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Corruption and subsidiary profitability: US MNC subsidiaries in the Asia Pacific region

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  • Seung-Hyun Lee

    ()

  • Sungjin Hong

    ()

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    Abstract

    Would multinational corporation (MNC) subsidiaries be more profitable in host countries where corruption is less severe? Would MNC subsidiaries be more profitable in less corrupt countries if they focus on local sales? This paper examines the impact of the level of corruption on the profitability of US MNCs in the Asia Pacific region. Using foreign direct investment (FDI) data archived by the US Bureau of Economic Analysis and corruption data reported by the World Bank, we find that MNC subsidiaries located in countries with a lower level of corruption are more profitable. In addition, MNC subsidiaries with a greater focus on local sales are more profitable when the corruption level is low. This study contributes to the literature by showing that when local sales are important to MNC subsidiaries, a lower level of corruption by host countries positively affects the profitability of the MNC subsidiaries. Copyright Springer Science+Business Media, LLC 2012

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    File URL: http://hdl.handle.net/10.1007/s10490-010-9214-8
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    Bibliographic Info

    Article provided by Springer in its journal Asia Pacific Journal of Management.

    Volume (Year): 29 (2012)
    Issue (Month): 4 (December)
    Pages: 949-964

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    Handle: RePEc:kap:asiapa:v:29:y:2012:i:4:p:949-964

    Contact details of provider:
    Postal: P.O. Box 17, 3300 AA Dordrecht, the Netherlands
    Web page: http://www.springerlink.com/link.asp?id=106589

    Related research

    Keywords: Corruption; Multinational corporation (MNC); Institutional environment; Subsidiary; Profitability;

    References

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    Cited by:
    1. Charlotte Karam & David Ralston & Carolyn Egri & Arif Butt & Narasimhan Srinivasan & Ping Fu & Chay Lee & Yong-lin Moon & Yongjuan Li & Mahfooz Ansari & Christine Kuo & Vu Hung & Andre Pekerti & Phili, 2013. "Perceptions of the ethicality of favors at work in Asia: An 11-society assessment," Asia Pacific Journal of Management, Springer, vol. 30(2), pages 373-408, June.

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