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Corruption and market attractiveness influences on different types of FDI
Author(s) -
Brouthers Lance Eliot,
Gao Yan,
McNicol Jason Patrick
Publication year - 2008
Publication title -
strategic management journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 11.035
H-Index - 286
eISSN - 1097-0266
pISSN - 0143-2095
DOI - 10.1002/smj.669
Subject(s) - attractiveness , foreign direct investment , language change , investment (military) , economics , resource (disambiguation) , monetary economics , business , international economics , macroeconomics , political science , psychology , politics , art , computer network , literature , computer science , psychoanalysis , law
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. Copyright © 2008 John Wiley & Sons, Ltd.