Tolerable Level of Corruption for Foreign Direct Investment in Africa

Türki̇ye’de Yolsuzluğun Doğrudan Yabanci Yatirimlar Üzeri̇ndeki̇ Olasi Etki̇leri̇ Üzeri̇ne Bi̇r Araştirma

“…With regard to the likely effects of corruption, although the significance of corruption variables varies across different models, a unidirectional relationship between the level of corruption and the FDI inflows is identified, which is in line with the findings of Hines (1995), Egger and Winner (2005), Sayek (2007), Bellos and Subasat (2013), Abotsi and Iyavarakul (2015). This result may be attributed to the fact that the FDI inflows continue with the perceived corruption level or the corruption potentially provide a stimulus to circumvent regulatory obstacles, which means support for the validity of the "greasing the wheels" or "efficient grease" hypothesis as suggested by Leff (1964), Huntington (1968), Lui (1985), Shleifer and Vishny (1993), Aidt (2003).…”

Institutional Effects on the Ownership in Cross-Border Acquisitions by African Firms

“…Institutional voids, such as unclear regulatory frameworks, inexperienced bureaucracies, underdeveloped court systems, and institutional settings with corruption issues and weak property rights protectionincrease transaction costs (Meyer, 2001;Chan et al, 2008;Abotsi & Iyavarakul, 2015) and demand different capabilities to survive rather than those required by a developed institutional environment. These environments usually offer opportunities to take advantage of market imperfections but those potential gains can be offset by excessive costs of uncertainty and government arbitrariness (Aybar & Ficici, 2009).…”

“…(2) the strategic-legitimacy approach (Suchman, 1995). First, within the transaction cost approach, the existence of institutional voidssuch as unclear regulatory frameworks, inexperienced bureaucracies, underdeveloped court systems, and institutional settings with corruption issues and weak property rights protectionincrease transaction costs (Meyer, 2001;Chan et al, 2008;Abotsi & Iyavarakul, 2015). Hence, "institutional development affects entry mode choice as underdeveloped institutions drive the costs of establishing wholly-owned ventures" (Meyer, 2001, p. 365), regardless of institutional distance considerations.…”

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“…Similar finding was observed in two global studies by Fahad and Ahmed (2016) and Luu et al, (2019). The study by Abotsi and Iyavarakul (2015) did not only find corruption to impact negatively on FDI, but further established a threshold level for corruption in Africa, using the quadratic method. The study found the threshold level to be 44.5 on a scale of 0 (most corrupt) to 100 (least corrupt).…”