The aim of this research is to understand how corruption affects the attraction of Foreign Direct Investment (FDI). Studies of corruption and its relationship with FDI have yielded mixed results; some have found that corruption deters FDI others have found no relation between the two factors, while others have found a positive one. In order to further the knowledge of how corruption affects FDI this study argues that it is not only the level of corruption what might affect FDI but also the distance between host and home countries. This study presents two sections, the first one concentrates on a macroeconomic level analysis of corruption and how it affects FDI to Latin America. The second section analyses how corruption affects the decision-making process of allocating FDI to a highly corrupt host country at the firm-level. After controlling for institutional and transaction cost variables, results show that corruption distance has an asymmetrical impact. Host countries enjoying “positive” corruption distance compared with home countries as sources of FDI experience no significant increases or reductions in levels of inward FDI. However, “negative” corruption distance suffered by host countries is associated with significantly lower levels of inward FDI. Conversely, firms from home countries with high corruption are undeterred by high corruption in host countries. This study also analysed how corruption affected foreign investors at the firm level. To do so, this study researched the decision making process of allocating FDI into a highly corrupt host country. The results of the analysis show that corruption amongst bureaucrats, judges, and members of the government elite do not seem to have an impact on the decision making process of allocating FDI in the country because foreign investors are aware of the problem. However, firms from more corrupt countries seem to have an advantage when operating in a highly corrupt foreign location because they may possess knowledge of how to cope with the arbitrariness dimension of corruption. High corruption levels in the host country seem to have an effect on the entry mode utilised by firms from countries with lower levels of corruption. Based on the results presented on this study, MNEs from less corrupt countries might opt to enter a highly corrupt host country via wholly owned subsidiaries (WOS) rather than joint ventures (JVs). This might be explained by the fact that these investors prefer to have more control over their firms’ operations in a highly corrupt country. Also, these managers need to protect their image and not to be associated with local partners that are perceived as corrupt. Finally, even though this study found evidence that all firms operating in Guatemala might participate in corrupt deals, those headquartered in highly corrupt countries are more willing to do so. This claim is based on the fact that firms from less corrupt countries might face stronger pressures from their headquarters to not engage in corrupt deals, whereas firms from more corrupt countries might not encounter such pressures.

This thesis describes the influence of Foreign Direct Investment on the Polish car industry and main characteristics of its development. There are data concerning the amount of realized Foreign Direct Investment to Poland as well as the list of branches in which they are mostly allocated concerning the car industry. The thesis also describes the development of the Polish motorism including the characteristics of models produced there. The last part analyses the four biggest automobile companies on the Polish market, which are specialized in the production of private and commercial motor vehicles. There are also data about the quantity of production, export and sales of these vehicles.

