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Government regulation, corruption, and FDI

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Abstract

We analyze favors as utilization of informal modes of exchange within a formal economy, relating their negative aspects to corruption. This exercise enables us to integrate them into a model linking national institutional factors to the magnitude of cross-country FDI flows. In our empirical tests of FDI inflows in 55 countries across four distinct time periods, we find that the level of economic regulation is a major determinant of the extent of FDI inflows as well as the level of corruption, but corruption does not have an independent influence on levels of FDI inflows. Our results have important policy implications regarding the role of the state in influencing the location decisions of MNEs.

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Authors and Affiliations

  1. Department of Strategic Management, Fox School of Business, Temple University, Philadelphia, PA, 19122, USA

    Ram Mudambi

  2. Dipartimento di Economia, Universita’ degli Studi di Messina, Piazza Pugliatti 1, 98100, Messina, Italy

    Pietro Navarra

  3. CPNSS, London School of Economics, London, UK

    Pietro Navarra

  4. Department of Business Policy, National University of Singapore, 15 Law Link, Singapore, Singapore

    Andrew Delios

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  1. Ram Mudambi
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  2. Pietro Navarra
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  3. Andrew Delios
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Correspondence to Ram Mudambi.

Appendix

Appendix

Table 5 Variables, definitions, and sources
Full size table

Emerging and developing economies in the dataset:

Argentina, Bolivia, Botswana, Brazil, Cameroon, Chile, P.R. China, Colombia, Congo Dem. R., Costa Rica, Dominican Rep., Ecuador, Egypt, El Salvador, Gabon, Ghana, Guatemala, Haiti, Honduras, India, Indonesia, Iran, Jamaica, Jordan, Madagascar, Malawi, Malaysia, Mali, Mauritius, Mexico, Morocco, Nigeria, Pakistan, Panama, Papua New Guinea, Paraguay, Peru, Philippines, Poland, Rwanda, Senegal, Sierra Leone, South Korea, Sri Lanka, Syria, Thailand, Togo, Trinidad and Tobago, Tunisia, Turkey, Uganda, Uruguay, Venezuela, Zambia, Zimbabwe.

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Mudambi, R., Navarra, P. & Delios, A. Government regulation, corruption, and FDI. Asia Pac J Manag 30, 487–511 (2013). https://doi.org/10.1007/s10490-012-9311-y

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