Asymmetric Effects of Corruption on FDI: Evidence from Swedish Multinational Firms

Hakkala, Katariina Nilsson; Norbäck, Pehr‐Johan; Svaleryd, Helena

doi:10.1162/rest.90.4.627

Cited by 111 publications

(84 citation statements)

References 18 publications

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“…This is in line with Hakkala et al (2008) and Javorcik and Wei (2009) as well as the previous literature where researchers generally have found a signi…cant negative e¤ect of corruption on multinational entry without di¤erentiating between di¤erent entry modes using aggregate data.…”

Section: Fdi Decision Alonesupporting

confidence: 91%

“…Corruption acting as the "grabbing hand" in FDI: Corruption in a host country introduces additional direct or indirect costs for the foreign investor and therefore makes FDI less likely. This argument …nds support in the works of Hines (1995), Wei (2000aWei ( , 2000b, Hellman et al (2002), Habib and Zurawicki (2002), Busse and Hefeker (2007), Hakkala et al (2008) and Javorcik and Wei (2009)…”

Section: The Recent Literaturementioning

confidence: 55%

“…Some concentrate of the ownership structure of the …rm and some on the di¤erent types of a¢ liate activity in host country and how they are a¤ected by corruption in the host country or by the corruption distance between the parent and host countries. Two such recent studies which are more relevant for the current paper are contributions made by Javorcik and Wei (2009) and Hakkala, Norbäck and Svaleryd (2008). Javorcik and Wei (2009) investigate how the volume of FDI and its ownership structure may be a¤ected by the extent of corruption.…”

Section: (Ii) Corruption Acting As the "Helping Hand" In Fdimentioning

confidence: 99%

“…The most relevant work for the current paper is by Hakkala et al (2008) who consider the impact of corruption on FDI in two dimensions: (i) corruption may in ‡uence the probability that a …rm chooses to invest in a foreign market but not the size of the a¢ liate activities once the investment is undertaken, and (ii) corruption may have di¤erent e¤ects on di¤erent types of a¢ liate activities such as horizontal, vertical or export platform sales. Using Swedish …rm-level data, Hakkala et al …nd that Swedish MNCs are less likely to invest in corrupt countries.…”

Section: (Ii) Corruption Acting As the "Helping Hand" In Fdimentioning

confidence: 99%

“…They also …nd that R&D intensive or large …rms weather corruption better compared to less technical or smaller …rms. The current paper complements Hakkala et al (2008) by using the same Swedish multinational …rm data to examine another aspect of FDI, namely the e¤ect of corruption on M&As and green…eld investments.…”

Section: (Ii) Corruption Acting As the "Helping Hand" In Fdimentioning

confidence: 99%

See 4 more Smart Citations

Multinationals and Corruption: Business as Usual?

Tekin‐Koru

2017

Globalization

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This paper disentangles the e¤ects of corruption on entry mode decision by carrying out an empirical analysis with rich, …rm-level data on the activities of Swedish MNCs around the globe in manufacturing sectors from 1987 to 1998. A number of propositions emerge from a simple theoretical framework. The panorama of the results from the empirical part supports most of these propositions: (i). Corruption has a direct negative impact on green…eld investments and a weak positive impact on M&As. (ii). There are complex, asymmetric, secondary e¤ects of corruption on the mode of entry. (iii). International experience dampens the e¤ect of corruption on the mode of entry.(iv). The results are robust to di¤erences in measures of corruption. JEL Classi…cation: F23

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Section: Fdi Decision Alonesupporting

confidence: 91%

Section: The Recent Literaturementioning

confidence: 55%

Section: (Ii) Corruption Acting As the "Helping Hand" In Fdimentioning

confidence: 99%

Section: (Ii) Corruption Acting As the "Helping Hand" In Fdimentioning

confidence: 99%

Section: (Ii) Corruption Acting As the "Helping Hand" In Fdimentioning

confidence: 99%

See 3 more Smart Citations

Multinationals and Corruption: Business as Usual?

Tekin‐Koru

2017

Globalization

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Repeat market entries in the internationalization process: The impact of investment motives and corporate capabilities

Jiang

Holburn

Beamish

2018

Global Strategy Journal

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Research Summary: This study examines strategic and resource contingencies that shape MNEs’ country location choices. Our analysis of overseas production investments by Japanese firms (1971–2006) finds that differences in investment motives (i.e., horizontal and vertical investment) and corporate capabilities (i.e., marketing and production capabilities) moderate how prior entries into a host country affect subsequent entry decisions. In general, the positive impact of prior entries on investment in a country is weaker for horizontal investments and stronger for vertical investments. A more nuanced relationship emerges when entry decisions are analyzed in conjunction with heterogeneous corporate marketing and production capabilities. The study illustrates the novel insights to be gained from analyzing the joint impact of path dependence, managerial intentions, and corporate capabilities on country location decisions. Managerial Summary: Multinational firms often make multiple investments over time in a concentrated set of countries, accumulating superior knowledge and capabilities in these environments. Researchers have nonetheless uncovered factors that can lead firms to deviate from strategic trajectories defined by their prior investments. In a statistical analysis of country entry decisions by Japanese manufacturing firms over a 35‐year period, we found that firms’ tendencies to reinvest in the same host countries were smaller for horizontal (i.e., market‐seeking) investments but greater for vertical (i.e., efficiency‐seeking) investments. We also found that organizational capabilities influence the geographic trajectory of international expansion: firms with stronger marketing and production capabilities were less likely to be influenced by the locations of prior entries and were more likely to invest in new countries.

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Corruption and foreign bank entry denials: A cross‐country panel analysis

Lskavyan

2022

Int. J Fin Econ

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The existing literature largely reports a negative effect of corruption on foreign direct investment (FDI) and explains it by the unwillingness of foreign investors to invest due to the high post‐entry costs and risks of corruption. However, in addition to affecting foreign investors' willingness to invest, corruption can also affect their ability to invest. This latter channel is less explored. To fill this gap, we use cross‐country panel data to analyse the relationship between corruption and foreign bank entry denials. Our fixed‐effects estimation results, as well as the following sensitivity checks show that corruption can also be an entry‐point deterrent: corrupt host countries are more likely to deny entry to foreign banks. This finding suggests that at least some foreign investors are forced rather than choose to stay out of corrupt countries. A policy implication could be that reducing the entry‐point corruption can increase foreign investment even if the post‐entry costs and risks of corruption remain unchanged.

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Asymmetric Effects of Corruption on FDI: Evidence from Swedish Multinational Firms

Cited by 111 publications

References 18 publications

Multinationals and Corruption: Business as Usual?

Multinationals and Corruption: Business as Usual?

Repeat market entries in the internationalization process: The impact of investment motives and corporate capabilities

Corruption and foreign bank entry denials: A cross‐country panel analysis

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