The liberalization of FDI is deepening, so have the incentive schemes put in place by a number of countries. Investment promotion agencies in these countries are seen to be actively promoting their countries as the best locations for foreign direct investment (FDI). With FDI emerging as a fovourite source of capital for most countries, profound questions about the true value of FDI to host countries are addressed in this study. While incentive packages may be justified on the basis of incomplete internalization of FDI benefits by foreign firms, it still remains critical to establish whether these benefits (spillovers) are substantive. As an attempt to answer these questions, this dissertation uses both firm level and country level data to investigate the effects of foreign direct investment (FDI) on productivity and economic growth. The first part of the study uses cross sectional firm level data to investigate whether foreign firms are more productive than domestic firms. We further examine whether there are any significant productivity spillovers from foreign to domestic firms or not. SIn the second part, focus is on country level analysis which uses both time series and panel data techniques. In the time series analysis we use the recent Toda-Yamamoto causality testing framework to determine the direction of causality between FDI and growth for three groups of countries: developing, emerging and developed countries. This is followed by fixed effects and dynamic panel data analyses for the 37 countries (9 developing, 12 emerging and 16 developed) where we test for absorptive capacity effects. Our findings show that results are determined to a great extent by the method of analysis. Interesting findings emerge from this study. The firm level data revealed the importance of multinational corporations in improving domestic firm productivity. With this finding, we anticipate these results to filter through the macro system and show up in the time series and panel data analyses. In the case of developing economies, productivity differences between domestic and foreign firms are confirmed only where the definition of FDI is below the full ownership level. Positive but statistically insignificant spillovers are found in the developing country sample. From the emerging economy sample, we iii find neither significant productivity differences nor related spillovers from foreign to domestic firms. With regards to developed economies, as in the case of emerging economies, there are no statistically significant productivity differences between domestic and foreign firms. Interestingly, for this sample, positive and highly significant spillovers from foreign to domestic firms are documented. The Toda Yamamoto Granger causality framework shows unidirectional causality from FDI to GDP in Colombia, Egypt and Zambia. These results suggest that in these three countries, we have a case of growth enhancing FDI. There is also evidence of causality which runs from GDP to FDI in China, Indonesia, France, Japan, Spain and the United Kingdom. This is a case where higher levels of economic activity attract foreign direct investment. We also find evidence of bi-directional causality for Argentina, Kenya and Thailand. No clear cut relationship between FDI and growth is established in the rest of the countries: Brazil, Chile, Ghana, India, Jordan, Madagascar, Malawi, Morocco, South Africa and all but four of the developed economies. The dynamic panel data analysis for the developing economy sample reveals positive effects between FDI and economic growth. A key finding from this is the negative impact of financial development, an absorptive capacity measure. This unexpected result raises the possibility of international capital flows becoming more harmful to developing economies when extensive development of the domestic financial sector makes it difficult to regulate financial transactions of relatively esoteric financial contracts. This evidence there should be a nuanced embrace of financial globalization by developing economies. In the emerging economy analysis, the roles of openness of the economy and financial development as absorptive capacity indicators are elevated. Overall, the dynamic analysis shows a largely negative and statistically insignificant effect of FDI on economic growth. For developed economies, we find that negative effects of FDI on economic growth are encountered at both the minimum and mean levels of openness. This suggests that for developed economies, a level of openness above the mean value would be ideal for economic growth to be realized through FDI. iv Corroborating our findings with the work of other scholars, we conclude that our results are complementary. It appears that the contradictions inherent in the FDI-Growth literature could be partly due to methodological differences.

Countries with high levels of growth-fostering business deregulation for domestic small and medium scale enterprises (SMEs) appear to attract more FDI inflows than countries with low levels of business deregulation. This may be because SMEs in such deregulated countries attract ample cross-border mergers and acquisitions (M&As), which are a major conduit of FDI inflows. This study therefore investigates the relationship between FDI inflow and business deregulation. The study employs a triangulation of quantitative research methodologies and a panel data of 154 countries to analyze the relationship between FDI and deregulation. Results from the study generally show that there are statistically significant and inversely proportional relationships between inbound FDI and the deregulation of: (i) starting a business, (ii) paying taxes, and (iii) export trading, by a country‘s domestic SMEs. The study also documents positive correlations between cross-border M&As and inbound FDI. Thus, countries are likely to attract more FDI inflows, especially through cross-border M&As, as they deregulate the: starting of businesses, payment of taxes and exportation of products for their domestic SMEs. Therefore, on policy front, it is recommended that in order to enhance FDI inflows, countries ought to deregulate these areas of infringement to efficient running of SMEs; this finding provides a complementary and/or substitute policy to the popular outward-looking incentive programs for attracting FDIs.

Thesis advisor: Robert G. Murphy / Rule of law has recently emerged as a possible solution for the promotion of functioning market economies and economic growth in developing countries. It has been argued that an established legal system provides individuals with a clear understanding of the law and consequently, should be more influential on the behavior and decisions of those individuals. This study explores the effects of an established rule of law environment on the relationship between foreign direct investment and economic growth. Several previous studies have analyzed the direct relationship between foreign investment and economic growth. However, none of these studies control for varying levels of legal incentives and property protection. Established legal institutions provide the type of stability that makes investment in a given country more attractive to foreign companies. I also test whether the combination of rule of law and FDI affect the estimated rate of GDP growth. The combination of these two effects would imply that FDI is more likely to create positive economic growth when applied to an economy with established legal institutions. Although the analysis does not fully support the effect of this rule of law—FDI interaction on growth, my analysis does suggest that FDI inflows are most efficient at promoting growth in countries with less legal development. / Thesis (BA) — Boston College, 2008. / Submitted to: Boston College. College of Arts and Sciences. / Discipline: Economics. / Discipline: College Honors Program. / Discipline: Economics Honors Program.

