Abstract

We explore the role of the newly introduced Information and Communication Technology (ICT) infrastructure that has been reigning over the traditional factors responsible for pulling foreign capital in the recent years, along with country-specific corruption level in determining the location decision of foreign direct investment (FDI) to the developing countries over time. Our core hypothesis is that given the different levels of ICT infrastructure, inflow of FDI increases with the level of corruption. A two-dimensional panel data model is used for FDI inflows (percentage of GDP) to 41 countries over the period 2001–2016. The results show a strong support of our hypothesis. Interestingly, the findings reflect that the individual effects of corruption and ICT are unable to attract FDI but they are jointly effective in bringing FDI as the coefficient of the interaction term between corruption and ICT is positive and statistically significant. The findings reveal that countries with high corruption levels would likely improve their ICT infrastructure to receive more FDI. The results are robust after using alternate measures of corruption and treating endogeneity concerns.