What Attracts Foreign Direct Investment into Autocratic States? Regime Time Horizon and Institutional Design

Abstract

States play a critical role in designing institutions to facilitate international business. We study the effect of autocratic states' time horizons on their attraction of foreign direct investment (FDI) through designing domestic and international institutions. We argue that autocrats with a long time horizon tend to build credible domestic commitment‐institutions that attract foreign investors; however, they are also likely to affect the design of commitment carve‐outs in international institutions, in particular bilateral investment treaties, thus weakening their institutional effect on foreign investment. We test these dual effects of regime time horizon on FDI inflow using data from 80 autocratic states over a 33‐year period and find substantial support for our arguments.