Foreign Direct Investment and Corruption
How does FDI inflow influence the host-country´s corruption level
and what is the moderating effect of the host-country’s institutional
quality?
Author: Martijn Bronder Student number: s3024768 Address: Aquamarijnstraat 419
9743 PK Groningen
Supervisors: J. van Polen E. Mendiratta
2
ABSTRACT
Most empirical research on FDI examines how the institutional environment in the host country influences the behavior of multinational corporations and their choice of foreign direct investment. This study highlights the other side of the picture: does FDI inflow in terms of mergers and acquisitions influence the host country corruption level over time? Applying several theories regarding FDI, this study identifies some important factors that could change the business processes in the host country such as the spill-over effect, the professionalization effect and the knowledge sharing effect. Applying data from M&As between the five least corrupt European countries and the five most corrupt countries within a ten year time-frame (2006-2015), and the host country corruption scores for the same period, moderated by the institutional quality in the host country, this study obtained positive significant results
indicating that host country corruption decreases over time as the amount of M&As increases and that the relation between FDI and corruption is positively moderated by the quality of the host country institutions. Finally, this study contributes to existing literature by integrating FDI, corruption and host country institutional quality in a single model to examine if M&As can enable the local institutions to reduce corruption, providing a basis for scholars to develop future research on these topics. Also, practical implications regarding the role of the
management are described, indicating the role the MNC can fulfill within the supply chain or network, in order to reduce corruption in the host-country.
Key words: Foreign Direct Investment; FDI; Mergers and Acquisitions; M&A; Corruption; Corruption Perception Index; Corporate Social Responsibility; CSR; Institutional Quality.
ACKNOWLEDGMENT
First of all I would like to thank both my supervisors Hans van Polen and Esha Mendiratta for their time they have invested in providing feedback for writing this Master thesis. Without your help, this thesis would not have become the way it is today. Furthermore I would like to thank my parents for their support and commitment. Finally I would like to thank my
classmates for helping me out with some of the obstacles I faced in the process of writing this thesis.
3
Table of Contents
INTRODUCTION ... 4
THEORY ... 6
Corruption ... 6
Foreign Direct Investment ... 10
Conceptual model ... 15
METHODOLOGY ... 16
The Sample ... 16
Dependent Variable (DV) ... 16
Independent Variable (IV) ... 17
4
INTRODUCTION
Much research has been done regarding the impact of foreign direct investment (FDI) originating from developed countries into developing countries (Driffield, Jones & Crotty, 2012; Mallampally & Sauvant, 1999). Some of this research is focused on the impact FDI has on corporate social responsibility (CSR) (Bardy, Drew & Kennedy, 2011; Nyuur, Ofori & Debrah, 2016). Others have focused on the influence of host country institutions and FDI (Loungani & Razin, 2001; Rahman, Uddin, & Lodorfos, 2017), or on the relation between corruption and FDI (Cuervo-Cazurra, 2006; Blundell-Wignall & Roulet, 2017). Reversed research regarding the impact of FDI on corruption is limited (Kwok & Tadesse, 2006; Pinto & Zhu, 2016) and research on this impact on countries within the European Union is lacking. According to several researchers (Keig, Brouthers & Marshall, 2015; Adefolake, 2011; Driffield, Jones & Crotty, 2012) corruption is seen as corporate social irresponsible behavior. Combined with the increasing demand for transparency (Ekatah, Samy, Bampton & Halabi, 2011), anti-corruption measures are becoming an important agenda point for firms and governments. Because CSR is seen as a strategic activity (Martínez-Ferrero, Banerjee & García-Sánchez, 2016), anti-corruption practices are a part of CSR activities (Welford, 2005; Preuss, Barkemeyer & Glavas, 2016). CSR activities are undertaken mainly by firms from developed countries active in developing countries (Azmat & Ha, 2013; Kolk, Hong & van Dolen, 2010; Preus, Haunschild & Matten, 2006) and the results of the study by Nyuur et al. (2016) show that these CSR activities from foreign firms increase the local firms’ uptake of CSR significantly with an increasing inflow of FDI. The question that arises is if firms from developed countries, operating in other developed countries, can also have a positive impact on the uptake of CSR activities by local firms, and eventually reduce corruption as there are major differences in corruption scores between developed countries (Transparency
International, 2017)
5 countries that have signed the convention, reduce their FDI towards the countries that did not sign the convention (Cuervo-Cazurra, 2006). Kwok & Tadesse (2006) and Nyuur et. al. (2016) show different results. They found no significant results for the impact of corruption on FDI inflows however, they did find that the presence of a multinational corporation (MNC) in a host country may reshape the institutional environment and influence the corrupt behavior and activities in the host country over time through the professionalization effect.
Corruption is an important factor for firms that do business at a local or international level as corruption takes place on many levels in society and can take several forms such as bribery, money embezzlement and extortions, has an influence on the allocation of resources and also involves the use or abuse of public or collective responsibility for private ends (Kwok & Tadesse, 2006). This means that corruption can take place in many institutions and determine their efficiency (Rodriguez, Uhlenbruck & Eden, 2005). The quality of the institutions in turn influence the choice and strategy of a MNCs entry mode into a specific foreign country (Rahman, Uddin, & Lodorfos, 2017; Loungani, and Razin, 2001).
As existing literature is lacking in the field of FDI and the impact it can have between
developed countries, especially regarding the relation with corruption, the research aim of this paper is to determine what the impact of FDI in terms of mergers and acquisitions is on corruption in the host country, moderated by the quality of the host-country institutions. This study therefore obtained the following research question:
“How does FDI inflow influence the host-country´s corruption level and what is the moderating effect of the host-country’s institutional quality?
The next section discusses the theoretical background of this study, which results in the development and presentation of the hypotheses. This is followed by the methodology section which presents the research design and data analysis. Subsequent, the results of the analysis are presented, followed by the discussion in which the theoretical and practical
6
THEORY
This study identifies several theories that are related to FDI, host country institutions and corruption. The relation between these theories will be explained at the end of this section, providing a clear perspective on which theories this study is based, followed by the
hypotheses.
Corruption
According to traditional theory of Milton Friedman, the only responsibility of a firm is to maximize shareholder value while engaging in open and free competition, without deception or fraud (Friedman, 1962). The latter part of this definition, ‘free competition without
deception or fraud’ forms the focus of this study as these two responsibilities are related to corruption according to the definition of corruption provided by the Organization for Economic Cooperation and Development (OECD), which states that “corruption reduces efficiency and increases inequality.” (OECD, 2014)
In line with this definition of Friedman, and especially with the latter part of it, Welford (2005) identified 20 elements of CSR originating from four areas: Internal aspects, External aspects, Accountability and Citizenship which relate to the entire definition. One of these 20 elements however, is the Code of Ethics, which includes the prevention of bribery and corruption (Welford, 2005). The Code of Ethics, or Code of Conduct, is one of the most widely used CSR tools and has been implemented by well over 90 per cent of the largest firms from developed countries (Preuss, Barkemeyer, & Glavas, 2016).
