Trading Up or Trading Down? How Home Country Corruption Affects Cross-Border R&D Investments

Maximilian von Zedtwitz, Severin Friedrich Bischof

Publikation: Bidrag til bog/antologi/rapportKonferenceabstrakt i proceedingsForskningpeer review


Prior research has demonstrated that corruption has largely negative effects on incoming international investments. What is less clear, however, is to what extent these negative effects are a product not of a host country’s absolute level of corruption, but of the relative distance to the home country’s degree of corruption. We define the Directional Corruption Distance (DCD) as the arithmetic difference between two countries’ corruption levels. Avoiding distorted FDI measures, we analyze the change in Research & Development Stock (RDS) representing more than 10,000 R&D centers of 500 technology-intensive MNCs taken from the Fortune 1000 list. Qualifying earlier research employing FDI as a dependent variable, we observe that countries of lower corruption are preferred destinations (Trading Up Hypothesis), but only under certain conditions. We further show that developed countries with lower degrees of corruption tend to prefer investments in other low-corruption countries (Comfort Hypothesis). High- corruption countries, conversely, do not exhibit this behavior and appear more open towards investment in other high-corruption countries (Familiarity Hypothesis). These findings underscore the influence of contextualizing variables in the origin of investments, and suggest extended research using firm-level field data to compensate for potential bias and flaws in FDI data.
TitelProceedings of the Eightieth Annual Meeting of the Academy of Management
RedaktørerGuclu Atinc
Antal sider1
UdgivelsesstedBriarcliff Manor, NY
ForlagAcademy of Management
StatusUdgivet - 2020
BegivenhedThe Academy of Management Annual Meeting 2020: Broadening Our Sight - Virtual
Varighed: 7 aug. 202011 aug. 2020
Konferencens nummer: 80


KonferenceThe Academy of Management Annual Meeting 2020
NavnAcademy of Management Proceedings