Corruption and Its Effects on FDI: Analysing the Interaction Between the Corruption Levels of the Home and Host Countries and Its Effects at the Decision-Making Level
- 267 Downloads
This study furthers our understanding of how corruption affects the decision-making process of allocating foreign direct investment. Drawing on the responses of 28 managers in charge of establishing operations in a highly corrupt host country, we argue that those firms based in home countries with low levels of corruption are more proactive in preparing to face corruption abroad than those based in countries with high corruption levels. This means that firms from less corrupt home countries have strategies in place to deal with high corruption abroad. This finding is based on the fact that these firms have stronger pressures to not engage in corruption from their home stakeholders. Also, these firms might not have the experience of dealing with corruption at home, which hinders their potential to deal with corruption abroad. On the other hand, those firms based in highly corrupt home countries do not have clear strategies to deal with corruption abroad. This assertion is based on the fact that these firms might have familiarity in dealing with corruption and thus, might not see it as an obstacle to operating abroad.
KeywordsCorruption Foreign direct investment allocation Firm-level analysis
- Berg, B. (2004). Qualitative research methods for the social sciences. Boston: Allyn & Bacon.Google Scholar
- Bryman, A. (2008). Social research methods (3rd ed.). Oxford: Oxford University Press.Google Scholar
- Denzin, N. (1989). The research act: A theoretical introduction to sociological methods (3rd ed.). Englewood Cliffs, NJ: Pretince Hall.Google Scholar
- Doh, J., Rodriguez, J., Uhlenbruck, K., Collins, J., & Eden, L. (2003). Coping with corruption in foreign markets. Academy of Management Perspectives, 17(3), 114–127.Google Scholar
- Glaser, B., & Strauss, Y. (1967). The discovery of grounded theory: Strategies for qualitative research. New York: Aldine.Google Scholar
- Goodspeed, T., Martinez-Vazquez, J., & Zhang, L. (2013). Do companies view bribes as a tax > evidence on the trade-off between corporate taxes and corruption in the location of FDI. In C. Fuest & G. Zodrow (Eds.), Critical issues in taxation and development (pp. 45–64). Cambridge: MIT Press.Google Scholar
- Hellman, J., Jones, G., Kaufmann, D., & Schankerman, M. (2000). Measuring governance, corruption and state capture: How firms and bureaucrats shape the business environment in transition economies. Washington, DC: World Bank.Google Scholar
- Kostova, T., & Zaheer, S. (1999). Organisational legitimacy under conditions of complexity: The case of the multinational enterprise. Academy of Management Review, 24, 64–81.Google Scholar
- Malkin, E. (2015, May 10). Roxana Baldetti’s resignation as Vice President shadows Guatemala politics. New York Times, p. A6.Google Scholar
- Miles, M., & Huberman, A. (1994). Qualitative data analysis. Beverly Hills, CA: Sage.Google Scholar
- Rose-Ackerman, S. (1997). The political economy of corruption. In K. A. Elliott (Ed.), Corruption and the global economy (pp. 31–60). Washington, DC: Institute for International Economics.Google Scholar
- Rose-Ackerman, S. (2008). Corruption and government. Journal of International Peacekeeping, Special issue on Post-conflict Peacebuilding and Corruption, 15(3), 328–343.Google Scholar
- Rose-Ackerman, S., & Coolidge, J. (1997). High-level rent-seeking and corruption in African regimes: Theory and cases. Washington, DC: World Bank.Google Scholar
- Scott, R. (1995). Institutions and organizations. Thousand Oaks, CA: Sage.Google Scholar
- Strauss, A., & Corbin, J. (1994). Grounded theory methodology: An overview. In K. Denzin & S. Lincoln (Eds.), Handbook of qualitative research (pp. 273–285). Thousand Oaks, CA: Sage.Google Scholar
- Transparency International. (2014). Corruption perception index. Retrieved July 03, 2015, from https://www.transparency.org/cpi2014/results.
- UNDP. (2009). Humanity divided: Confronting inequality in developing countries. New York: United Nations Development Program.Google Scholar
- United Nations. (2014, October). Development policy and analysis division. Retrieved March 3, 2015, from http://www.un.org/en/development/desa/policy/cdp/ldc/ldc_criteria.shtml.
- World Bank. (2014). World Development Indicators. Retrieved July 02, 2015, from http://data.worldbank.org/country/guatemala.
- Yackee, J. (2010, November 23). How much do U.S. corporations know (and care) about bilateral investment treaties? Some hints from new survey evidence. Perspectives on topical foreign direct investment issues by the Vale Columbia Center on Sustainable International Investment.Google Scholar