However, these responsibilities and elements of CSR according to Welford (2005) can be interpreted differently across countries as countries are to a certain degree free to determine their rules and laws due to differences in institutions (Brammer & Pavelin, 2005; Campbell, 2007; Matten & Moon, 2008). Thus, these institutional differences between countries can lead to differences in acting social responsible towards the stakeholders of the firm(Campbell, 2007; Matten & Moon, 2008). These differences also have implications for the amount and type of corruption which may also differ per country (Campbell, 2007; Matten & Moon, 2008).
7 as there are differences in institutional quality per country (Campbell, 2007), heterogeneity exists in approaches to act corporate social responsible between firms from different countries (Brammer & Pavelin, 2005). This however also works the other way around; when the host country grows, it would like to enhance its international reputation and attract more business, therefore learning from foreign MNCs active in their country (Kwok & Tadesse, 2006). Besides adapting to the host country in order to gain legitimacy, the subsidiary of the foreign MNC may also strive to obtain internal legitimacy within the MNC, thus following the rules and goals set by the headquarter. This striving for internal legitimacy could have positive effects within the host country environment as the headquarters in the home country environment may have adopted norms and practices that ban corrupt behaviors by their subsidiaries (Davis, Desai & Francis, 2000; Kostova & Roth, 2002). Although the CSR activities of a firm may differ per country, there is one thing that is the same in every country and that are the stakeholders of a firm (Yang & Rivers, 2009).
Stakeholders of a firm are defined as individuals or groups which are either harmed by or benefit from the firm, or whose rights can be violated, or have to be respected by the firm (Crane & Matten, 2004).Yang & Rivers (2009) have identified eight stakeholders namely: 1. formal government institutions; 2. the community in which the company operates or serves; 3. Non-government organizations (NGOs); 4. industry bodies; 5. consumers; 6. shareholders; 7. employees; and 8. parent firms. Understanding who the stakeholders of the MNC are, helps in explaining on which levels corruption can take place. But it also helps in understanding on which levels the MNC can exert pressure that could lead to changes in the way business is done in the host-country and in doing so, reduce corruption.
Although the interpretations of acting social responsible may differ across countries, the general view about corruption is quite clear as several agencies have come up with guidelines for behaving social and ethical responsible, ensuring a common known understanding
regarding corruption and its consequences. One of these institutions is the Organization for Economic Cooperation and Development (OECD). The OECD has designed the ‘Convention on Combating Bribery of Foreign Public Officials in International Business’ which is signed by 41 countries worldwide (OECD, 2017). Another example of worldwide institution is the Global Reporting Initiative (GRI), which “provides the world’s most widely used standards
8 Corruption refers to the exercise of public power for private gain, undermines economic and social progress and steals the future of young generations (Cuervo-Cazurra, 2006; Blundell-Wignall & Roulet, 2017). Although this is a pretty negative definition of corruption, there are scholars that argue that corruption is not always a negative thing (Huntington, 1968; Leff, 1964). They see corruption as ‘grease in the wheels’ that facilitates transactions and speeds up procedures that would otherwise take a long time, or would not take place at all (Huntington, 1968; Leff, 1964). Corruption is also an instrument to change market procedures, introducing competition into what would otherwise be a monopolistic setting (Leff, 1964). Although there are some arguments to support these theories, corruption is mainly seen as an unethical behavior and should be fought (Cuervo-Cazurra, 2006; Blundell-Wignall & Roulet, 2017; OECD, 2014; Transparency International). The reason corruption should be fought is that corruption leads to an unfair advantage for firms participating in corruption, over firms who do not do so (OECD, 2014), but it also goes hand in hand with huge amounts of money which could have been used for other, better, purposes.
The World Bank (2016) estimates that over US$ 1 trillion is paid in bribes each year which can be seen as a waste of money that could have been invested in other projects. Besides the huge amount of money spend on bribery, corruption leads to even higher costs, not only financially, but also reduces efficiency, increases uncertainty and increases inequality (OECD, 2014). Furthermore firms participating in corruption face risking prosecution, blacklisting and reputational damage, but also participating in corrupt activities provides no guarantees for business success as there can always be a third party offering more money and thus obtaining the deal (Blundell-Wignall & Roulet, 2017). As bribery is illegal, no demand for fulfillment can be obtained in court. Therefore, a firm paying a bribe creates leverage of the other party over the firm as the firm depends on the other party. The other party could postpone delivery or acceptance, demanding a higher bribe, only increasing the costs for the firm (De Soto, 1989).
Building on these forms of corruption Rodriguez, Uhlenbruck, & Eden (2005) argue in their study that there are two types of corruption a firm faces namely: pervasiveness and
9 a society, the more visible and accepted bribery is. If bribery in a country is highly visible, it is easier for the firms to decide if they would participate actively in bribing. Thus, when it is clear that every firm pays bribes, a firm can be quite sure that bribing is expected in order to do business in that environment (Seung-Hyun & Kyeungrae,2007). This also means that when bribery is not visible, a firm could expect that it could do business in that country without being expected to pay bribes to government officials (Rodriguez et al., 2005; Seung-Hyun, & Kyeungrae,2007)
Arbitrariness is described by Rodriguez et al. (2005) as “the inherent degree of ambiguity associated with corrupt transactions in a given nation or state.” Whereas pervasive corruption reflects the visibility of corruption within a given country, Arbitrariness reflects the
uncertainty of a firm regarding corruption as it is less transparent and, perhaps more important, it is less predictable as it lacks a stable underlying structure or process (Rodriguez et al., 2005). If corruption is arbitrary, transactions between firms and the local government are characterized by a high level of enduring uncertainty regarding the size, target and number of payments, or bribes, to obtain approval or legitimacy. This uncertainty increases the
transaction costs of a firm in doing business in a country that is characterized by arbitrariness (Rodriguez et al., 2005).
Besides these two types of corruption, pervasiveness and arbitrariness, corruption can take place on several levels. The first level is grand corruption which represents the actions committed at a high level of government that distort policies or the central functioning of the state, enabling leaders to benefit at the expense of the public good. The second level is petty corruption which refers to everyday abuse of entrusted power by low- and mid-level public officials in their interactions with ordinary citizens, who often are trying to access basic goods or services in places like hospitals, schools, police departments and other agencies. The last level is political corruption and this refers to the manipulation of policies, institutions and rules of procedure in the allocation of resources and financing by political decision makers, who abuse their position to sustain their power, status and wealth (Rodriguez et al., 2005; Pinto & Zhu, 2016; World Bank, 2017).
