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Corruption and Its Effects on FDI: Analysing the Interaction Between the Corruption Levels of the Home and Host Countries and Its Effects at the Decision-Making Level

Author

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  • Jose Godinez

    (Merrimack College)

  • Ling Liu

    (University of Edinburgh Business School)

Abstract

This study furthers our understanding of how corruption affects the decision-making process of allocating foreign direct investment. Drawing on the responses of 28 managers in charge of establishing operations in a highly corrupt host country, we argue that those firms based in home countries with low levels of corruption are more proactive in preparing to face corruption abroad than those based in countries with high corruption levels. This means that firms from less corrupt home countries have strategies in place to deal with high corruption abroad. This finding is based on the fact that these firms have stronger pressures to not engage in corruption from their home stakeholders. Also, these firms might not have the experience of dealing with corruption at home, which hinders their potential to deal with corruption abroad. On the other hand, those firms based in highly corrupt home countries do not have clear strategies to deal with corruption abroad. This assertion is based on the fact that these firms might have familiarity in dealing with corruption and thus, might not see it as an obstacle to operating abroad.

Suggested Citation

  • Jose Godinez & Ling Liu, 2018. "Corruption and Its Effects on FDI: Analysing the Interaction Between the Corruption Levels of the Home and Host Countries and Its Effects at the Decision-Making Level," Journal of Business Ethics, Springer, vol. 147(4), pages 705-719, February.
    • Handle: RePEc:kap:jbuset:v:147:y:2018:i:4:d:10.1007_s10551-016-3380-7
    DOI: 10.1007/s10551-016-3380-7
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    Cited by:

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    2. Ming-Chang Huang & Tian-Jyun Gong & Shih-Ping Sun & Ping-Hsin Lin, 2023. "Obstacles or catalysts? A balanced view of formal institutional risks on FDI location choice," Asian Business & Management, Palgrave Macmillan, vol. 22(5), pages 2077-2105, November.
    3. Chei Bukari & Emm anuel Atta Anaman, 2021. "Corruption and firm innovation: a grease or sand in the wheels of commerce? Evidence from lower-middle and upper-middle income economies," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 11(2), pages 267-302, June.
    4. Romero-Martínez, Ana M. & García-Muiña, Fernando E., 2021. "Digitalization level, corruptive practices, and location choice in the hotel industry," Journal of Business Research, Elsevier, vol. 136(C), pages 176-185.
    5. Cooke, Fang Lee & Wang, Jingtian & Wood, Geoffrey, 2022. "A vulnerable victim or a tacit participant? Extending the field of multinationals and corruption research," International Business Review, Elsevier, vol. 31(1).
    6. Anastasia Stathopoulou & Tommy Kweku Quansah & George Balabanis, 2022. "The Blinding Effects of Team Identification on Sports Corruption: Cross-Cultural Evidence from Sub-Saharan African Countries," Journal of Business Ethics, Springer, vol. 179(2), pages 511-529, August.
    7. Cuervo-Cazurra, Alvaro & Dieleman, Marleen & Hirsch, Paul & Rodrigues, Suzana B. & Zyglidopoulos, Stelios, 2021. "Multinationals’ misbehavior," Journal of World Business, Elsevier, vol. 56(5).
    8. Ling Liu & Jose Godinez & John Henley & J. Mauricio Galli Geleilate, 2023. "Corruption distance and the equity-based foreign entry strategies of multinational enterprises in sub-Saharan Africa," Journal of International Business Policy, Palgrave Macmillan, vol. 6(4), pages 492-510, December.
    9. Michael A. Sartor & Paul W. Beamish, 2020. "Private Sector Corruption, Public Sector Corruption and the Organizational Structure of Foreign Subsidiaries," Journal of Business Ethics, Springer, vol. 167(4), pages 725-744, December.
    10. Jose Godinez & Denise R. Dunlap, 2021. "Frontier Markets and Sustainable Entrepreneurial Competences: An Exploratory Study of the Impact of a New Industry in Guatemala," Sustainability, MDPI, vol. 13(20), pages 1-21, October.
    11. Imtiaz Arif & Lubna Khan & Sundus Waqar, 2023. "Does Corruption Sand or Grease the Wheels? A Case of BRICS Countries," Global Business Review, International Management Institute, vol. 24(6), pages 1468-1481, December.
    12. Yang, Jie & Mohammad, Shoeb, 2023. "Is the cure worse than the disease? The effect of emerging market MNEs on host country corruption," International Business Review, Elsevier, vol. 32(3).

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