The Impact of Corruption Distance on Ownership Strategies of Spanish and Portuguese MNEs

Mariana Pedrosa Faria; Fernando Carvalho; Nuno Rosa Reis

doi:10.5585/ijsm.v17i1.2603

Authors

Mariana Pedrosa Faria Faculty of Economics - University of Coimbra
Fernando Carvalho Faculty of Economics - University of Coimbra
Nuno Rosa Reis School of Technology and Management CARME – Center for Applied Research in Management and Economics Polytechnic Institute of Leiria

DOI:

https://doi.org/10.5585/ijsm.v17i1.2603

Keywords:

Corruption Distance, Ownership Strategy, Home-Host Differences, Portugal, Spain.

Abstract

The ownership strategy of foreign subsidiaries is an important decision for multinational enterprises (MNEs). Previous research has analyzed the effect of country dimensions on this strategy, both from the home and the host country. In this paper we delve into the effect of differences between home and host country on the MNEs’ ownership strategies. Empirically, we analyze the influence of corruption distance on the ownership strategies of Spanish and Portuguese MNEs, using data from 3,941 foreign subsidiaries. We found that the higher the absolute corruption distance between Spain (or Portugal) and the host country, the higher the ownership controlled by MNEs. However, when the host is more corrupt than the home country, MNEs have a lower ownership level in the local subsidiaries.