10 business abroad will choose a country with lower levels of corruption in order to reduce the costs of doing business. However, as will be further elaborated in the next part, there are several reasons for a firm to expand to a certain country, providing the host country with several benefits, such as the professionalization effect, that could reduce corruption.
Foreign Direct Investment
Foreign Direct Investment (FDI) reached its highest level in 2015 with US$ 1.76 trillion, only to fall back to US$ 1.52 trillion in 2016 as economic growth remained weak (UNCTAD Global Investment Trends Monitor, 2017; UNCTAD Global Report, 2016). The amount of cross-border mergers and acquisitions (M&As) shows signs of restraint although the amount of the value of net sales rose to $831 billion. This however pales when compared to the 67% and 68% increases registered in 2014 and 2015 (UNCTAD Global Investment Trends Monitor, 2017). Despite the reduced number of growth in 2016, equity investments in the value of M&As has never been this high since 2007. As can been seen in Figure 1, the amount of FDI inflows is however still increasing since 2005 despite a reduced growth rate in 2016.
These numbers show that firms are willing to invest in cross-border M&As, although there are several factors (which will be discussed next), firms have to keep in mind when investing in cross-border M&As. In order to get a better view of FDI, the next step is to identify FDI, why firms participate in FDI, the determinants of entry modes of FDI and finally the relation with corruption.
11 To begin with, FDI is generally known as an investment of a firm from one country into another country. This investment can take the form of either establishing a new business activity, also known as Greenfield investment (Barkema & Vermeulen, 1998), or acquiring a foreign business activity, also known as a brownfield investment (Meyer & Estrin, 2001 ), but most commonly known as a merger and acquisition (M&A) (Barkema & Vermeulen, 1998). Second, firms expand their business abroad due to three advantages a firm may have. These advantages are ownership advantages, location advantages, and internalization advantages, also known as the OLI or eclectic approach developed by Dunning (1988). These three advantages represent the ‘Why’ ‘Where’ and ‘How’ of FDI respectively. Ownership
advantages represent why one firm expands its business abroad where others do not. Location advantages refers to where a firm expands its business to. Finally, the internationalization advantages reflects the governance mode of the foreign business (Dunning, 1988; Neary, n.d.). Building on the OLI or eclectic approach, the ownership advantages are linked to the resource based view (RBV) by Barney (1991). The RBV theory assumes that resources are
heterogeneous and immobile among firms, and that differences in resources therefore are stable over time. These factors make that a firm can have a sustainable competitive advantage over another firm. A firm can have a sustainable competitive advantage when a firm
implements a value creating strategy not simultaneously being implemented by any
competitors and when other firms are unable to duplicate the benefits of the strategy. In order for this to be the case, the firm’s resources must fulfill to the VRIN criteria. VRIN resources are:
- Valuable: Value creating (neutralize weaknesses/ exploit opportunities); - Rare: Scarce, not possessed by many other firms
- Inimitable: Hard to copy due to: causal ambiguity, path dependency and social complexity;
- Non-substitutable: No strategic equivalent resources exist (Barney, 1991).
12 As mentioned, location refers to which country a firm expands its business to. When selecting a country to expand to, there are several motives for selecting a location. To begin with, a firm has two options for expanding their business that deal with foreign expansion. The first option for a firm to expand their business abroad is referred to as Horizontal FDI (Markusen, 1984; Neary, n.d; Glass, n.d.), and occurs when a firm expands its business abroad in order to improve its market range and share to foreign consumers.
Vertical FDI (Helpman, 1984) occurs when a firm expands its business abroad, focusing on production, in order to reduce production costs (Neary, n.d) and not necessarily to serve the host country market (Dunning, 1988; Neary, n.d; Glass, n.d.). Despite these two different options of firm expansion, most firm expansion takes place at horizontal level and thus firms expand mainly to access and serve a foreign market (Neary, 2009; Glass, n.d.).
Besides these reasons for expansion and country choice, the liability of foreignness also influences the location choice. Liability of foreignness (Petersen & Pedersen,2002; Zaheer, 1995; Bhanji & Oxley, 2013), refers to all additional costs that a firm faces when operating in a foreign market, such as bribes and other forms of corruption (Zaheer, 1995).
Based on the outcome of the ownership advantages and the destination of the firm’s expansion, the host country entry mode is selected. This paper focusses on the entry mode which provides the MNC the highest levels of control combined with the highest level of knowledge-contribution which are M&As as is seen in Figure 2.
13 According to Meyer & Nguyen (2005), Brouthers & Hennart (2007) and DiMaggio & Powel (1983) there are several other host-country factors that influence the country choice for firm expansion and governance mode. The first host country factor is the institutional environment. DiMaggio & Powell (1983) argue that a firm has to deal with three types of institutional pressures namely, Coercive pressures, Mimetic pressures and Normative pressures.
DiMaggio & Powell (1983) describe coercive pressures as both formal and informal pressures, such as legal mandates, local legislation or the influence stakeholders have, as the firm
dependents on them. Eibahnasawy & Revier (2012) found in their study that a strong support for rule of law is strongly correlated with reduced corruption, suggesting that a better quality of law enforcement reduces corruption. Mimetic pressures originate from uncertainty the firm faces when goals are ambiguous, technologies are poorly understood or due to changes in the direct environment of the firms (DiMaggio & Powell,1983). Due to these forms of uncertainty firms may copy successful strategies or model themselves on other successful organizations. Based on the fact that firms expand their business abroad due to their sustainable competitive advantage (Barney, 1991), local competitors will try to copy the MNC’s business activities due to the uncertainty the local firm faces due to the presence of the MNC (Kwok & Tadesse, 2006). Finally, normative pressures stem from the standards and cognitive frameworks that are created and controlled by professionals and other moral standards-making bodies such as the already described agencies as the OECD and GRI.(DiMaggio & Powell , 1983; Shadnam & Lawrence, 2011).
14 local competitors may participate in CSR activities and thus in anti-corruption activities, reducing the amount of corruption in the host country, only in order to survive (Chen, Wen, & Luo, 2016; Callan & Thomas, 2009). These findings thus indicate that the presence of a foreign MNC in the host country can result in declining corruption rates.
Besides the spillover effect, the copying of best practices from the MNC by local firms can also be linked to the relational rents theory from Dyer & Singh (1998) who suggest that in the case of M&As, the foreign firm can make a positive contribution to a host economy by supplying capital, technological and managerial resources that would otherwise not be available. Thus, these transfers, according to Kurtishi-Kastrati (2013), can result in “technology spillovers, human capital formation support, enhancement of competitive business environment, contribution to international trade integration and improvement of enterprise development.” FDI however, can also help the improvement of the environment and social condition in the host country through the relocation of ‘cleaner’ technology and guiding to more socially responsible corporate policies. (Loungani & Razin, 2001; Nyuur et al., 2016; Kurtishi-Kastrati, 2013).
