Title: Does a nonlinear specification methodology better capture the link between host country corruption levels and inward foreign direct investments? A study of 92 countries
Authors: Chi-Hui Wang; Prasad Padmanabhan; Chia-Hsing Huang
Addresses: Beijing Institute of Technology, No. 6, Jinfeng Road, Tangjiawan, Zhuhai City GuangDong Province, China ' Greehey School of Business, St. Mary's University, San Antonio, TX. 78228, USA ' SolBridge International School of Business, 128, Uam-ro, Dong-gu, Daejeon 34613, South Korea
Abstract: This paper investigates the link between inward foreign direct investment flows and host country corruption levels using annual data for developed, developing and transitional countries, over the 2002-2015 period. We find that the nonlinear specification provides a better characterisation of the relationship between corruption and inward FDI flows. Furthermore, we find that this relationship is a function of the development status of the host country. Finally, the marginal impact of corruption levels on FDI seems to be statistically significant at a higher level when a nonlinear (as opposed to a linear) specification is used.
Keywords: foreign direct investment; corruptions perceptions index; nonlinear modelling.
Global Business and Economics Review, 2020 Vol.23 No.1, pp.50 - 78
Received: 28 Feb 2018
Accepted: 17 Aug 2018
Published online: 13 Jul 2020 *