Contrary to popular assumptions linking economic integration with decreased corruption, this article examines how multinational corporation (MNC) activity affects developing countries. Using China as a case study, it argues that MNC presence may actually contribute to rent creation—a key driver of corruption in host nations.
The research draws from original data on filed corruption cases to develop robust measures of corruption levels across Chinese provinces with varying MNC exposure. Analysis reveals a strong association: increased MNC activity correlates significantly with higher provincial-level corruption rates, even after accounting for potential endogeneity issues and alternative indicators.
This finding carries important implications for governance strategies in developing economies where policymakers often expect foreign investment to automatically improve institutional quality.
