Corruption is defined as “the misuse of public power for private benefits” (Transpancency International, 1999). It occurs when people in positions of public trust use their positions to gain benefits by means such as bribes, extortion or fraud. However corruption extends beyond the public domain among public officials and politicians to the private domain in the form of bribery, embezzlement, fraud and abuse of office by private individuals in organisations (Nye, 1967)
Major Article Summary
Habib and Zurawicki conducted a study on corruption and Foreign Direct Investment (FDI) in their article, “Corruption and Foreign Direct Investment” which appeared in the Journal of International Business Studies (2002). They looked at two aspects of corruption and its impact on foreign direct investment. Firstly, they looked at the level of corruption in a host country and its impact on FDI and secondly, the impact of absolute difference in the corruption level between the host and home country on FDI.
They found that firms, as a whole, do not support corruption based on: moral grounds, the fact that they find it difficult to handle and generally very costly. They also found that differences in the level of corruption between the home and host countries had a negative impact on FDI because it meant that there was less understanding between firms and host countries which made it difficult to deal mutually. As such, for their own benefits firms should make an effort to combat corruption.
Lambsdorff (1999) in his article “Corruption in Empirical Research-A Review” states that the presence of corruption lowers a country's attractiveness for making investments (p.12). Wei (2000) in her article “How taxing is corruption on international investors?” adds that corruption acts as a deterrent to companies regardless of whether or not they have regulations in their countries such as the Foreign Corrupt Practices Act in America that provides an...