Concluding on all the benefits FDI can have in the host country, the global mobility of capital limits the ability of governments to pursue bad policies such as corruption (Feldstein, 2000; Loungani &Razin, 2001). Continuing on these benefits, recent studies indeed suggest that FDI inflows could encourage local firms to be socially responsible in order to increase their image and reputation (Gonzalez-Perez, et al., 2011; Nyuur et al., 2016; Bardy et al., 2012).
Based on the results of these studies, it is acceptable to argue that an increase in M&As as an entry strategy by countries with low levels of corruption into host countries with high levels of corruption can eventually result in lower levels of corruption in the host country. The first hypothesis is therefore:
Hypothesis 1: An increase of M&As in the host country reduces the level of corruption in the
host country.
Continuing on the institutional pressures as described by DiMaggio & Powel (1983) Kuada and Hinson (2012) reason that there is an increasing adoption of CSR activities by local firms in developing countries with institutional voids (Nyuur et al., 2016), which is due to pressures from foreign firms. Institutional voids refer to the overall strength of the host country
15 incorporates fundamental ground rules such as political, social, and legal rules that establish the basis for production, exchange, and distribution. Institutions are however viewed by other scholars as a resource that shapes the firms capabilities and activities (Dunning & Lundan, 2008; Nyuur et al., 2016). Continuing on these perceptions, Globerman & Shapiro (2002) found a significant positive impact of good governance on FDI, where an effective government and low regulatory encumbrance in the host country indicate a beneficial institutional environment and thus create favorable conditions for attracting FDI as well as economic growth. Busse & Hefeker (2007) show that government stability, law and order, democratic accountability of government, and quality of bureaucracy are highly significant factors of foreign investment inflows. These findings indicate that the institutional quality in the host country has a positive impact on FDI inflows (Busse & Hefeker, 2007; Lucke & Eichler, 2016). As hypothesis one assumes that FDI in terms of M&As has a positive impact on the level of corruption in the host country, and literature indicates that institutional quality in the host country has a positive effect on FDI inflows, this study argues that higher
institutional quality leads to higher FDI inflows and positively moderates the relation between FDI and corruption. The second hypothesis is therefore:
Hypothesis 2: The quality of the host country institutions positively moderates the relation
between FDI and host-country corruption.
Conceptual model FDI in terms of M&As Host country Corruption- score Host Country Institutions
H1
H2
+
16
METHODOLOGY
The Sample
In order to give a solid and profound answer to the research question, this study uses ten countries which are part of the European Union. These ten countries are selected based on their corruption score according to Transparency International. As previous literature mainly focused on MNC’s from developed countries and its impact in developing countries (Kuada & Hinson, 2012; Nyuur et al., 2016), this study is limited to the impact firms from countries within the European Union have on each other. According to the United Nations all countries within the European Union are considered developed countries(United Nations, 2014), there is however an inconsistency between literature and country corruption reports. Literature states that CSR activities are mainly undertaken by firms in developed countries (Azmat & Ha, 2013; Preuss, Haunschild & Matten, 2006) however, taking previous literature into account that corruption is part of CSR activities (Welford, 2005; Preuss et al., 2016) and
anti-corruption strategies such as the code of ethics, are implemented by well over 90 per cent of the firms in developed countries (Preuss et al., 2016), it is remarkable that, when looking at the Corruption Perceptions Index (Transparency International), there are developing countries scoring better than developed countries. Therefore this study takes the five least corrupt countries and the five most corrupt countries within the European Union in order to measure the impact of M&As between countries with almost no corruption and countries with high corruption scores, thus testing if the professionalization effect and knowledge sharing also show significant effects.
Dependent Variable (DV)
17
Independent Variable (IV)
The independent variable in this study is FDI in terms of M&As. The amount of money that is spent on M&As is more than half the amount of total FDI flows (UNCTAD Global
Investment Trends Monitor, 2017). Data about M&As is obtained from the Zephyr database which is widely used for measuring mergers and acquisitions . As this study measures the impact of FDI in terms of M&As, on host country corruption, only data regarding M&As between countries from within the sample size are used. Using Zephyr, 554 M&As were identified that took place between the year 2005-2014. This time frame was used for
measuring the total amount of M&As and differs from the time frame used for measuring host country corruption score due to the one year time lag between the M&A and its effects. Of these 554 M&As, 196 were towards Bulgaria, 11 towards Croatia, 22 towards Greece, 229 towards Poland and 96 towards Romania. In all these M&As, firms from Denmark, Finland, the Netherlands, the United Kingdom and Sweden were the acquiring firm.
Reverse Causality
As there are scholars who argue that FDI is determined by the amount of host country corruption (Cuervo-Cazurra, 2006; Blundell-Wignall & Roulet, 2017) there could be reverse causality as it remains unclear if FDI is positively or negatively influenced by host country corruption. Reverse Causality implies that the independent variable is influenced by the dependent variable, where the expectation is that the dependent variable is influenced by the independent variable (Katz, 2006). In this study this would mean that the amount of M&As is influenced by the host country corruption level, as has been the field of study by Cuervo-Cazurra (2006) and Blundell-Wignall & Roulet (2017). In order to prevent this reverse causality bias, this study makes use of a ten year time frame, 2006-2015. A time frame concerning a longer period of time is used in several studies in order to check for reverse causality (Kwok & Tadesse, 2006; Pinto & Zhu, 2016)
18
Moderator
The World Bank Worldwide Governance Indicators (WGI) are used to determine the host country institutional quality. The WGI measures Voice and Accountability, Political Stability and Absence of Violence/Terrorism, Government Effectiveness, Regulatory Quality, Rule of Law, and Control of Corruption (Kaufmann, Kraay & Mastruzzi, 2009). In line with several studies (Jadhav, 2012; Busse & Hefeker, 2007) it is found that four country indicators influence the attractiveness of a country and thus influence FDI inflows into a specific country. These indicators originate from the study by Kaufmann, et al. (2009) and will be used as the moderator in this study.
The first indicator, Voice and Accountability, captures the perceptions onto which extent a country's citizens are able to participate in selecting their government, as well as freedom of expression, freedom of association, and a free media. This is similar to the Polity IV scores that measure to which degree a country is democratic (Pinto & Zhu, 2016). The second indicator, Political Stability and Absence of Violence, captures the perceptions of the
likelihood that a government will be destabilized or overthrown by unconstitutional or violent means, including politically-motivated violence and terrorism. The third indicator,
Regulatory Quality, captures the perceptions of the ability of the government to formulate and implement sound policies and regulations that permit and promote private sector development. The fourth and last indicator, Rule of Law, captures the perceptions of the extent to which agents have confidence in and abide by the rules of society, and in particular the quality of contract enforcement, property rights, the police, and the courts, as well as the likelihood of crime and violence (Kaufmann, et al., 2009).
