Far From Home: Do Foreign Investors Import Higher Standards of Governance in Transition Economies?
Based on the Business Environment and Enterprise Performance Survey (BEEPS) of firms in transition countries, which unbundles corruption to measure different types of corrupt transactions and provide detailed information on the characteristics and performance of firms, we find that: i) corruption reduces FDI inflows and attracts lower quality investment in terms of governance standards; ii) in misgoverned settings, FDI firms may magnify the problems of state capture and procurement kickbacks, while paying a lower overall bribe burden than domestic firms; iii) FDI firms undertake those forms of corruption that suit their comparative advantages, generating substantial gains for them and challenging the premise that they are coerced, which makes it difficult to develop effective constraints on such behavior; and, iv) transnational legal restrictions to prevent bribery had not led to higher standards of corporate conduct among foreign investors by the year 2000. Rather than being construed as a case against foreign investment; we argue that state capture is created and maintained through restrictions on competition and entry in strategic sectors. Thus, enhancing competition by attracting a wider, more diverse set of FDI firms is critical to the broader strategic framework of fighting state capture and corruption.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Drabek, Zdenek & Payne, Warren, 2002.
"The Impact of Transparency on Foreign Direct Investment,"
Journal of Economic Integration,
Center for Economic Integration, Sejong University, vol. 17, pages 777-810.
- Drabek, Z. & Payne, W., 1999. "The Impact of Transparency on Foreign Direct Investment," Economic Research and Analysis Division (ERAD) 99-02, World Trade Organization. Economic Research and Analysis Division (ERAD).
- Drabek, Zdenek & Payne, Warren, 2001. "The impact of transparency on foreign direct investment," WTO Staff Working Papers ERAD-99-02, World Trade Organization (WTO), Economic Research and Statistics Division.
- Drabek, Z. & Payne, W., 1999. "The Impact of Transparency on Foreign Direct Investment," Papers 99-02, Stanford - Institute for Thoretical Economics.
- Alesina, Alberto & Weder, Beatrice, 2002.
"Do Corrupt Governments Receive Less Foreign Aid?,"
4553011, Harvard University Department of Economics.
- Philip R. Lane & Aaron Tornell, 1999. "The Voracity Effect," American Economic Review, American Economic Association, vol. 89(1), pages 22-46, March.
- Theodore H. Moran, 1998. "Foreign Direct Investment and Development: The New Policy Agenda for Developing Countries and Economies in Transition," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 53, January.
- Beata K. Smarzynska & Shang-Jin Wei, 2000. "Corruption and Composition of Foreign Direct Investment: Firm-Level Evidence," NBER Working Papers 7969, National Bureau of Economic Research, Inc.
- repec:zbw:wtowps:99-02 is not listed on IDEAS
- Smarzynska, Beata K. & Shang-Jin Wei, 2000. "Corruption and the composition of foreign direct investment - firm-level evidence," Policy Research Working Paper Series 2360, The World Bank.
When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpdc:0308006. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA)
If references are entirely missing, you can add them using this form.