Credible commitment institutions and foreign direct investment: How are autocratic countries able to attract fdi

My dissertation project examines the causes of FDI inflows in autocratic countries, attempting to answer the puzzle "Why do some autocratic countries attract more FDI inflows than others?" Given the credible commitment issue that FDI entails, institutions to protect property rights and enforce contracts are argued to be central mechanisms for attracting FDI inflows. This line of reasoning leads to the stylized conclusion that democracy has more advantages than autocracy in attracting FDI. However, we observe autocratic countries, such as China and Singapore, attracting huge amounts of FDI. This generates the puzzle. I focus on the role of domestic and international commitment institutions and how they affect FDI inflows in autocratic countries. I argue that autocratic regimes can attract FDI inflows by developing domestic commitment institutions particularly when they have long time horizons, and the credibility of the institutions is strengthened by political institutions such as autocratic legislatures and parties. I also contend that autocratic countries benefit by joining international commitment institutions such as bilateral investment treaties (BITs), but the effects of those international institutions on FDI inflows are modified by the strength of the domestic commitment institutions. Using a time-series cross-sectional design which covers autocratic countries from 1970 to 2008, I find evidence supporting the arguments. My conclusion is that market friendly and stable autocrats can attract considerable FDI inflows just as democratic countries are able to do.