These aggregate indicators are based on hundreds of specific and disaggregated individual variables measuring various dimensions of governance, taken from 35 data sources provided by 33 different organizations (Kaufmann, et al., 2009). All scores lie between -2.5 and 2.5, with higher scores corresponding to a higher quality of governance. The quality of the host country institutions is constructed by computing a simple average of the above-mentioned indicators as is in line with the study from Khordagui & Saleh (2013).
Control Variables
Control for OECD Convention
19 officials and also of officials of public international organizations. It requires signatory
countries to modify their laws to make illegal the bribery of foreign officials, to provide mutual legal assistance in investigations, and to allow for extraditions. The Convention requires stricter accounting standards, external auditing, and internal controls in national laws by the countries that signed the convention and it establishes a systematic mechanism for monitoring of the implementation of the Convention's standards by each signatory country (Blundell-Wignall, & Roulet, 2017). Control for this convention was done with the use of a dummy variable, a country could either score a 0, indicating that this country did not signed the convention, or a 1 which indicates that the country did signed the convention. The
assumption is that countries that did not signed the convention, namely Romania and Croatia, would have lower levels of M&As according to the studies of Cuervo-Cazurra (2006) and Blundell-Wignall & Roulet (2017) who found that FDI inflows originating from countries that did sign the convention would be lower towards countries that did not sign the convention. Control for GDP per capita
According to previous research (Husted, 1999; Pinto & Zhu, 2016), wealthier countries tend to be less corrupt. Therefore this study controls for gross domestic product (GDP) per capita which measures the total output of a country that takes GDP and divides it by the amount of people in that country. This way comparisons between the countries are more reliable as the GDP per capita shows the relative performance of a country. Data regarding GDP per capita was obtained via the database of the World Bank. This data resulted in some outliers which could result in a skewed sample distribution. To prevent this, the outliers are winsorized and thus replaced with the nearest nonsuspect data as is in line with Hoaglin, Iglewicz & Tukey, (1986). To ensure the homoscedasticity of the error term, the natural log has been taken (Wei, 2000).
Control for Total Gross enrollment rate in secondary education
20 students because of early or late school entrance and grade repetition (World Data Bank). Data regarding the gross enrolment rate was obtained via the World Data Bank. However, there were some missing data for a couple of years for one or two countries, depending on the year. This missing data has been omitted using the missing value approach. The missing data were given a number that would otherwise not occur in the data and these numbers were then excluded. In total there was data missing for three years regarding two countries, resulting in three missing numbers.
Analysis
The obtained data regarding the variables was entered into SPSS, which allows people to statistically analyze data. The first step then was to perform a descriptive analysis in order to obtain a general overview of the data and to see how the data is distributed. The results of the descriptive analysis are displayed in Table 1. In order to test if M&As influence host country corruption, this study makes use of the ordinary least squares (OLS) regression. Furthermore, hetroskedacity, normal distribution, skewness and kurtosis have been checked for.
Correlations could occur between the used variables, thus this study also checked for
correlations and multicollinearity between de variables. The results displayed in table 3 show that there is no problematic correlation between the variables. Correlation coefficients of .9 and above usually suggest the presence of multicollinearity (Pallant, 2007; Nyuur, 2016). According to Table 3 the highest correlation score is .795 and is between the dependent variable “host country corruption score” and the control variable “institutional quality of the host country”, which indicates that there is a small concern regarding multicollinearity. However, by calculating the variance inflation factor (VIF) for each of the regression
21
RESULTS
Table 2 shows the results of the OLS regression. Model 1 is the baseline model and contains only the control and dependent variable. The variables included in model 1 are positive, Institutional quality and GDP per Capita are significant at 1%, Gross enrolment rate is significant at 5% but the OECD Convention against bribery however is not significant. Model 2 includes the same variables as model 1, but now also includes the independent variable “Total number of M&As”. There are some deviations with model 1, the most
noticeable changes are the OECD convention against bribery which has become negative at a 5% significance level and the Gross Enrolment rate Education has no significance level. The inclusion of the independent variable shows that there is a positive relation of .005 at a 1% significance level between the number of M&As and the host country corruption score, after controlling for the effects of Institutional Quality in the Host-country, the Gross Enrolment rate Education, the OECD Convention against bribery and GDP per Capita. These results prove that Hypothesis 1, which suggest that an increase of M&As in the host country reduces the level of corruption in the host country, is confirmed. Model 2 also shows a R² of .811 explaining 81% of the variance in Host country Corruption Score (R²=.811, adjusted R² =.810). Model 3 again shows different results as it also includes the interaction effect. These results indicate that hypothesis 2 which suggests that the relation between FDI inflows and host country corruption are positively moderated by the quality of the host country institutions, is also confirmed with a positive outcome of .288 at a 1% significance level. The variance
Table 1: Descriptive Statistics
N Minimum Maximum Mean Std.
22 explained in the model by the inclusion of the interaction term is also higher (R²=.883,
adjusted R² =.882) than the explained variance in model 2 without the interaction term. Furthermore, Model 3 shows that consistent with previous research (Barro, 1991; Kwok & Tadesse, 2006) education has a positive effect on host country corruption, although without any acceptable significance level. As Husted (1999) and Pinto & Zhu (2016) already
concluded in their studies, wealthier countries tend to be less corrupt, which is also the case in this study. With a positive effect and at a 1% significance level, Model 3 shows that higher rates of GDP per capita result in lower host country corruption scores. The results regarding the OECD convention show a positive effect on the host country corruption level of .145 at a 1% significance level.
Table 2: OLS Regression output: DV is Host Country Corruption Score
Variables Model 1 Model 2 Model 3 VIF
Institutional Quality Host-country 1.502*** (.131) 1.538*** (.092) .728*** (.087) 4,699 Gross Enrolment rate in secondary
education .020** (.005) -.009 (.005) .007 (.004) 2,320
OECD Convention against bribery .100
(.057) -.135** (.043) .145*** (.037) 2,023 LN GDP per Capita .565*** (.000) .455*** (.087) .658*** (069) 4,013
Total Number of M&As .005***
(.000) .005*** (.000) 1,556 Interaction .288*** (.016) 2,040 R² .676 .811 .883 Adjusted R² .673 .810 .882 Durbin Watson .140 .190 .408 N= 554 *P < 0.1; **P < 0.05; ***P <0.01
23
Table 3: Correlation matrix
Variables Host country Corruption Score Total Number of M&As Institutional Quality Host-country Gross Enrolment rate in secondary education OECD Convention against bribery LN GDP per Capita Host country Corruption
