Corruption and market attractiveness influences on different types of FDI

Lance Eliot Brouthers; Yan Gao; Jason McNicol

doi:10.1002/smj.669

Corruption and market attractiveness influences on different types of FDI

Lance Eliot Brouthers, Yan Gao, Jason McNicol

Research output: Contribution to journal › Article › peer-review

148 Citations (Scopus)

Abstract

Previous studies have proposed that a compensatory model predicts the level of foreign direct investment (FDI) in a country; FDI levels are a result of ‘trade-offs’ between the positive effect of market attractiveness and the negative influence of corruption. In contrast, we hypothesize and find that the compensatory relationship only holds for market-seeking investment; for resource-seeking FDI the model appears to be noncompensatory. Greater market attractiveness mitigates the negative impact of corruption on market-seeking investment, but the ability of market attractiveness to mitigate the negative impact of corruption on resource-seeking FDI quickly disappears as corruption levels increase. Implications and future research directions are discussed.

Original language	English
Pages (from-to)	673-680
Journal	Strategic Management Journal
Volume	29
Issue number	6
DOIs	https://doi.org/10.1002/smj.669
Publication status	Published - 22 Feb 2008
Externally published	Yes

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10.1002/smj.669

Cite this

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abstract = "Previous studies have proposed that a compensatory model predicts the level of foreign direct investment (FDI) in a country; FDI levels are a result of {\textquoteleft}trade-offs{\textquoteright} between the positive effect of market attractiveness and the negative influence of corruption. In contrast, we hypothesize and find that the compensatory relationship only holds for market-seeking investment; for resource-seeking FDI the model appears to be noncompensatory. Greater market attractiveness mitigates the negative impact of corruption on market-seeking investment, but the ability of market attractiveness to mitigate the negative impact of corruption on resource-seeking FDI quickly disappears as corruption levels increase. Implications and future research directions are discussed.",

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AB - Previous studies have proposed that a compensatory model predicts the level of foreign direct investment (FDI) in a country; FDI levels are a result of ‘trade-offs’ between the positive effect of market attractiveness and the negative influence of corruption. In contrast, we hypothesize and find that the compensatory relationship only holds for market-seeking investment; for resource-seeking FDI the model appears to be noncompensatory. Greater market attractiveness mitigates the negative impact of corruption on market-seeking investment, but the ability of market attractiveness to mitigate the negative impact of corruption on resource-seeking FDI quickly disappears as corruption levels increase. Implications and future research directions are discussed.

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