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Corruption and foreign direct investment phases: The moderating role of institutions

Jingtao Yi (), Shuang Meng (), Craig D. Macaulay () and Mike W. Peng ()
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Jingtao Yi: Renmin University of China
Shuang Meng: Central University of Finance and Economics
Craig D. Macaulay: California State University, Long Beach
Mike W. Peng: University of Texas at Dallas

Journal of International Business Policy, 2019, vol. 2, issue 2, 167-181

Abstract: Abstract We examine the effect of corruption and institutions on inward foreign direct investment (FDI) along different investment phases in host countries. We contribute to the literature by distinguishing the propensity and the stock of FDI to better clarify the relationship between corruption and FDI, and by substantiating an integrated formal and informal institution-based view. The results support both the ‘corruption as sand’ theory and the ‘corruption as grease’ theory after controlling for the location selection processes of multinational enterprises. We also show that investment freedom and press freedom negatively moderate the relationship between corruption and the propensity and the stock of FDI. Our conclusions may inspire governments in their policy decisions towards controlling corruption and promoting FDI.

Keywords: corruption; FDI; investment freedom; press freedom (search for similar items in EconPapers)
Date: 2019
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Journal of International Business Policy is currently edited by Sarianna Lundan, Ari Van Assche and Anne Hoekman

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