Score 1
Total Number of M&As .643** 1
Institutional Quality
Host-country .795** .282** 1
Gross Enrolment rate in
secondary education .328** .525** .129** 1
OECD Convention against
bribery .315** .407** .353** .309** 1
LN GDP per Capita .698** .327** .746** .475** .155** 1
** Correlation is significant at the 0.01 level (2-tailed).
DISCUSSION
This study was designed to shed more light on the influence of FDI inflow in terms of mergers and acquisitions (M&As) and the impact is has on host-country corruption scores. The results of this study provide evidence for the assumption that the presence of a foreign firm, in this study a firm origination from either Denmark, Finland, the Netherlands, the United Kingdom or Sweden, has a positive influence on the institutional environment in the host country. Through knowledge sharing, the professionalization effect, the spillover effect and the mimetic pressures the local firms face in order to survive, the presence of a MNC allows the stakeholders of the MNC to change business processes and thus reduce corrupt activities. These outcomes therefore provide evidence to confirm hypothesis one, which states that an increase of M&As in the host country reduces the level of corruption in the host country. This hypothesis is confirmed at the highest possible significance level of 1%, thus leaving little room for debate. The study further established that the interaction between FDI and the institutional quality is significant at a 1% significance level, showing that the
institutional quality of the host country positively moderates the relationships between FDI and the host country corruption level. This indicates that, in order to provide an answer on the research question of this study, which was: “How does FDI inflow influence the
host-country´s corruption level and what is the moderating effect of the host-country’s institutional quality”, it can be stated that FDI in terms of mergers and acquisitions has a positive
24 also indicate that the institutional quality from the host country positively moderates the relation between FDI and corruption. These findings have some important implications for academic research, management activities and governmental institutions.
Theoretical Implications
The theoretical implications are to begin with, that the results of this study provide evidence that FDI inflows have a positive impact on the host country corruption score. M&As could allow local firms to gain knowledge and help further the understanding of the relevance of lower levels of corruption in doing business on national and international level. Over time, together with the demonstration effect and with the previous described effects, local firms, government officials and other business people may model themselves after the MNCs and modify their traditional business practices, thus reducing the amount of corruption. They may want to obtain legitimacy within the global business community, raising their country's international reputation, and thus making their country attract more international business. Consistent with previous research of Cuervo-Cazurra (2006) and Blundell-Wignall & Roulet (2017), the OECD convention against bribery has a positive impact on attracting FDI for a country. The results regarding the moderating effect of host country institutional quality are also consistent with previous literature (Busse & Hefeker, 2007; Lucke & Eichler, 2016), indicating that a strong institutional quality positively influences attracting FDI and also helps further reduce corruption. When looking at the gross enrolment rate in secondary education, this study finds similar results as Barro (1991) and Kwok & Tadesse (2006) who found in their studies that education is linked to the reduction of corruption. Education allows students to better understand the unethical view of corruption, but it also shows students that countries with lower levels of corruption are generally wealthier and public services and governments are more efficient (Kwok & Tadesse, 2006). However, higher enrolment rates of education does not necessarily have to lead to the deterioration of corruption as Dutta & Roy (2013) argue in their study that education is dependent on press freedom and media
accessibility in order to reduce corruption. This means that if students are being taught lies or alternative truths for whatever reason and they cannot access sources that prove differently, for example newspapers or social media, people will not be able to change the old and current ways of life (Dutta & Roy, 2013; Kwok & Tadesse, 2006).
25 (2007) that indicates collinearity, there is one correlation that requires further elaboration. The correlation score between the variables Host-Country Institutional Quality and Host-Country Corruption Score is .795 relative high, which indicates that these variables explain for a large part the same. Furthermore, with an increase of the institutional quality, the corruption score will go up. As a higher score indicates less corruption, and a lower score indicates more corruption, a higher host country institutional quality also indicates a higher country corruption score. This thus means that the amount of corruption depends for a large part on the institutional quality within a country. The reason for this is that the factors used to determine the institutional quality, partly influence the ability for people to participate in corrupt activities. As the Rule of Law captures the perceptions of the extent to which agents have confidence in the quality of contract enforcement, property rights, the police, and the courts, as well as the likelihood of crime and violence (Kaufmann, et al., 2009), Rule of law is linked to corruption as corruption is a crime (De Soto,1989) and firms participating in
corruption face risking prosecution and blacklisting (Blundell-Wignall & Roulet, 2017). Therefore, if there is a strong rule of law within a country, the likelihood of corrupt activities within that country is small due to the penalties and prosecution firms face when participating in corruption.
Finally, this study has combined research regarding FDI (Helpman, 1984; Dunning, 1988; Rahman et.al., 2017), institutional pressures (DiMaggio & Powel, 1983; Shadnam & Lawrence, 2011) and corruption (De Soto, 1989; Rodriguez et al., 2005), making a
contribution to each of the related literature. By integrating FDI, corruption and host country institutional quality into a single model to examine if M&As can enable the local institutions to reduce corruption, this paper has extended the literature in each of these areas. Therefore, based on the results of this study, this study provides a basis for scholars to develop an even more integrated theory on the presented issues.
Practical Implications
26 competitors of the MNC and there are local firms or institutions who are part of the supply chain of the MNC (Wilhelm, 2011).
Secondly, as Wilhelm (2011) shows in her article, firms operating within a supply chain are part of a network in which the weakest link in the chain determines the overall power or success of the network. MNCs operating within a foreign country could establish their own network there as they may need local firms for production activities, or do business with local firms in order to gain legitimacy in the host country (Baughn, Bodie & Mclntosh, 2007). This implies that MNCs operating in a foreign country may want to help further the local firms in their business activities as this may result in an overall increase of the strength of the supply chain, thus increasing the strength of the MNC. Thus, management of the MNC should show in a transparent way how the business process looks like, enabling the local firms to learn from this process. In doing so, the MNC may in turn learn from local firms as these local firms may develop new capabilities or business processes which the MNC could then apply in its own business process (Wilhelm, 2011).
Finally, as this study has shown, the institutional quality of the host country positively influences the relation between FDI and corruption, thus in order for local governments and politicians to make their country attractive for more FDI, they should invest in the four factors described in this study, namely: voice and accountability, political stability and absence of violence, regulatory quality and rule of law.
Future research
Although this study makes some important contributions to existing literature, there are a number of limitations. First, it is possible that FDI inflow and host country institutional quality are not the only factors that influence the host country corruption score. Because of globalization and the accessibility of the internet, local firms may be required to adapt to new situations in their environment in order to survive. As corruption is generally seen as unethical behavior, negative news regarding corruption in a country is more easily spread across the world through the internet, thus damaging a firm or country’s reputation on a global scale. Additionally, this study measured FDI in terms of M&As as this provides the highest level of control and the highest level of the contribution of knowhow. There are however several other types of FDI as is already displayed in Figure 3, such as franchising, licensing and joint
27 Another limitation of this study is that the focus is on the one way stream of effects a M&A can have, and the benefits of the presence of a MNC for the host country. However, as a MNC also has to adapt to the environment in the host country in order to gain legitimacy in the host country, firms adapt their activities to the host country environment (Baughn, et al., 2007; Bondy, Matten & Moon 2004; Welford, 2005; Wokutch, 1990). This could result in the adoption of corrupt activities by the MNC, which in turn could find its way to the home country resulting in the opposite effect of what this study has investigated. Therefore future research could focus on M&As and the effect it has on home country corruption. This can be done by investigating if countries with low levels of corruption in the past and with high levels of outgoing FDI towards countries with high levels of corruption, have become more corrupt in the passing of time.
