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Teaching Tip: Where Companies Locate and the Corruption Index

February 10, 2012

Today’s Wall Street Journal (Feb.10,2012) ran a very eye-catching 1/2 page ad, taken out by the Eurasian country,  Georgia.  Why would a multinational corporation locate in Georgia? “Because according to Transparency International we are one of the least corrupt countries in the world,” touts the ad.

And, indeed, as we discuss in Chapter 8, Location Strategies, corruption can create substantial economic inefficiency, as well as ethical and legal problems in the global arena. Transparency International’s annual corruption perceptions index (CPI) (www.transparency.org) is illustrated in Table 8.2 and excerpted here in today’s blog.  This is an interesting topic to share with your students, and can lead to their tracking the success of other nations on this index, as well as on others (such as the World economic forum’s annual competitive index —see Table 8.1 and www.weforum.org).

The World Bank’s VP for Europe and Central Asia writes in the Journal: “Corruption is sometimes seen as as endemic, a product of traditional local culture, and, as such, inevitable. Georgia’s experience shows that the vicious cycle can be broken.” Georgia’s zero tolerance approach toward public-sector graft since its 2003 “Rose Revolution” places the country among some of the advanced European nations on the Transparency  rankings. Georgia rose to 64th place out of 183 nations (from 68th last year) with a CPI score of 4.1. It is not quite in the league with the US, Canada, or New Zealand, but ahead of all four BRIC nations.

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