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Corruption and foreign direct investment phases: The moderating role of institutions

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A Correction to this article was published on 17 June 2019

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Abstract

We examine the effect of corruption and institutions on inward foreign direct investment (FDI) along different investment phases in host countries. We contribute to the literature by distinguishing the propensity and the stock of FDI to better clarify the relationship between corruption and FDI, and by substantiating an integrated formal and informal institution-based view. The results support both the ‘corruption as sand’ theory and the ‘corruption as grease’ theory after controlling for the location selection processes of multinational enterprises. We also show that investment freedom and press freedom negatively moderate the relationship between corruption and the propensity and the stock of FDI. Our conclusions may inspire governments in their policy decisions towards controlling corruption and promoting FDI.

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Change history

  • 17 June 2019

    This paper has been corrected owing to typographical errors in Table 1 and Table 2. The corrected tables are reproduced below.

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ACKNOWLEDGEMENTS

The authors appreciate the excellent guidance of Sarianna Lundan (Editor-in-Chief), Hafiz Mirza (Editor), and three reviewers. We would like to thank the National Natural Science Foundation of China (Grant No. 71873136) and the Jindal Chair at UT Dallas for the support of this project.

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Authors and Affiliations

  1. Business School, Renmin University of China, 59 Zhongguancun Street, Haidian District, Beijing, 100872, People’s Republic of China

    Jingtao Yi

  2. School of International Trade and Economics, Central University of Finance and Economics, 39 South College Road, Haidian District, Beijing, 100081, People’s Republic of China

    Shuang Meng

  3. Department of Management, College of Business Administration, California State University, Long Beach, 1250 Bellflower Blvd, MS-8502, Long Beach, CA, 90840, USA

    Craig D. Macaulay

  4. Jindal School of Management, University of Texas at Dallas, 800 West Campbell, SM43, Richardson, TX, 75080, USA

    Mike W. Peng

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  1. Jingtao Yi
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Correspondence to Shuang Meng.

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Accepted by Hafiz Mirza, Area Editor, 2 April 2019. This article has been with the authors for one revision.

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Yi, J., Meng, S., Macaulay, C.D. et al. Corruption and foreign direct investment phases: The moderating role of institutions. J Int Bus Policy 2, 167–181 (2019). https://doi.org/10.1057/s42214-019-00024-x

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