Finally, as this study shows similar results as Kwok & Tadesse (2006) when looking at the importance of gross enrolment rates for education, this study limits to this specific factor. Dutta & Roy (2013) explain that education itself is not enough to reduce corruption but also press freedom and media accessibility. Besides these factors, culture and religion also
influence corruption according to the study by Mensah (2014). As this paper does not include these factors, which could better help explain the differences in the corruption scores within the world, future research should include these factors. Combining the way this research is conducted and its finding with the papers from Dutta & Roy (2013) and Mensah (2014), allows future researchers to come up with more thorough and elaborated findings which could explain the differences in corruption scores between countries.
REFERENCES
Adefolake, A. 2011. Universal standards in CSR: are we prepared? Corporate Governance:
The international journal of business in society, 11: 107–119
Azmat, F., & Ha, H. 2013. Corporate social responsibility, customer trust, and loyalty perspectives from a developing country. Thunderbird International Business Review, 55: 253–270.
Bardy, R., Drew, S., & Kennedy, T. F. 2012. Foreign Investment and Ethics: How to
Contribute to Social Responsibility by Doing Business in Less-Developed Countries. Journal
28 Barkema. H. G., & Vermeulen, F. 1998. International expansion through start-up or through acquisition: A learning perspective. Academy of Management Journal.4(1): 7–26.
Barro, R. 1991. Economic growth in a cross-section of countries. Quarterly Journal of
Economics, 106(2): 407–444
Baughn, C. C, Bodie, N. L., & Mclntosh, J. C. 2007. Corporate Social and Environmental Responsibility in Asian Countries and Other Geographic Regions. Corporate Social
Responsibility & Environmental Management, 14(4): 189–205.
Bhanji , Z., & Oxley , J. E . 2013. Overcoming the dual liability of foreignness and privateness in international corporate citizenship partnership. Journal of International
Business Studies, 44 : 290–311
Blundell-Wignall, A., & Roulet, C. 2017. Foreign direct investment, corruption and the OECD Anti-Bribery Convention, OECD Working Papers on International Investment, 2017/01, OECD Publishing, Paris.
Bondy, K., Matten, D., & Moon, J. 2004. The Adoption of Voluntary Codes of Conduct in MNCs: A Three Country Comparative Study. Business and Society Review, 109(4): 449–477 Brammer, S., & Pavelin , S. 2005. Corporate community contributions in the United Kingdom and the United States. Journal of Business Ethics, 56: 15–26
Brouthers, K. D., & Hennart, J. F. 2007. Boundaries of the firm: Insights from international entry mode research. Journal of management, 33(3): 395–425.
Busse, M., & Hefeker, C. 2007. Political Risk, Institutions and Foreign Direct Investment.
European Journal of Political Economy, 23(2): 397–415
Callan, S.J. and Thomas, J.M. 2009. Corporate Financial Performance and Corporate Social Performance: An Update and Reinvestigation. Corporate Social Responsibility and
Environmental Management, 16(2): 61–78.
29 Carroll, A.B. 1979. A Three-Dimensional Conceptual Model of Corporate Social
Performance. Academy of Management Review, 4: 497–505.
Chen, Y., Wen, X., & Luo, M. 2016. Corporate Social Responsibility Spillover and Competition Effects on the Food Industry. Australian Economic Papers, 55: 1–13.
Chung, H. F.L., & Enderwick, P. 2001. An Investigation of Market Entry Strategy Selection: Exporting vs Foreign Direct Investment Modes, A Home-Host Country Scenario. Asia Pacific
Journal of Management, 18(4): 443–461
Cohen, W. M., & Levinthal, D. A. 1990. Absorptive capacity: A new perspective on learning and innovation. Administrative Science Quarterly, 35: 128–152.
Crane, A. and Matten, D. 2004. Business Ethics. Oxford England: Oxford University Press. Cuervo-Cazurra, A. 2006. Who cares about corruption? Journal of International Business
Studies, 37(6): 807–822
Davis, L., & North, D. 1971. Institutional change and American economic growth. Cambridge, England: Cambridge University Press.
Davis, P.S., Desai, A.B. & Francis, J.D. 2000. Mode of international entry: an isomorphism perspective. Journal of International Business Studies, 31(2): 239–258
De Soto, H. 1989. The Other Path, New York United States: Harper & Row
DiMaggio, P.J., & Powell, W.W., 1983. The iron cage revisited: Institutional isomorphism and collective rationality in organizational fields. American Sociological Review, 48(2): 147– 160
Dunning, J.H., 1988. The Eclectic Paradigm of International Production: A Restatement and Some Possible Extensions. Journal of International Business Studies, 19: 1–31
Dunning, J. H., & Lundan, S. M. 2008. Institutions and the OLI paradigm of the multinational enterprise. Asia Pacific Journal of Management, 25: 573–593.
Dutta, N. & Roy, S. 2013. Media, Education and Corruption: Investigation the Associations.
30 Dyer, J.H. & Singh, H. 1998. The relational view: Cooperative strategy and sources of
interorganizational competitive advantage. Academy of Management Review, 23(4): 660–679 ElBahnasawy, N. G., & Revier, C. F. 2012. The Determinants of Corruption: Cross-Country Panel Data Analysis. The Developing Economies, 50(4): 311–333
Feldstein, M. 2000. Aspects of Global Economic Integration: Outlook for the Future. NBER Working Paper No. 7899, Cambridge, Massachusetts: National Bureau of Economic Research Friedman, M. 1962. Capitalism and Freedom, University of Chicago Press, Chicago, IL. Glass, A. n.d. World Economy Vertical versus Horizontal FDI, unpublished paper, Texas A&M University, Texas
Globerman, S., & Shapiro, D. 2002. Global Foreign Direct Investment Flows: The Role of Governance Infrastructure. World Development, 30(11): 1899–1919
Gonzalez-Perez, M. A., Riegler, S., & Riegler, F. X. 2011. Foreign direct investment (FDI) and social responsibility networks (SRN) in Colombia. Journal of Globalization,
Competitiveness and Governability, 5: 42–59
Hair, J. F., Black, W. C., Babin, B. J., Anderson, R. E., & Tatham, R. L. 2006. Multivariate data analysis (6th ed.). Upper Saddle River, NJ: Pearson Prentice Hall.
Helpman, E. 1984. A Simple Theory of International Trade with Multinational Corporations.
Journal of Political Economy, 94:451–471.
