Review of Professional Management
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Poonam Bewtra1

First Published 6 Jan 2023.
Article Information Volume 20, Issue 2 December 2022
Corresponding Author:

Poonam Bewtra, Department of Commerce, Janki Devi Memorial College, University of Delhi, Delhi 110060, India.

1 Department of Commerce, Janki Devi Memorial College, University of Delhi, Delhi, India

Creative Commons Non Commercial CC BY-NC: This article is distributed under the terms of the Creative Commons Attribution-NonCommercial 4.0 License ( which permits non-Commercial use, reproduction and distribution of the work without further permission provided the original work is attributed.


As firms invest in foreign countries, they face additional costs of doing business in the form of liabilities of foreignness. The liabilities of foreignness are aggravated by the distance in the institutional environment of the home country in which the firms are embedded and the host country in which they invest. Within this context, the aim of this research paper is to examine if a specific form of institutional distance, that is, corruption distance, affects the quantum of inward foreign direct investment (FDI) in India, which is a large emerging market and an important receiver of global FDI flows. Using country-wise FDI inflows data from 2008 to 2020, the results of panel autoregressive distributed lag (ARDL) method reveal the presence of a long-run relationship between FDI inflows and corruption distance between India and the home country of the investor firm. The disequilibrium in the long-run relationship, if any, gets adjusted at the rate of 38.1% per year. The findings also suggest that an improvement in the control of corruption is expected to lead to greater FDI inflows in the country, thereby providing an important policy implication. To attract FDI and to fully realise its benefits which are essential for an emerging country like India, policymakers need to make concerted efforts to control the level of corruption.


FDI, corruption distance, panel ARDL, India, governance, institutional environment, liability of foreignness


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