Who Cares about Corruption?

• Published in: Journal of international business studies Vol. 37; no. 6; pp. 807 - 822
• Main Author: Alvaro Cuervo-Cazurra
• Format: Journal Article
• Language: English
• Published: Basingstoke Palgrave Macmillan Journals 01-11-2006; Palgrave Macmillan
• Series: Journal of International Business Studies
• Subjects: Bribery; Business corruption; Business structures; Conventions; Corporate governance; Corruption; Corruption in government; Costs; Countries; Data corruption; Foreign direct investment; Foreign enterprises; Foreign investment; Government corruption; Government officials; Government-business relations; Host countries; Host country; Incentives; Industrialized nations; Investors; Multinational enterprises; Political behavior; Public officials; Regulation; Social responsibility; Studies; Treaties
• ISSN: 0047-2506; 1478-6990
• DOI: 10.1057/palgrave.jibs.8400223

This paper examines the impact of corruption on foreign direct investment (FDI). It argues that corruption results not only in a reduction in FDI, but also in a change in the composition of country of origin of FDI. It presents two key findings. First, corruption results in relatively lower FDI from countries that have signed the Organization for Economic Cooperation and Development Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. This suggests that laws against bribery abroad may act as a deterrent against engaging in corruption in foreign countries. Second, corruption results in relatively higher FDI from countries with high levels of corruption. This suggests that investors who have been exposed to bribery at home may not be deterred by corruption abroad, but instead seek countries where corruption is prevalent.