This disssertation investigates spillover effects in the South African SA banking sector using a number of different perspectives and methods. First, I used an adapted model developed by Claessens et al., (2001) and extended by Uiboupin (2005) to identify the effect of the foreign banks’ re-entry on the domestic banks’ performance after the apartheid regime change. The results show that the foreign banks’ entry has an effect on the before-tax profit of domestic banks and increases the competition in SA banking market. Then I further the investigation from an efficiency perspective using a cost efficiency model for the same bank panel. The results show that on average foreign banks are 28% more efficient that domestic banks. But the results show that over the period 2000-10 both categories of banks increased their efficiency level by around 10% and that the origin of the banks as well as their size were the main factors responsible for the efficiency gap. Then results from the implemention of a survey I designed, using an adapted version of Kraft (2002) for the foreign banks and branches, confirm that the entry of foreign banks contributed to the modernisation of the SA banking sector and to the introduction of new products and best practices, leading to the conclusion that spillover effects were localised in the limited segment of the SA wholesale banking. I analyse the impact of recent FDIs in SA banking sector, in terms of knowledge transfer and spillovers. The results show that the acquisition of ABSA (an SA big four) by Barclays (a British bank) generated increased efficiency. That was not the case for the Standard Bank (another of the SA big four), of which a 20% share was acquired by ICBC. The results show that these recent FDIs have no significant impact on competitiors’ behaviour and strategy.

A China está se transformando em uma das principais origens mundiais de Investimentos Externos Diretos (IEDs). No Brasil, os Investimentos Externos Diretos Chineses (IEDCs) têm aumentado desde os primeiros anos deste século, registrando grande elevação principalmente a partir de 2010. Os IEDCs no Brasil são investimentos realizados notadamente por Empresas de Propriedade Estatal (EPEs), principalmente Propriedade Estatal Central (EPECs), cujas principais modalidades de entrada são greenfield e fusões e aquisições. Estes investimentos são determinados pela busca de mercados e recursos naturais e estão concentrados na região Sudeste do país. Esse ganho de relevância do Brasil enquanto destino dos IEDCs motivou a presente pesquisa a responder a seguinte questão: Como o Brasil tem se posicionado, nesse início de século, frente aos Investimentos Externos Diretos Chineses para o país? Tem-se como resultado preliminar que o Brasil pode elevar a entrada desses investimentos e possivelmente os seus transbordamentos tecnológicos, compatibilizando seus interesses econômicos e geopolíticos com os chineses. Porém, parece necessário ao Brasil resolver os aspectos conjunturais e estruturais do crescimento do país que entravam as entradas dos investimentos chineses e de outras nações. / China has become one of the main worldwide sources of Foreign Direct Investment (FDI). In Brazil, Chinese Foreign Direct Investments (CFDI) have increased since the beginning of this century, presenting a higher rate of growth starting in the 2010s. CFDIs in Brazil are investments performed by State-Owned Enterprises (SOEs), especially Central State-Owned Enterprises (CSOEs), whose main entry strategy are greenfield, and mergers & acquisitions. Those investments are guided by the search for markets and natural resources and are concentrated in the Brazilian Southeast. This increased relevance of Brazil as CFDIs destination motivated this research to find answers to the following question: How has Brazil stood, in this century, in terms of Chinese Foreign Direct Investments flowing into the country? Preliminary results show that Brazil can increase the entry these investments and possibly their technological spillovers, harmonizing economic and geopolitical interests with the Chinese. However, it seems necessary to Brazil to solve the cyclical and structural aspects of its growth which discourages the entries of Chinese investments and from other Nations.