Hoaglin, D. C. Iglewicz B., & Tukey, J. W. 1986. Performance of Some Resistant Rules for Outlier Labeling. Journal of the American Statistical Association, 81: 991–999
Huntington, S.P. 1968.‘Political Order in Changing Societies’, Yale University Press: New Haven
Husted, B. 1999. Wealth, culture and corruption, Journal of International Business Studies, 30(2): 339–360
31 Katz, M. 2006. Study Design and Statistical Analysis: A Practical Guide for Clinicians. Cambridge University Press: Cambridge
Knack, S. & Azfar, O. 2003 Trade intensity, country size and corruption. Economics of
Governance. 4: 1–18
Kuada, J., & Hinson, R.E. 2012. Corporate social responsibility practices of foreign and local companies in Ghana. Thunderbird International Business Review, 54: 521–536.
Kaufmann, D., Kraay, A. & Mastruzzi, M. 2009. Governance Matters VIII Aggregate and Individual Governance Indicators 1996–2008. Policy Research Working Paper 4978 The World Bank Development Research Group Macroeconomics and Growth Team 06/2009 Khordagui, N. H., & Saleh, G. 2013. FDI and Absorptive Capacity in Emerging Economies.
Topics in Middle Eastern and African Economies, 15: 141–172
Kostova, T. & Roth, K. 2002. Adoption of an organizational practice by subsidiaries of multinational corporations: institutional and relational effects. Academy of Management
Journal, 45(1): 215–233
Kurtishi-Kastrati, S. 2013. The Effects of Foreign Direct Investments for Host Country’s Economy. European Journal of Interdisciplinary Studies, 5: 26–38
Kwok, C. C.Y., & Tadesse, S. 2006. The MNC as an agent of change for host-country institutions: FDI and corruption. Journal of International Business Studies, 37(6): 767–785 Leff, N.H. 1964. Economic Development through Bureaucratic Corruption. American
Behavioral Scientist, 8(3): 8–15
Loungani, P. & Razin, A. 2001. How Beneficial Is Foreign Direct Investment for Developing Countries? Finance & Development, 38(2): 6–10
Lucke, N. & Eichler, S. 2016. Foreign direct investment: the role of institutional and cultural determinants. Applied Economics, 48(11): 935–956
Mallampally, P. & Sauvant, K. P. 1999. Foreign direct investment in developing countries.
Finance & Development, 36: 34
Markusen, J., R., 1984. Multinationals, Multi-Plant Economies, and the Gains from Trade,
32 Martínez-Ferrero, J., Banerjee, S., & García-Sánchez, I. 2016. Corporate Social
Responsibility as a Strategic Shield Against Costs of Earnings Management Practices.
Journal of Business Ethics, 133(2): 305–324
Matten, D., & Moon, J. 2008. “Implicit” and “explicit” CSR: A conceptual framework for a comparative understanding of corporate social responsibility. Academy of Management
Review, 33(2): 404–424 .
Mehra, A. 2011. The Corporate Responsibility to Prevent Corruption. Accessed February 2017 on https://www.forbes.com/sites/csr/2011/07/01/the-corporate-responsibility-to-prevent-corruption/#5814af1eae0
Mensah, Y. 2014. An Analysis of the Effect of Culture and Religion on Perceived Corruption in a Global Context. Journal of Business Ethics, 121(2): 255–282.
Meyer, K. E., & Estrin, S. 2001. Brownfield entry in emerging markets. Journal of
International Business Studies, 32(3):575–584.
Meyer, K. E., & Nguyen, H. V. 2005. Foreign investment strategies and sub‐national institutions in emerging markets: Evidence from Vietnam. Journal of management studies, 42(1): 63–93.
Neary, J. P., n.d. World Economy FDI: The OLI Framework. Unpublished paper, University of Oxford, Oxford.
Neary, J. P., 2009. Trade costs and foreign direct investment . International Review of
Economics & Finance, 18(2): 207–218.
Nyuur, R. B., Ofori, D. F., & Debrah, Y. A. 2016. The Impact of FDI Inflow on Domestic Firms’ Uptake of CSR Activities: The Moderating Effects of Host Institutions. Thunderbird
International Business Review, 58(2): 147–159
Osabutey, E. L., Williams, K., & Debrah, Y. A. 2014. The potential for technology and knowledge transfers between foreign and local firms: A study of the construction industry in Ghana. Journal of World Business, 49: 560–571.
33 Petersen, B. & Pedersen, T. 2002 . Coping with liability of foreignness: Different learning engagements of entrant firms. Journal of International Management, 8: 339–350
Pinto, P. M. & Zhu, B. 2016. Fortune or Evil? The Effect of Inward Foreign Direct Investment on Corruption. International Studies Quarterly, 60: 693–705
Preuss, L., Haunschild, A., & Matten, D. 2006. Trade unions and CSR: A European research agenda. Journal of Public Affairs, 6(4): 256–268.
Preuss, L., Barkemeyer, R., & Glavas, A. 2016. Corporate Social Responsibility in Developing Country Multinationals: Identifying Company and Country-Level Influences.
Business Ethics Quarterly, 26(3): 347–378.
Rahman, M., Uddin, M., & Lodorfos, G. 2017. Barriers to enter in foreign markets: evidence from SMEs in emerging market. International Marketing Review, 34: 68–86.
Rodriguez, P., Uhlenbruck, K., & Eden, L. 2005. Government Corruption and the Entry Strategies of Multinationals. Academy of Management Review, 30 (2): 383–396. Shadnam, M., & Lawrence, T. B. 2011. Understanding Widespread Misconduct in
Organizations: An Institutional Theory of Moral Collapse. Business Ethics Quarterly. 21(3): 379–407
Seung-Hyun, L., & Kyeungrae, O. 2007. Corruption in Asia: Pervasiveness and arbitrariness.
Asia Pacific Journal of Management, 24: 97–114
Transparency International, Corruption Perceptions Index, Accessed February 2017 on 2017 https://www.transparency.org/research/cpi/overview
Wei, S. 2000. How taxing is corruption on international investors?' The Review of Economic and Statistics, 82: 1–11
Welford, R. 2005. Corporate Social Responsibility in Europe, North America and Asia.
Journal of Corporate Citizenship, 17: 33–52
34 Wokutch, R. E. 1990. Corporate Social Responsibility Japanese Style. Academy of
Management Executive, 4(2): 56–74.
World Bank 2016. “Anti-Corruption” accessed March 2017 on http://www.worldbank.org/en/topic/governance/brief/anti-corruption
Yang, X., & Rivers, C. 2009. Antecedents of CSR Practices in MNCs' Subsidiaries: A Stakeholder and Institutional Perspective. Journal of Business Ethics, 86 (2): 155–169 Zaheer, S. 1995. Overcoming the liability of foreignness. Academy of Management Journal, 38: 341–363
