Foreign Direct Investment and Corruption

This open access book provides theory and evidence on the corruption mechanisms that affect multinational enterprises’ investment behaviour. The mechanisms are formalised using small-scale modelling of market corruption cost and uncertainty effects in an integrated theoretical framework which accounts for Cournot competitor behaviour, or the enterprise’s market entry, ongoing operations, and exit in a two-stage game. These are empirically examined using rich data on Swedish enterprises’ production activities and market outreach in the manufacturing, mining and quarrying, communication and information services, financial and insurance services, and professional, scientific and technical services industries. Corruption effects are identified from market entry, investment, and exit regressions and quantified by marginal effects. The book offers an analytical grounding and systematic industry evidence relevant to graduate students, researchers and policymakers interested in enterprise investment incentives in corrupt systems.