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Who cares about corruption?

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Abstract

This paper examines the impact of corruption on foreign direct investment (FDI). It argues that corruption results not only in a reduction in FDI, but also in a change in the composition of country of origin of FDI. It presents two key findings. First, corruption results in relatively lower FDI from countries that have signed the Organization for Economic Cooperation and Development Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. This suggests that laws against bribery abroad may act as a deterrent against engaging in corruption in foreign countries. Second, corruption results in relatively higher FDI from countries with high levels of corruption. This suggests that investors who have been exposed to bribery at home may not be deterred by corruption abroad, but instead seek countries where corruption is prevalent.

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Acknowledgements

The paper benefited from suggestions by the Guest Editor Peter Rodriguez, three anonymous reviewers, the discussant Marty Meznar, Chuck Kwok, Kendall Roth, Annique Un, and the audience at the JIBS Focused Issue Workshop in Phoenix, Arizona. The School of Global Management and Leadership at Arizona State University at the West campus, Lally School of Management and Technology at Rensselaer Polytechnic Institute, the Department of Economics at Rensselaer Polytechnic Institute, and the Center for International Business Education and Research at Thunderbird, The Garvin School of International Management, provided financial support for the Workshop. Funding from the Center for International Business Education and Research at the University of South Carolina is gratefully acknowledged. All errors remain mine.

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Authors and Affiliations

  1. Moore School of Business, University of South Carolina, Columbia, South Carolina, USA

    Alvaro Cuervo-Cazurra

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  1. Alvaro Cuervo-Cazurra
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Correspondence to Alvaro Cuervo-Cazurra.

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Accepted by Lorraine Eden, Army Hillman, Peter Rodriguez, Donald Siegel and Peter Rodriguez, Guest Editors, 17 April 2006. This paper has been with the author for two revisions.

Appendix

Appendix

Home and host countries

Host countries

Algeria, Angola, Anguilla, Argentina, Armenia, Aruba, Australia, Austria, Azerbaijan, Bahamas, Barbados, Belgium/Luxembourg, Belize, Benin, Bermuda, Bolivia, Brazil, Brunei, Bulgaria, Burkina Faso, Burundi, Cambodia, Cameroon, Canada, Cape Verde, Central African Republic, Chad, Chile, Colombia, Comoros, Costa Rica, Cuba, Czech Republic, Denmark, Djibouti, Dominican Republic, Ecuador, El Salvador, Eritrea, Estonia, Ethiopia, Finland, France, Gambia, Germany, Greece, Guatemala, Guyana, Haiti, Honduras, Hungary, Iceland, Ireland, Italy, Jamaica, Japan, Kazakhstan, Korea, Kyrgyzstan, Latvia, Lithuania, Macau, Macedonia, Malawi, Mali, Mauritius, Mexico, Moldova, Mongolia, Morocco, Mozambique, Myanmar, Netherlands, Netherlands Antilles, New Zealand, Nicaragua, Norway, Panama, Paraguay, Peru, Poland, Portugal, Russia, Rwanda, Saint Kitts Nevis, Saint Lucia, Sierra Leone, Slovakia, Slovenia, Somalia, Spain, Suriname, Sweden, Switzerland, Tanzania, Trinidad Tobago, Tunisia, Turkey, Uganda, UK, Uruguay, US, Uzbekistan, Venezuela, Zambia, Zimbabwe.

