Diffusion of Bilateral Investment Treaties 827 hosts to scramble to improve access to a share of the bigger "pie."While other researchers have suggested that BITs may contribute to a growth in FDI,43 our theory suggests a possible feedback loop:the expectation of greater payoffs may stimulate more treaties.This relationship is not predicted by more sociological explanations,which might expect BITs to proliferate as a function of the density of BITs themselves,rather than the growing volume of investment.Nor is it pre- dicted by learning theories,which would presumably require a demonstration that BITs actually“work”in attracting capital. Finally,while all countries should be subject to some degree to the competitive pressures we have theorized above,BITs should diffuse somewhat more readily among host governments that lack credibility.For these countries,a BIT can be expected to make a real difference to investors,other factors held constant.In countries that already have institutions and practices that are favorable to inves- tors,transparent,and predictable,a costly BIT adds relatively little value.These states may be able to compete for capital on the basis of their"inherent"credibil- ity.This relationship is in principle consistent with power-based explanations(pow- erful home governments may be more likely to demand BITs from unreliable hosts than inherently reliable ones),but it is much less consistent with more socio- logical accounts discussed in Simmons,Dobbin and Garrett in this issue.If gov- ernments have been "socialized"to accept the dominant paradigm for investor protection,there would be no reason for the more credible host governments to largely exempt themselves. A competitive theory of BITs predicts that the host countries most likely to sign treaties will be those whose competitors have signed,those who depend on man- ufacturing over extractive production,and those with a credibility gap.More gen- erally,a competitive theory predicts increased treaties as the pool of available capital grows.In the following section,we develop an empirical strategy for testing these hypotheses against alternative explanations. Empirical Methods and Data Analytical Design We use an event history framework to estimate the duration of time before two countries sign a BIT.Our analysis begins in 1958,the year before the first BIT, and includes those BITs concluded up to 1 January 2000,the last year for which we have accurate data.Since the focus of the analysis is a bilateral agreement between governments in a given year,the appropriate unit of analysis is the coun- try dyad-year.In each dyad,we identify the potential "home"and the potential "host"country based on their relative level of development,as measured by GDP per capita.Of course,such designations become less meaningful the closer the 43.Neumayer and Spess 2005.hosts to scramble to improve access to a share of the bigger “pie+” While other researchers have suggested that BITs may contribute to a growth in FDI, 43 our theory suggests a possible feedback loop: the expectation of greater payoffs may stimulate more treaties+ This relationship is not predicted by more sociological explanations, which might expect BITs to proliferate as a function of the density of BITs themselves, rather than the growing volume of investment+ Nor is it pre￾dicted by learning theories, which would presumably require a demonstration that BITs actually “work” in attracting capital+ Finally, while all countries should be subject to some degree to the competitive pressures we have theorized above, BITs should diffuse somewhat more readily among host governments that lack credibility+ For these countries, a BIT can be expected to make a real difference to investors, other factors held constant+ In countries that already have institutions and practices that are favorable to inves￾tors, transparent, and predictable, a costly BIT adds relatively little value+ These states may be able to compete for capital on the basis of their “inherent” credibil￾ity+ This relationship is in principle consistent with power-based explanations ~pow￾erful home governments may be more likely to demand BITs from unreliable hosts than inherently reliable ones!, but it is much less consistent with more socio￾logical accounts discussed in Simmons, Dobbin and Garrett in this issue+ If gov￾ernments have been “socialized” to accept the dominant paradigm for investor protection, there would be no reason for the more credible host governments to largely exempt themselves+ A competitive theory of BITs predicts that the host countries most likely to sign treaties will be those whose competitors have signed, those who depend on man￾ufacturing over extractive production, and those with a credibility gap+ More gen￾erally, a competitive theory predicts increased treaties as the pool of available capital grows+ In the following section, we develop an empirical strategy for testing these hypotheses against alternative explanations+ Empirical Methods and Data Analytical Design We use an event history framework to estimate the duration of time before two countries sign a BIT+ Our analysis begins in 1958, the year before the first BIT, and includes those BITs concluded up to 1 January 2000, the last year for which we have accurate data+ Since the focus of the analysis is a bilateral agreement between governments in a given year, the appropriate unit of analysis is the coun￾try dyad–year+ In each dyad, we identify the potential “home” and the potential “host” country based on their relative level of development, as measured by GDP per capita+ Of course, such designations become less meaningful the closer the 43+ Neumayer and Spess 2005+ Diffusion of Bilateral Investment Treaties 827