Economics at your fingertips  

Far From Home: Do Foreign Investors Import Higher Standards of Governance in Transition Economies?

Joel S. Hellman, Geraint Jones and Daniel Kaufmann ()
Additional contact information
Joel S. Hellman: The World Bank
Geraint Jones: MIT

Development and Comp Systems from University Library of Munich, Germany

Abstract: Based on the Business Environment and Enterprise Performance Survey (BEEPS) of firms in transition countries, which unbundles corruption to measure different types of corrupt transactions and provide detailed information on the characteristics and performance of firms, we find that: i) corruption reduces FDI inflows and attracts lower quality investment in terms of governance standards; ii) in misgoverned settings, FDI firms may magnify the problems of state capture and procurement kickbacks, while paying a lower overall bribe burden than domestic firms; iii) FDI firms undertake those forms of corruption that suit their comparative advantages, generating substantial gains for them and challenging the premise that they are coerced, which makes it difficult to develop effective constraints on such behavior; and, iv) transnational legal restrictions to prevent bribery had not led to higher standards of corporate conduct among foreign investors by the year 2000. Rather than being construed as a case against foreign investment; we argue that state capture is created and maintained through restrictions on competition and entry in strategic sectors. Thus, enhancing competition by attracting a wider, more diverse set of FDI firms is critical to the broader strategic framework of fighting state capture and corruption.

Keywords: foreign direct investment; FDI; kickbacks; state capture; bribery; corporate governance; corruption; governance; transition economies (search for similar items in EconPapers)
JEL-codes: D4 H0 K0 L1 L2 L5 O1 P2 P5 M2 P0 H4 K2 K4 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2003-08-27
New Economics Papers: this item is included in nep-eec, nep-ifn, nep-law, nep-pbe, nep-pol and nep-tra
Note: Type of Document - Acrobat PDF; pages: 28
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link) (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this paper

More papers in Development and Comp Systems from University Library of Munich, Germany
Bibliographic data for series maintained by EconWPA ().

Page updated 2020-12-06
Handle: RePEc:wpa:wuwpdc:0308006