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1 – 10 of over 5000Dawn L. Keig and Lance Eliot Brouthers
This paper aims to apply a risk/uncertainty lens to corruption to explore how different types of corruption (formal vs informal) in a multinational enterprise’s (MNE) operating…
Abstract
Purpose
This paper aims to apply a risk/uncertainty lens to corruption to explore how different types of corruption (formal vs informal) in a multinational enterprise’s (MNE) operating environment have different relationships to firm performance.
Design/methodology/approach
This paper uses a portfolio approach to measure the formal and informal corruption impacts of an MNE’s entire set of operating locations and test the hypotheses using both accounting- and market-based measures of performance on a sample of 648 firms.
Findings
This study hypothesizes and finds that because formal corruption represents risk, it is typically included in the a priori evaluations of trade-offs between market attractiveness and costs made by MNEs prior to market entry, higher formal corruption in the firm’s environment is positively related to its financial performance. Conversely, the uncertainty associated with the generally intangible and pervasive nature of informal corruption prevents similar, accurate cost consideration before entering the market, resulting in a negative relationship between higher levels of informal corruption and firm performance.
Originality/value
This study provides unique empirical support for the notion that MNEs can both gain and lose by investing in corrupt institutional environments, grounded in an understanding of the differences between risk and uncertainty, reinforcing the importance of considering the potential impacts of both the formal and informal dimensions of corruption in a firm’s operating environment.
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Corruption has been evidenced as one of the major factors that drive a firm's dynamics and growth. This study examines the relationship between corruption and financing structure…
Abstract
Purpose
Corruption has been evidenced as one of the major factors that drive a firm's dynamics and growth. This study examines the relationship between corruption and financing structure decisions of small and medium-sized enterprises (SMEs) in Vietnam.
Design/methodology/approach
The authors use a longitudinal data set from the Vietnam's SME Survey in the period 2007–2013 and adopt the two-stage least squares method to deal with endogeneity.
Findings
After controlling for endogeneity and firm heterogeneity, the authors find that, overall, corruption does significantly affect the decisions of financing sources. Given that, corruption increases the use of informal debt and decreases the levels of formal debt, owner's equity and retained earnings.
Practical implications
The findings suggest implications for corruption-combating actions and policies.
Originality/value
Different from previous studies that either provide evidence of government corruption and a firm's capital structure at the country level or focus on corruption and debt only, we deliver a more comprehensive analysis on the nexus between corruption and various financing sources.
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Jinsil Kim, David H. Weng and Seung-Hyun (Sean) Lee
Drawing on the bribery literature, this paper aims to examine the effect of bribes paid in the home country on firms’ decision to internationalize through exports from transition…
Abstract
Purpose
Drawing on the bribery literature, this paper aims to examine the effect of bribes paid in the home country on firms’ decision to internationalize through exports from transition economies. It also investigates whether the effect of home country bribery may vary from new ventures to established firms, and from those firms that operate in an environment with high to low informal competition.
Design/methodology/approach
This paper tests several hypotheses using a panel data with fixed effects based on a sample of firms in transition economies from the Business Environment and Enterprise Performance Survey.
Findings
First, home country bribery in transition economies can make domestic markets more lenient and dampen firms’ motivation to seek opportunities abroad. Second, new ventures have a higher motivation to focus on their domestic markets after paying bribes. Finally, despite the benefits accrued in the home country through bribery, firms that face a higher level of informal competition in the home country are more likely to seek opportunities abroad.
Practical implications
Managers in transition economies should consider their home country bribery activities in their evaluation of foreign market opportunities. Firms that use money to influence home country government officials, especially new ventures, are advised to have a more holistic view in evaluating foreign market opportunities so they will not miss out on new opportunities.
Originality/value
This paper advances literature on home country institutions and the research on firm global strategies. Moreover, it also highlights several contingencies that shape the effect of home country bribery on firms’ foreign market focus.
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The purpose of this paper is to analyze the changes that have taken place in the Russian higher education sector over the last two decades. Specifically, it analyses such…
Abstract
Purpose
The purpose of this paper is to analyze the changes that have taken place in the Russian higher education sector over the last two decades. Specifically, it analyses such phenomena as corruption and politicization of Russian universities through the concept of “loyalty as rent”.
Design/methodology/approach
This paper is a synthesis of conceptual work and case study, developing and applying the concept of “loyalty as rent” to the case of Russian higher education. Rapidly developing segments of the Russian economy are known for sprawling informal economic relations. In such segments, illicit revenues may exceed legal income and political influence is considered an economic resource.
Findings
Informal approval of corrupt activities in colleges and universities in exchange for loyalty and compliance with the current political regime is commonplace in modern Russia. Political indoctrination of universities is advanced by the ruling political regime in Russia through informal means, while academic meritocracy is no longer honored. The ruling regime uses corruption in the universities to derive its rent not in money but in loyalty to the regime.
Originality/value
This paper argues that the widespread corruption in Russian universities may be used by the state in order to gain much needed political support of faculty and students.
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Abate Andre Modeste and Novice Patrick Bakehe
This paper aims to examine the relationship between the payment of bribes, the access to electricity and the productivity of informal production units (IPUs).
Abstract
Purpose
This paper aims to examine the relationship between the payment of bribes, the access to electricity and the productivity of informal production units (IPUs).
