Bridging the gap? Corruption, knowledge and foreign ownership

Driffield, Nigel, Mickiewicz, Tomasz, Pal, Sarmistha and Temouri, Yama (2010). Bridging the gap? Corruption, knowledge and foreign ownership. Working Paper. CEDI.

Abstract

We argue that in addition to host corruption per se, as accounted for by the existing literature, an explanation of inter-country variation in FDI needs to account for the distance between the host and home corruption, which we call relative corruption. We use a large matched home-host firm-level panel data-set for 1998-2006 from CEE transition countries. Year-specific selectivity corrected estimates suggest that, ceteris paribus, higher relative ‘grand’ corruption lowers foreign ownership as the returns to investment tends to be lower in more corrupt environment. However, after controlling for the selectivity bias, knowledge-intensive parent firms are found to hold controlling ownership, as the difficulty of successful joint venture looms large in more corrupt environment. Results are robust to alternative specifications.

Divisions: Aston Business School > Economics, Finance & Entrepreneurship
Aston Business School > Aston India Foundation for Applied Research
Aston Business School
Additional Information: © 2010 The Authors
Uncontrolled Keywords: FDI,grand corruption,relative corruption,knowledge intensity,Eastern Europe
Published Date: 2010-05
Authors: Driffield, Nigel
Mickiewicz, Tomasz ( 0000-0001-5261-5662)
Pal, Sarmistha
Temouri, Yama

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