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

Author

Listed:
  • 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)

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.

Suggested Citation

  • Jingtao Yi & Shuang Meng & Craig D. Macaulay & Mike W. Peng, 2019. "Corruption and foreign direct investment phases: The moderating role of institutions," Journal of International Business Policy, Palgrave Macmillan, vol. 2(2), pages 167-181, June.
    • Handle: RePEc:pal:joibpo:v:2:y:2019:i:2:d:10.1057_s42214-019-00024-x
    DOI: 10.1057/s42214-019-00024-x
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