisions and impacts vary according to the nature of investments and investors. Most legal scholarship on international investment has even ignored other areas of legal research like international trade, taxation, and domestic law and institutions.

If we are to understand investor decision-making and provide the necessary underpinnings for effective state policies on promoting and managing international investment, we must study the topic in a manner that integrates legal, economic, political, and business factors as they operate in different local or national circumstances. The scope and depth of research in one discipline can be expanded and enriched by insights and perspectives from other disciplines. Assumptions and theoretical conclusions – regarding the behaviour of investors and states (and state actors) as well as the roles played by domestic and international institutions that characterize one discipline – need to be tested and informed by the application of understanding and research methods from other disciplines.

Admittedly, the suggestion that there would be benefits to an interdisciplinary approach to understanding foreign investment is not new. In 1989, economist John Dunning called for a shift in international business research to include more work from other disciplines – including law, political science, and management – to respond to the increasing difficulty of understanding how international businesses behave.³ Nevertheless, despite international economic activity becoming ever more complex, relatively little has been done to develop an interdisciplinary understanding of investment in international business research.⁴ In recent years, there have been renewed expressions of the need for greater interdisciplinary understanding of investment policies and processes, including by UNCTAD, the OECD, and the World Bank.⁵ Yet, almost all research and policy analysis on investment still proceeds from only one disciplinary perspective.⁶ Investment experts, whether in academia or public agencies, are often remarkably unfamiliar with the conceptual tools, issues addressed, and insights produced in disciplines other than their own.

2 Srividya Jandhyala and Robert J Weiner, ‘Institutions sans frontières: International Agreements and Foreign Investment’ (2014) 45 Journal of International Business Studies 649.

3 John H Dunning, ‘The Study of International Business: A Plea for a More Interdisciplinary Approach’ (1989) 20 Journal of International Business Studies 411, 423–424.

4 John Cantwell and Mary Y Brannen, ‘Positioning JIBS as an Interdisciplinary Journal’ (2011) 42 Journal of International Business Studies 1.

5 UNCTAD, ‘The Global Academic Policy Research Network for Investment for Development’ (2014); OECD, ‘FDI Qualities Toolkit: Investment for Inclusive and Sustainable Growth. Progress Report III’ (OECD 2019); World Bank, Maximizing Potential Benefits of FDI for Competitiveness and Sustainable Development: World Bank Group Report on Investment Policy & Promotion Diagnostics and Tools (World Bank Group 2017).

6 To help remedy this situation, the Academy of International Business created the Journal of International Business Policy in 2018 to study from a multidisciplinary perspective the interaction between international business enterprises and governments, NGOs, and supranational organizations.

This volume represents a modest attempt to contribute to the development of an interdisciplinary approach to international investment, through chapters that look at key themes in each of the four disciplines that have the most well-developed analysis of international investment: law, economics, international business, and political science. We acknowledge that, for the most part, each paper is written from its own disciplinary perspective with the occasional nod to other disciplines. In that sense, most of the book is multidisciplinary rather than interdisciplinary.⁷ As such, it reflects the challenge that interdisciplinary research represents.⁸ To address this challenge, we develop in the conclusion, based on the contributions in this volume, an agenda for further interdisciplinary research on international investment. With this agenda, we hope to encourage and facilitate future work toward a more integrated approach to studying international investment and the policies that govern it so that policy-makers can make more informed decisions. It is our hope that improved decision-making will ultimately ensure that international investment contributes to sustainable development.

7 On the meaning of interdisciplinarity, see David Roth-Istigkeit, ‘The Blinkered Discipline? – Martti Koskenniemi and Interdisciplinary Approaches to International Law’ (2017) 9 International Theory 1.

8 There are strong institutional barriers within academic institutions that impede interdisciplinary cooperation: Joseph LC Cheng, Witold J Henisz, Kendall Roth, and Anand Swaminathan, ‘Advancing Interdisciplinary Research in the Field of International Business: Prospects, Is...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Table of Contents
• Acknowledgements
• List of acronyms
• Notes on contributors
• 1. Introduction to international investment policy and rationale for an interdisciplinary approach
• Part I: International investment’s changing context
• Part II: Promoting international investment
• Part III: Managing international investment
• Part IV: Conclusion
• Index