Corruption, democracy and the location decisions of emerging multinationals: evidence from China’s cross-border mergers and acquisitions

Abstract

Purpose

This study investigated the moderating role of democracy in the relationship between corruption and foreign direct investment. The purpose of this study is to understand whether corruption has different effects on the location decisions of multinational enterprises (MNEs) depending on the regime type.

Design/methodology/approach

This study explored how institutional context influenced the impacts of corruption on the location decisions of MNEs, specifically using a sample of Chinese cross-border mergers and acquisitions between 2000 and 2020.

Findings

This study assessed the role of democracy in the relationship between corruption and the location decisions of Chinese MNEs. In general, this study found that Chinese MNEs were hindered by host country corruption, but that these detrimental effects were weaker in the presence of more effective democratic institutions.

Originality/value

This study contributes to the literature on institutional factors in international business through its simultaneous investigation of the effects of both democracy and corruption on the location decisions of MNEs. Moreover, there is a prevailing view that Chinese MNEs are willing to enter countries with high corruption, but the results of this study indicate that they are risk-averse in ways similar to their Western counterparts.

Citation

Wang, J. and Shen, X. (2023), "Corruption, democracy and the location decisions of emerging multinationals: evidence from China’s cross-border mergers and acquisitions", Chinese Management Studies, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/CMS-06-2022-0200