Corruption and cross-border investment in emerging markets: Firm-level evidence

This paper studies the joint impact of corruption on the entry mode and volume of inward foreign direct investment (FDI) using a unique firm-level data set. We find that corruption not only reduces inward FDI, but also shifts the ownership structure towards joint ventures. The latter finding support...

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Bibliographic Details
Published in:Journal of international money and finance 2009-06, Vol.28 (4), p.605-624
Main Authors: Javorcik, Beata S., Wei, Shang-Jin
Format: Article
Language:English
Subjects:
Corruption
Corruption Developing countries Foreign direct investment Multinational firms Joint ventures
Developing countries
Emerging markets
Foreign direct investment
Foreign investment
International finance
Investment planning
Joint ventures
Multinational enterprises
Multinational firms
Ownership
R&D
Research & development
Studies
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Summary:This paper studies the joint impact of corruption on the entry mode and volume of inward foreign direct investment (FDI) using a unique firm-level data set. We find that corruption not only reduces inward FDI, but also shifts the ownership structure towards joint ventures. The latter finding supports the view that corruption increases the value of using a local partner to cut through the bureaucratic maze. However, R&D intensive firms are found to favor sole ownership.
ISSN:0261-5606
1873-0639
DOI:10.1016/j.jimonfin.2009.01.003