Home countries

Afghanistan, Albania, Algeria, Andorra, Angola, Anguilla, Antigua Barbuda, Argentina, Armenia, Aruba, Australia, Austria, Azerbaijan, Bahamas, Bahrain, Bangladesh, Barbados, Belarus, Belgium/Luxembourg, Belize, Bermuda, Bhutan, Bolivia, Bosnia Herzegovina, Botswana, Brazil, British Virgin Islands, Brunei, Bulgaria, Cameroon, Canada, Cape Verde, Cayman Islands, Chad, Channel Islands, Chile, China, Colombia, Congo, Cook Islands, Costa Rica, Croatia, Cuba, Cyprus, Czech Republic, Denmark, Dominica, Dominican Republic, Ecuador, Egypt, El Salvador, Estonia, Faeroe Islands, Fiji, Finland, France, French Polynesia, Gambia, Georgia, Germany, Gibraltar, Greece, Grenada, Guatemala, Guernsey, Guinea-Bissau, Guyana, Honduras, Hong Kong, Hungary, Iceland, India, Indonesia, Iran, Iraq, Ireland, Isle of Man, Israel, Italy, Ivory Coast, Jamaica, Japan, Jersey, Jordan, Kazakhstan, Kenya, Kuwait, Kyrgyzstan, Laos, Latvia, Lebanon, Liberia, Libya, Liechtenstein, Lithuania, Macau, Macedonia, Malawi, Malaysia, Mali, Malta, Marshall Islands, Mauritania, Mauritius, Mexico, Moldova, Monaco, Mongolia, Morocco, Myanmar, Nauru, Nepal, Netherlands, Netherlands Antilles, New Caledonia, New Zealand, Nicaragua, Nigeria, Niue, North Korea, Northern Marianas, Norway, Oman, Pakistan, Palau, Panama, Papua New Guinea, Paraguay, Peru, Philippines, Poland, Portugal, Puerto Rico, Qatar, Reunion, Romania, Russia, Saint Kitts Nevis, Saint Vincent Grenadines, San Marino, Saudi Arabia, Serbia Montenegro, Seychelles, Sierra Leone, Singapore, Slovakia, Solomon Islands, South Africa, South Korea, Spain, Sri Lanka, Sudan, Suriname, Swaziland, Sweden, Switzerland, Syria, Taiwan, Tajikistan, Tanzania, Thailand, Trinidad and Tobago, Tunisia, Turkey, Turkmenistan, Turks and Caicos, Uganda, UK, Ukraine, United Arab Emirates, Uruguay, US Virgin Islands, US, Uzbekistan, Vanuatu, Vatican, Venezuela, Viet Nam, Wallis and Futuna, Western Samoa, Yemen, Zambia, Zimbabwe.

Home countries that do not appear in the list of host countries

Afghanistan, Albania, Andorra, Antigua Barbuda, Bahrain, Bangladesh, Barbados, Belarus, Bhutan, Bosnia Herzegovina, Botswana, British Virgin Islands, Cayman Islands, Channel Islands, China, Congo, Cook Islands, Croatia, Cyprus, Dominica, Egypt, Faeroe Islands, Fiji, French Polynesia, Georgia, Gibraltar, Grenada, Guernsey, Guinea-Bissau, Hong Kong, India, Indonesia, Iran, Iraq, Isle of Man, Israel, Ivory Coast, Jersey, Jordan, Kenya, Kuwait, Laos, Lebanon, Liberia, Libya, Liechtenstein, Malaysia, Malta, Marshall Islands, Mauritania, Monaco, Nauru, Nepal, New Caledonia, Nigeria, Niue, North Korea, Northern Marianas, Oman, Pakistan, Palau, Papua New Guinea, Philippines, Puerto Rico, Qatar, Reunion, Romania, Saint Vincent Grenadines, San Marino, Saudi Arabia, Serbia Montenegro, Seychelles, Singapore, Solomon Islands, South Africa, Sri Lanka, Sudan, Swaziland, Syria, Taiwan, Tajikistan, Thailand, Turkmenistan, Turks and Caicos, Ukraine, United Arab Emirates, US Virgin Islands, Vanuatu, Vatican, Viet Nam, Wallis and Futuna, Western Samoa, Yemen.

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Cuervo-Cazurra, A. Who cares about corruption?. J Int Bus Stud 37, 807–822 (2006). https://doi.org/10.1057/palgrave.jibs.8400223

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