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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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File URL: http://mpra.ub.uni-muenchen.de/49348/1/MPRA_paper_49348.pdf
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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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  1. Lui, Francis T, 1985. "An Equilibrium Queuing Model of Bribery," Journal of Political Economy, University of Chicago Press, vol. 93(4), pages 760-81, August.
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  6. Simeon Djankov & Rafael La Porta & Florencio LopezdeSilanes & Andrei Shleifer, 2000. "The Regulation of Entry," NBER Working Papers 7892, National Bureau of Economic Research, Inc.
  7. Hakkala, Katariina & Norbäck, Pehr-Johan & Svaleryd, Helena, 2005. "Asymmetric Effects of Corruption on FDI: Evidence from Swedish Multinational Firms," Working Paper Series 641, Research Institute of Industrial Economics, revised 20 Aug 2007.
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  14. Tekin-Koru, Ayca, 2009. "Asymmetric effects of trade costs on entry modes: Firm level evidence," MPRA Paper 21483, University Library of Munich, Germany.
  15. repec:cup:cbooks:9780521677530 is not listed on IDEAS
  16. Erin Anderson & Hubert Gatignon, 1986. "Modes of Foreign Entry: A Transaction Cost Analysis and Propositions," Journal of International Business Studies, Palgrave Macmillan, vol. 17(3), pages 1-26, September.
  17. Shang-Jin Wei, 1997. "How Taxing is Corruption on International Investors?," William Davidson Institute Working Papers Series 63, William Davidson Institute at the University of Michigan.
  18. Ayça Tekin-Koru, 2006. "Corruption and the ownership composition of the multinational firm at the time of entry: Evidence from Turkey," Journal of Economics and Finance, Springer, vol. 30(2), pages 251-269, June.
  19. Hefeker, Carsten & Busse, Matthias, 2005. "Political Risk, Institutions and Foreign Direct Investment," HWWA Discussion Papers 315, Hamburg Institute of International Economics (HWWA).
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  24. Wheeler, David & Mody, Ashoka, 1992. "International investment location decisions : The case of U.S. firms," Journal of International Economics, Elsevier, vol. 33(1-2), pages 57-76, August.
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