Companies that operate in corrupt markets gain competitive edge, study finds
Swedish manufacturers that invested in corrupt countries learned to navigate bribery and graft more efficiently, giving them an advantage over competitors without such experience. The finding suggests that corruption, while deterring initial entry, becomes less costly once firms adapt—a dynamic that could shape how regulators approach foreign investment and anti-corruption enforcement.
Originaltitel: Effects of corruption on foreign direct investment: Evidence from Swedish multinational enterprises
<p>In this paper, we provide novel evidence on the adjustment of multinational enterprises (MNEs) to corrupt environments. We examine if the corruption barrier to entry is reduced by corruption experience (i.e., previous investment in a corrupt system) using a rich enterprise data set on Swedish manufacturers' activities in the 1997-2015 period. A mixed logit model, which accounts for enterprise-specific market substitution patterns, is used to ensure the accuracy of estimates. Our findings show that a strong deterrent effect of corruption is counteracted by corruption experience, which implies that MNEs learn to adjust to reduce corruption entry costs. Multinational enterprises that acquire corruption experience gain a competitive advantage over other enterprises.</p>