Corruption and the Ownership Composition of the Multinational Firm at the Time of Entry: Evidence from Turkey
17 Pages Posted: 22 Mar 2006
Date Written: March 31, 2006
This paper is an empirical assessment of the relationship between corruption and the ownership structure of foreign direct investment. In particular, two forms of ownership structures are considered: joint venture and wholly owned subsidiary. The results indicate a strong negative impact of corruption on joint ventures, particularly for the ones originating from the developed countries. As the degree of corruption dissimilarity between the source country and Turkey gets deeper, the share of foreign ownership declines. This lends support to the transaction cost approach which emphasizes the costs of sharing ownership that are expected to increase in corrupt environments.
Keywords: Foreign Direct Investment, Entry, Corruption, Discrete Choice
JEL Classification: F23, K4, R38, C25
Suggested Citation: Suggested Citation