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How does corruption act as a barrier for FDI in Romania?

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The research topic focuses mainly on the “Link between FDI and corruption in Romania”. Foreign Direct Investment is a relatively new term that is said to bring a positive outcome to any country seeking it. However, there is another side of the story that is often hidden or forgotten and that is the costs of FDI. This research paper will analyze at what cost Romania will benefit from FDI taking in consideration the amount of corruption the country is dealing  with since the fall of the communist era. 




1. Theme 1: Corruption and FDI in Romania



Dutulescu, S., & Nisulescu-Ashrafzadeh, I. (2016). Fenomenul coruptiei în România. Audit Financiar, 14(6), 623.


Reiter, S. L., & Steensma, H. K. (2010). Human development and foreign direct investment in developing countries: the influence of FDI policy and corruption. World

development, 38(12), 1678-1691.


Bac M (2001) Corruption, connections and transparency: Does a better screen imply a better scene? Public Choice 107:87–96


Egger, P., & Winner, H. (2005). Evidence on corruption as an incentive for foreign direct investment. European journal of political economy, 21(4), 932-952.


Egger, P., & Winner, H. (2006). How corruption influences foreign direct investment: A panel data study. Economic Development and Cultural Change, 54(2), 459-486.




2. Theme 2: Theoretical concepts about FDI


Bitzenis, A. (2003). Universal Model of theories determining FDI. Is there any dominant theory? Are the FDI inflows in the CEE countries and especially in Bulgaria a myth?. European Business Review, 15(2), 94-104.


Denisia, V. (2010). Foreign direct investment theories: An overview of the main FDI theories.







3. Factors influencing FDI in Romania:


LUDOȘEAN, B. M. (2012). A VAR analysis of the connection between FDI and economic growth in Romania. Theoretical and Applied Economics, 19(575), 115-130.


Vintila, D., & Zaharia, R. (2012). Foreign direct investments and economic growth in Romania. In 7th International Scientific Conference, Business and Management (p. 248).


Borensztein, E., J. De Gregorio, and J.W. Lee (1998): “ How Does Foreign Direct Investment Affect

Economic Growth?”  in Journal of International Economics  45, p.115– 135.


aman, G., Vasile, V., Matei, M., Croitoru, C., & Enescu, G. (2011). Some challenging (macro) economic aspects of FDI in Romania. Revista Romana de Economie, 33(2).

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How does corruption act as a barrier for FDI in Romania?


Institutional Affiliation

How does corruption act as a barrier for FDI in Romania?


The economic and political liberation of the developing countries led to Foreign Direct Investment (FDI) gaining popularity leading to a surge in its flows. Egger and Winner (2006) assert that the FDI recipient countries had recorded a 20% annual growth in the FDI volume since 1986 when most of them were liberated.  Foreign Direct Investment is a relatively new term that is said to bring a positive outcome to any country seeking it. However, there is another side of the story that is often ignored, and that is regarding the costs and underlying forces of FDI. For instance, there is an unequal distribution of the amount of FDI in developing countries. According to Vintila and Zaharia (2012), this situation has motivated researchers to conduct various econometric and statistical analyses into the factors affecting FDI performance.

            Corruption in the host countries is among the FDI determinants that have attracted attention (Egger & Winner, 2006). In an economic context, corruption involves the payment of bribes to corrupt government officials into providing business favors that include police protection, tax assessments, and issuance of permits. These are factors that significantly increase the costs of business operations in the majority of the developing countries. Therefore, acknowledging corruption as a barrier to FDI is significant since it raises that costs of doing business, and intensifies uncertainty. The reality of corruption has compromised access to developing economies as it leads in some multinationals being accorded preferential access to profitable markets. According to Aman et al. (2011), corruption supports illegality and secrecy, the abuse of public power for selfish gains and can assume different forms in a developing economy.

A political system that is corrupted does not support the establishment of FDI. Most of the developing countries allow people to take up powerful positions based on patronage; this situation creates instability that misleads the economic environment. Corruption acts as a barrier to FDI because it affects the different levels of government and economic sectors, hence, significantly affecting the efficiency and reliability levels. According to Ludoșean (2012), the threat posed by corruption upsets the institutions and sectors within a developing country. This research proposal will focus on investigating corruption as one of the determinants of FDI performance in Romania. The lack of reliable data and the difficulty of testing theories make the process of measuring corruption to be complicated. As...


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