Competing for Capital:The Diffusion of Bilateral Investment Treaties,1960-2000 Zachary Elkins,Andrew T.Guzman, and Beth A.Simmons Abstract Over the past forty-five years,bilateral investment treaties (BITs)have become the most important international legal mechanism for the encouragement and governance of foreign direct investment.The proliferation of BITs during the past two decades in particular has been phenomenal.These intergovernmental treaties typ- ically grant extensive rights to foreign investors,including protection of contractual rights and the right to international arbitration in the event of an investment dispute. How can we explain the widespread adoption of BITs?We argue that the spread of BITs is driven by international competition among potential host countries-typically developing countries-for foreign direct investment.We propose a set of hypotheses that derive from such an explanation and develop a set of empirical tests that rely on network measures of economic competition as well as more indirect evidence of com- petitive pressures on the host to sign BITs.The evidence suggests that potential hosts are more likely to sign BITs when their competitors have done so.We find some evidence that coercion and learning play a role,but less support for cultural expla- nations based on emulation.Our main finding is that the diffusion of BITs is associ- ated with competitive economic pressures among developing countries to capture a share of foreign investment.We are agnostic at this point about the benefits of this competition for development. The global market for productive capital is more integrated than ever before.The growth of foreign direct investment(FDI)is a clear example.According to World Bank data,gross FDI as a percentage of total world production increased seven- fold from 1.2 percent to 8.9 percent between 1970 and 2000.Though such invest- ments tend to be highly skewed across jurisdictions-developed countries account For useful comments on earlier drafts of this article,we thank Bill Bernhard,Bear Braumoeller, Frank Dobbin,Robert Franzese,Jeffry Frieden,Geoffrey Garrett,Tom Ginsburg,Jude Hays,Lisa Mar- tin,Bob Pahre,Mark Ramsayer,Steven Ratner,Susan Rose-Ackerman,and John Sides.For research assistance,we thank Elizabeth Burden.Raechel Groom,and Alexander Noonan. International Organization 60,Fall 2006,pp.811-846 2006 by The IO Foundation. D0L:10.1017/S0020818306060279Competing for Capital: The Diffusion of Bilateral Investment Treaties, 1960 – 2000 Zachary Elkins, Andrew T+ Guzman, and Beth A+ Simmons Abstract Over the past forty-five years, bilateral investment treaties ~BITs! have become the most important international legal mechanism for the encouragement and governance of foreign direct investment+ The proliferation of BITs during the past two decades in particular has been phenomenal+ These intergovernmental treaties typ￾ically grant extensive rights to foreign investors, including protection of contractual rights and the right to international arbitration in the event of an investment dispute+ How can we explain the widespread adoption of BITs? We argue that the spread of BITs is driven by international competition among potential host countries—typically developing countries—for foreign direct investment+ We propose a set of hypotheses that derive from such an explanation and develop a set of empirical tests that rely on network measures of economic competition as well as more indirect evidence of com￾petitive pressures on the host to sign BITs+ The evidence suggests that potential hosts are more likely to sign BITs when their competitors have done so+ We find some evidence that coercion and learning play a role, but less support for cultural expla￾nations based on emulation+ Our main finding is that the diffusion of BITs is associ￾ated with competitive economic pressures among developing countries to capture a share of foreign investment+ We are agnostic at this point about the benefits of this competition for development+ The global market for productive capital is more integrated than ever before+ The growth of foreign direct investment ~FDI! is a clear example+ According to World Bank data, gross FDI as a percentage of total world production increased seven￾fold from 1+2 percent to 8+9 percent between 1970 and 2000+ Though such invest￾ments tend to be highly skewed across jurisdictions—developed countries account For useful comments on earlier drafts of this article, we thank Bill Bernhard, Bear Braumoeller, Frank Dobbin, Robert Franzese, Jeffry Frieden, Geoffrey Garrett, Tom Ginsburg, Jude Hays, Lisa Mar￾tin, Bob Pahre, Mark Ramsayer, Steven Ratner, Susan Rose-Ackerman, and John Sides+ For research assistance, we thank Elizabeth Burden, Raechel Groom, and Alexander Noonan+ International Organization 60, Fall 2006, pp+ 811–846 © 2006 by The IO Foundation+ DOI: 10+10170S0020818306060279