Corruption and subsidiary profitability: US MNC subsidiaries in the Asia Pacific region

Seung-Hyun Lee, Sungjin J. Hong

Research output: Contribution to journalArticlepeer-review

19 Citations (Scopus)

Abstract

Would multinational corporation (MNC) subsidiaries be more profitable in host countries where corruption is less severe? Would MNC subsidiaries be more profitable in less corrupt countries if they focus on local sales? This paper examines the impact of the level of corruption on the profitability of US MNCs in the Asia Pacific region. Using foreign direct investment (FDI) data archived by the US Bureau of Economic Analysis and corruption data reported by the World Bank, we find that MNC subsidiaries located in countries with a lower level of corruption are more profitable. In addition, MNC subsidiaries with a greater focus on local sales are more profitable when the corruption level is low. This study contributes to the literature by showing that when local sales are important to MNC subsidiaries, a lower level of corruption by host countries positively affects the profitability of the MNC subsidiaries.
Original languageEnglish
Pages (from-to)949-964
Number of pages16
JournalASIA PACIFIC JOURNAL OF MANAGEMENT
Volume29
Issue number4
DOIs
Publication statusPublished - Dec 2012

ASJC Scopus subject areas

  • Business and International Management
  • Strategy and Management
  • Economics, Econometrics and Finance (miscellaneous)

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