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Cross-border M&As vs. Greenfield Investments: Does Corruption Make a Difference?

  • Ayca, Tekin-Koru

This paper disentangles the effects of corruption on entry mode decision by carrying out an empirical analysis with rich, firm-level data on the activities of Swedish MNCs around the globe in manufacturing sectors from 1987 to 1998. A number of hypotheses emerge from a simple theoretical framework. The panorama of the results from the empirical part supports these hypotheses: (i) Corruption has a direct negative impact on greenfield investments and a weak positive impact on M&As. (ii). There are complex, asymmetric, secondary effects of corruption on the mode of entry. (iii). International experience dampens the effects of corruption on the choice of entry. (iv) The results are robust to differences in measures of corruption.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 42857.

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Date of creation: Oct 2012
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Handle: RePEc:pra:mprapa:42857
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