“Sand” or “grease” effect? The impact of corruption on the investment volume of public−private partnerships

Abstract

PurposeSome scholars argue that corruption hinders economies and investment because it generates extra costs, while others suggest that it can act as a stimulus. Their mixed empirical findings have prompted the analysis of whether investors' attitude towards corruption changes depending on its degree of prevalence.Design/methodology/approachThe authors examined 4,518 public–private partnerships (PPPs) located in 46 developing countries for the period 1997–2017. The data were collected from the World Bank PPP database. The authors investigated the relationship between the amount of investment in PPP projects and the level of corruption using regression with multilevel mixed effects.FindingsCorruption and the amount of investment in PPP projects are inversely related at the low and high end of the spectrum of corruption, but the relationship is positive towards the middle. Further analysis revealed that this was spurred by high investment PPP projects in less developed countries.Originality/valueThe findings allow the authors to reconcile the opposing positions in the literature through a “sand–grease–sand the wheels” effect between the volume of investment and corruption, which can be configured as a reverse S-shape consisting of three stages.