Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/244578 
Year of Publication: 
2021
Series/Report no.: 
Working Paper No. 4/2021
Publisher: 
Örebro University School of Business, Örebro
Abstract: 
In this paper, we analyze if the enterprise decision to invest in a corrupt market is affected by its experience of other corrupt markets. Our conjecture is that multinational enterprises (MNEs) can learn how to navigate corrupt environments and reduce their corruption-related market entry costs. We test this conjecture using a rich data set on manufacturing enterprises from an uncorrupt country, Sweden, over the 1997-2015 period. The market entry effect of corrupt country experience is examined using an extended gravity model (Morales et al., 2019) controlling for income group, regional and border country experience. We find strong support of our conjecture using mixed logit estimations, which are consistent with the multidimensional entry decision of the extended gravity model. To understand the effect of corruption on foreign direct investment, the outreach pattern of MNEs needs to be taken into account.
Subjects: 
Corruption
multinational enterprise
foreign direct investment
JEL: 
F23
Document Type: 
Working Paper

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