Host country corruption and Japanese outward foreign direct investment: A sectoral and industry-level analysis

Abstract

Japan regained its status as the world's largest source of outward FDI in 2018. This paper studies the relationship between host country corruption and Japanese outward manufacturing and service FDI into 179 countries for the years 1995–2019. Employing a negative binomial model, we find that host country corruption is negatively associated with Japanese MNE activity at both aggregated, sectoral and industry-levels. Moreover, we do not identify major industry-level FDI determinant differences at the global level as both sectors and industries appear driven by market seeking motives. In contrast, the factor endowment variables signaling vertical FDI showed little if any statistical significance.