maybe the results are not robust or they suffer from publication bias. It matters the way you measure corruption. Some papers taking a recent sample of Asian countries find that corruption deters FDI. A good research paper would be to conduct a Meta Regression Analysis and see whether or not you find publication bias

In my experience corruption is just one more operating cost. The major problem that nobody talks are mafia actions.

Distributors and small local producers are afraid (for more productive organizations) in many countries not distributed or add value to goods from abroad. Although these are economically very profitable.

It might depend on the country of origin of the investor. Consider you are an investor from country with high corruption. Then you will have advantage against investors from countries with low corruption, because you "know how" and high corruption in host country will not deter you.

So the overall impact on FDI may depend on the composition of the investors' origins.

(Just hypothesis)

There is a possibility that fdi in some particular industries get increased when there is high corruption. Examples like medicine, ship building or breaking which have very strict norms otherwise. With corruption it becomes easier to get approval for them. This is particularly true for industries with high hazard probability and which cause depletion of natural resources. So again or depends upon type of investors and the country they come from.

It is intuitive that corruption imposes hurdles to fdi. I think that country of origin and its perceived image, has nothing to do with actual corruption practices. Germany and its big corporations is a good modern example. In my mind, it is the competition for a given business abroad, the kind of industry involved, as Utkarsh commended, and of course the host country corruption level (not counting what is considered as corruption) that define the need for such practices. So I think that easiness of corruption per se has little to do with fdi attraction.

High levels of corruption in the host country may impede the attraction of FDI in general. Indeed, there are countries which have witnessed the exact opposite, i.e. an increase in FDI. But this is not due to corruption in the host country per se, but rather the similarities that the investers have with their host counterparts and the investment sectors in which they get involved. For example, there is significant FDI in the energy sectors - namely hydrocarbons- of countries with the highest corruption index. This is because, governments act as garantors for those companies who enjoy numerous prerogatives.

In my opinion, the level of corruption (relative to other countries) is not that relevant to determine FDI flows. It is the change in the level that will drive FDI. Also, take into account that Corruption indexes are constructed using historical information. Expected changes in the corruption level will be more directly associated to positive changes in FDI flows. Regards,

E.

In a study of Transition economies in the 1990's, we explored whether corruption interacted with tax laws to influence FDI. If tax laws use ambiguous language, leaving room for interpretation by a tax official AND the country has a high level of corruption, firms may find it more difficult to predict tax liabilities discouraging FDI. We found evidence of this. “Incentive Targeting, Influence Peddling and FDI,” with N. Valev and K. Edmiston, International Tax and Public Finance, (September) 2004

The impact of corruption depends to some extent on the type of FDI. Extractive FDI can be short term and bribery will not affect the FDI only the distribution of the money. Manufacturing FDI should have a longer term and the returns will be affected by the level of corruption. Higher corruption means that less of the FDI profits are available to provide higher wages and better prices to suppliers.

As far as i know high levels of corruption discourages FDI, based on FDI value and corruption indicators perception. However, it does not stop FDI. What it happens in such cases is that high levels of corruption attract investments with low value added and high tax fraud potential instead of businesses with high value added and low tax fraud potential. So, corporations may invest in mining operations (low value added) but prefer to organize complex production processes in low corruption environment.

Bottom line, i completely agree with Carl.

In my view, corruption is a moderator to the relationship between FDInvesment  to a country. This does not out rule the probability of corruption playing a mediating role depending on the various parameter of the host country i.e. leadership, governance and administrative structures. The issue is what is the parameter underscoring the dependent variable. Holding interests of FDI constant (investment), My hypothesis is, corruption in the host country discourages FDI

It clearly hinders.