Effects of corruption on foreign direct investment inflow in South Korea: A systematic literature review

Abstract

Corruption remains one of the critical impediments to attracting Foreign Direct Investment (FDI) in emerging and developed economies alike. Despite South Korea's remarkable economic growth, underpinned by trade liberalization and FDI openness, the country faces persistent challenges related to corruption and regulatory deficiencies. This systematic literature review (SLR) investigates the impact of corruption on inward FDI (iFDI) in South Korea by synthesizing empirical and theoretical evidence from 2010 to 2024. Following the ROSES protocol, 21 high- and moderate-quality articles were systematically analyzed from Scopus, Web of Science, and Google Scholar. The findings reveal two primary theoretical standpoints: the "grabbing hand" (sands the wheels) and the "helping hand" (greases the wheels) hypotheses. Although Korea's investment environment is institutionally strong, its anti-corruption provisions in treaties are weak. The evidence points more strongly toward corruption deterring FDI inflows, especially in sectors requiring high transparency. This review highlights the need for more explicit anti-corruption safeguards in Korea’s bilateral and multilateral investment agreements. Future research should explore the role of institutional reforms and sector-specific FDI behavior under corruption dynamics.