Corruption, the digital sectors, and the profitability of foreign subsidiaries in emerging markets


Utilising institutional theory, we reconsider the relationship between foreign subsidiary profitability and host country corruption, and offer two key insights. First, when corruption is at a medium level, the profitability of foreign subsidiaries is strongly negatively affected, consistent with prospect theory. However, when corruption is widespread and becomes an uncertainty-reducing norm, subsidiary profitability becomes relatively stronger, albeit remaining at a lower level than in a corruption-free environment. Second, extensive business restrictions weaken the relationship between corruption and foreign subsidiary profitability. Furthermore, foreign companies operating in digital sectors are less affected both by host country corruption and by business restrictions. In addition, we consider lobbying to be an alternative non-market strategy to bribery, which can reduce the negative impact of business restrictions for companies in digital sectors. Our hypotheses have been supported by estimations drawing on over 18,000 foreign subsidiaries in emerging markets.

Publication DOI:
Divisions: College of Business and Social Sciences > Aston Business School > Economics, Finance & Entrepreneurship
College of Business and Social Sciences > Aston Business School > Centre for Personal Financial Wellbeing
College of Business and Social Sciences > Aston Business School
Additional Information: Copyright © 2023 Elsevier Inc. This author's accepted manuscript version is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International
Uncontrolled Keywords: institutions,corruption,digital economy,emerging markets,foreign subsidiaries,prospect theory,Business, Management and Accounting(all),SDG 16 - Peace, Justice and Strong Institutions
Publication ISSN: 1873-7978
Last Modified: 20 Jun 2024 07:24
Date Deposited: 22 Mar 2023 16:17
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Related URLs: https://www.sci ... 148296323002060 (Publisher URL)
http://www.scop ... tnerID=8YFLogxK (Scopus URL)
PURE Output Type: Article
Published Date: 2023-06-01
Published Online Date: 2023-03-20
Accepted Date: 2023-03-10
Authors: Wu, Yan
Yang, Yang (ORCID Profile 0000-0003-2075-3803)
Mickiewicz, Tomasz (ORCID Profile 0000-0001-5261-5662)



Version: Accepted Version

Access Restriction: Restricted to Repository staff only until 20 September 2024.

License: Creative Commons Attribution Non-commercial No Derivatives

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