Corruption and MNCs' entry mode. An empirical econometric study of Portuguese firms investing in PALOPs

Abstract

Extant literature on FDI entry modes and corruption tend to convey the idea that corruption leads to the choice of low equity, i.e. joint‐ventures with local partners, or non‐equity modes, namely export and contracting, in order to avoid the contact with corrupt state officials. Recently, however, Demirbag et al. (2010) argument that, despite corruption, linguistic and historical ties between home and host countries guide MNCs to prefer high equity modes (namely, whollyowned subsidiaries). Focusing on a rather unexplored setting, the African countries, most specifically the PALOP (Países Africanos de Língua Oficial Portuguesa), which includes countries with both very high (Equatorial Guinea, Guinea‐Bissau, and Angola), high (Mozambique, São Tome and Principe) and middle (Cape Verde) levels of corruption, and that maintain quite close linguistic and historical ties with Portugal, we aim at testing Dermirbag's argumentation; in particular, we aim at assessing the extent to which PALOP's