The Host Country Corruption And Its Impact Study On Multinational Strategy

The emergence of emerging markets is the symbol of economic globalization. Abundant natural resources, low cost labor force, and potential huge market attract MNEs (multinational enterprises) to invest in these countries. To make sure rapid economic development, emerging markets adopt the market economy rules. But for regret, corruptions abound in these governments. During the operation in host countries, MNEs have to deal with corrupt officials. In traditional international business theories, researches mostly focus on FDI between developed countries and hypothesis that governments always be incorrupt and efficient. However, the governments in emerging markets don't deserve these hypotheses in fact. So our research question is how corruption breeding from host countries impact on the strategies of MNEs which coming from countries with rectitude governments.Based on this consideration, I want to build up a complete analysis paradigm concerning impact of corruption of host country on strategies of MNEs. This research is made up two parts. The first part deals with what exactly corruption is in the view of international business and through what kind of channels it affect MNEs. The second part discusses what strategies of MNEs' will be changed in the corrupt circumstance and how these impacts happen.The first part is composed of six chapters. The main subjects are mechanism of corruption formation, transaction process of corruption, and channel that corruption impacts on MNEs. Firstly, we set forth that corruption is formed by government officials who want to seize private gains in the process of transactions of government products and types of government product markets determinate how much officials can get. Effectiveness of government, richness, power distance, individualism, and enforcement of law all influence the degree of corruption in a country. In longitudinal perspective, sustainable FDI inflows, improvement of citizen education, efficiency of government can contain corruption. Secondly, we treat corruption as a kind of contract which composed of choosing partner, tentative gifts, set up contracts, contract enforcement, and remedy after the enforcement of contract. Lastly, corruption in host has direct or indirect influences on MNEs and on the other sides of the coin, MNEs have counter-effect on host corruption with regulatory pressure effect, demonstration effect, and professionalization effect. Furthermore, corruption in host has different effects on MNEs which have motivations of using monopoly power, using resource, or grasping natural resources in host respectively.The second part constitutes nine chapters. Main concerns include how corruption in host works on FDI inflows and the resources of FDI in macro level and how corruption changes strategies of MNEs in micro level. Research conclusion indicate that corruption in host reduce FDI inflow and reduce FDI from comparatively incorrupt countries. To reduce the negative impacts of corruption, MNEs will choose their suitable entry mode according to their own motivation of investing abroad.The perception of MNEs about corruption can be analyzed in four levels. The first layer concerns the factors which will induce MNEs to conduct corruption. Our conclusion is that there are three kinds of factors including mission circumstances, institutional environment, and intern factors. In the second level, we identify that political strategies and some operational strategies will be affected by corruption. These impacts will be moderated by MNEs' corporate social responsibility identification. At the same time, MNEs can choose some tactics such as avoidance, control, corporation, and flexibility to deal these influences. The third and fourth layers discuss why MNEs should be against corruption and how can they oppose corruption. In our study, corruption can bring on lose of long-term benefits and competitive advantage, strategic barrier, and organizational inefficiency. And MNEs can contain corruption through suitable corporate culture, organizational structure, and implemental system.