Do international investment agreements attract foreign direct investment in knowledge intensive industries?

This study estimates the industry-specific effects of international investment agreements (IIAs) on foreign direct investment (FDI) by focusing on how intellectual properties are intensively used in industries (i.e. knowledge intensity). It also considers the country-level heterogeneity in the effects of IIAs by focusing on the intellectual property rights (IPR) protection in host countries and addresses the issue of why there is no consensus on the effects of IIAs among the previous studies. Using data of US outward FDI for the period 1999-2018, it finds that the IIAs between the United States and 56 countries promote FDI from knowledge-intensive industries into countries with weak IPR protection. This result supports the hypothesis that IIAs have a positive effect on FDI if IIAs substitute for the weak legal protection of IPR in host countries.