Bridging the gap? Corruption, knowledge and foreign ownership

Nigel Driffield, Tomasz Mickiewicz, Sarmistha Pal, Yama Temouri

Research output: Preprint or Working paperWorking paper


We argue that in addition to host corruption per se, as accounted for by the existing literature, an explanation of inter-country variation in FDI needs to account for the distance between the host and home corruption, which we call relative corruption. We use a large matched home-host firm-level panel data-set for 1998-2006 from CEE transition countries.
Year-specific selectivity corrected estimates suggest that, ceteris paribus, higher relative ‘grand’ corruption lowers foreign ownership as the returns to investment tends to be lower in more corrupt environment. However, after controlling for the selectivity bias, knowledge-intensive parent firms are found to hold controlling ownership, as the difficulty of successful joint venture looms large in more corrupt environment. Results are robust to alternative specifications.
Original languageEnglish
Number of pages37
Publication statusPublished - May 2010

Publication series

NameEconomics and finance working paper series

Bibliographical note

© 2010 The Authors


  • FDI
  • grand corruption
  • relative corruption
  • knowledge intensity
  • Eastern Europe


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