This thesis examines how practices of Corporate Social Responsibility (CSR) serve to legitimise Uruguay's largest ever foreign investment, the US$2.5-billion pulp mill constructed by the Finnish-Chilean firm Montes del Plata. Unusually, this investment prompted little social conflict, which runs counter to the community tensions frequently associated with large-scale infrastructure investments in Latin America. To explore this, the thesis takes an agency-oriented approach to the study of corporate-community relations. It offers fresh insights for critical management scholars and anthropologists of corporations into the techniques of collusion and co-optation in large-scale foreign direct investment (FDI) projects. Based on participant observation with Montes del Plata's community relations managers and their community interlocutors, conducted over separate periods during and after the mill's construction, the thesis examines the legitimising impulse of corporate citizenship, both as concept and practice. I show how the company seeks to incorporate itself as a morally-infused entity through ongoing interactions between its representative agents and external actors. I argue that the form of CSR that emerges is neither moral nor responsible, but its command over social relations nonetheless makes it a potent force for corporate capitalism's expansion. The mill owner attempts to manage its social and political relations in such a way as to secure the proximity needed for legitimacy-building, while creating the requisite distance to reduce onerous moral obligations; a balance that I analyse using the concepts of detachment and depoliticisation. The thesis opens with a discussion of the politics of representation, demonstrating how the agents of Montes del Plata (the Corporation) shape the local political ecosystem through the recognition, or not, of its counterparties' claims to representativeness. Chapters 1 and 2 also explore the theory of personation, especially in the efforts by the Corporation's community managers to infuse the company with moral characteristics. Their struggles in doing so invite consideration of a pragmatic approach to legitimacy building through the calculated management of social relations. Chapters 3 and 4 further show how principles of detachment and depoliticisation frame the Corporation's approach to relationship management. Chapter 3 examines how participation and empowerment are utilised to depoliticise development goods and stage the Corporation's detachment from their delivery. Chapter 4 examines the detachment effects of the changes to the region's political economy sparked by the mill project, and how the mill owner depoliticises public expectations of job creation. The conclusion makes the case for a distinctive approach to FDI legitimation driven by detachment (and reattachment) and facilitated by depoliticisation, which I term 'detachable CSR'.

<p>Crude oil can attract a lot of investments and development into a country but when not managed well can as well cause a lot of destruction and conflict. Like fire, crude oil is a good servant but can be a bad master too depending on how it is handled. Using Dunning‟s eclectic paradigm, a positive relationship between foreign direct investment and locational attraction was established. Of the two components within the locational attraction, natural resource attracts more foreign direct investment than market size in the case of Africa. It was established through our case study of Angola that oil attracts foreign direct investment because oil is a location attraction which attracts foreign firms. These investments on the other hand contribute to the productive capacity of the receiving country thus stimulating economic development. However, the availability of natural resources (oil) and its ability to attract foreign investment does not guarantee economic development. The establishment of appropriate institutions, mechanisms and policies would ensure efficient use of oil revenue for sustained economic growth. We identified vital policy options (the Fund mechanism and spending rule) available to Ghana , with inference from Norway, which could help evade the „Dutch Disease‟. Oil production could thus attract more foreign direct investment and contribute to the economic development of Ghana only on condition that appropriate oil revenue management policies are implemented.</p>

<p>Not long ago, Brazil was a country with an unstable economic system; inflation and interest rates were high and the political system was corrupt and complex. Still Brazil has for a long time been a successful market for Swedish companies. In São Paulo, the financial center of Brazil, a “little Sweden” has emerged which is considered to be the largest center for Swedish industry outside of Sweden.</p><p>The purpose of this thesis is to examine why a ‘little Sweden’ has emerged in Brazil as well as examining what importance different economical factors have had for Swedish foreign direct investments in Brazil. Theories regarding foreign direct investments as well as other business theories have been used in the research. To get a deep understanding of the subject, four interviews have been made with organizations involved in helping Swedish companies in Brazil.</p><p>The research has shown that the most important factors in the creation of the ‘little Sweden’ has been; access to production factors such as natural resources, the competitiveness of the home market together with the size of Brazil’s market, the financial capacity of the Swedish companies, the fact that Swedish companies could offer products and services that suited the demands of Brazil, as well as the fact that the Swedish entrepreneurs had a long term thinking and a great optimistic visions for the future.</p>