Design/methodology/approach
The data used for this study come from the second Survey on Employment and Informal Sector conducted in 2010 by the National Institute of Statistics of Cameroon and representative at the national level. The survey was conducted among 3,560 IPUs. Survey participants reported whether they had been personally affected by corruption in the twelve months preceding the survey. Relying on the data of this survey, the recursive trivariate probit model was used to study the correlation between corruption and access to electricity.
Findings
The results reveal that the payment of bribes positively influences IPU access to electricity, and consequently access to this infrastructure has a positive impact on company performance.
Research limitations/implications
A main limitation of this paper is the environment of study in which corruption appeared to be institutionalised. It would therefore be interesting to extend the results obtained by conducting research in other countries and also including other infrastructures such as telecommunications.
Practical implications
The main contribution of this research is to highlight the effectiveness of the fight against corruption and its impact on the access of some basics resources that affect the performance of certain companies. Indeed, the fight against corruption would be easier if economic actors had access to certain resources and fundamental infrastructures for their activities. Thus, improving the supply of resources and infrastructures can be an important lever in the fight against corruption in Africa.
Originality/value
This research addresses a vulnerable sector vis-à-vis the pressure of the actors involved in the provision of a service essential to the activity of companies. It highlights the justification for accepting the use of corruption. Indeed, entrepreneurs are faced with a dilemma between moral standards on the one hand, and economic imperatives on the other. If corruption is a condition of access to electricity which, in turn, improves performance, it is easy to pay bribes to gain access to electricity.
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Arezou Harraf, Hasan Ghura, Allam Hamdan and Xiaoqing Li
The paper aims to analyse the interplay between formal and informal institutions' and their impact on entrepreneurship rates in emerging economies.
Abstract
Purpose
The paper aims to analyse the interplay between formal and informal institutions' and their impact on entrepreneurship rates in emerging economies.
Design/methodology/approach
This study expands previous research in examining the moderating effect of control of corruption on the relationship between formal institutions and the development of the entrepreneurial activity. The study utilizes longitudinal analyses of a dataset from 41 emerging economies over 11 years (2006–2016).
Findings
Findings provided robust support for the study's hypotheses. The results suggested lower levels of corruption positively moderate the effects of a country's number of procedures and education and training on the rates of entrepreneurial activity, while negatively moderating the effects of firm-level technology absorption on the rates of entrepreneurial activity.
Research limitations/implications
The study has considered only one particular aspect of high-growth entrepreneurship, which is newly registered firms with limited liability. Although newly registered firms are recognized as one of the critical drivers of entrepreneurial activity. Future research should seek to examine other aspects of growth-oriented entrepreneurship such as activities involving a high level of innovation, corporate entrepreneurship or technology developments.
Practical implications
This study advanced the existing theories in the field of entrepreneurship and institutional economics as it merged the two theories as a driving framework in the design of the study in the context of emerging economies.
Social implications
The study tested a theoretical model by expanding the number of emerging economies in the study and found comparable findings that explain factors that may influence the likelihood of individuals entering entrepreneurship.
Originality/value
This article adds to the current literature as it highlights the importance of the interplay of formal and informal institutions in determining their impact on entrepreneurship rates in emerging economies. This is of particular importance to policy-makers, and the business world as the empirical results of this study show the benefits of control of corruption in boosting entrepreneurial rates in these economies, which strive for economic diversification in their developmental endeavours.
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Using state-level data on productive and unproductive entrepreneurship, shadow economy size, and public official corruption, the purpose of this paper is to examine whether formal…
Abstract
Purpose
Using state-level data on productive and unproductive entrepreneurship, shadow economy size, and public official corruption, the purpose of this paper is to examine whether formal sector productive (unproductive) entrepreneurial activity is associated with lower (higher) levels of informal economic activity.
Design/methodology/approach
Additionally, the author aims to connect US state-level entrepreneurship, shadow economy size, and corruption by asking whether corruption affects entrepreneurial outcomes primarily through its effects on the shadow economy. The author contends that if this is the case, then estimates of corruption should serve as a good instrument for shadow economy size in regressions on formal sector entrepreneurial outcomes.
Findings
Results from OLS regressions suggest that shadow economy size shares a strong, negative (positive), and statistically significant relationship with productive (unproductive) entrepreneurship. These results are fairly robust to GMM estimation. Additionally, the author finds that corruption is a strong instrument for shadow economy size; one for which validity cannot be rejected in regressions on productive, and net entrepreneurship scores.
Research limitations/implications
However, the author cannot safely assert that the author finds evidence of the shadow economy serving as a primary channel through which corruption affects observed entrepreneurial outcomes. Failure to reject validity of the corruption instrument is, at best, suggestive of the primacy of the entrepreneurial choice between formal and informal sector participation.
Originality/value
This study, to the author’s knowledge, is the first to attempt “connecting the dots” between entrepreneurship, corruption, and shadow economy size.
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Fabian Teichmann, Sonia Ruxandra Boticiu and Bruno S. Sergi
This study aims to illustrate how bribery and fake news in Eastern European countries can affect businesses across Europe. Countries such as Romania, Bulgaria, Slovenia and…
Abstract
Purpose
This study aims to illustrate how bribery and fake news in Eastern European countries can affect businesses across Europe. Countries such as Romania, Bulgaria, Slovenia and Hungary represent sizeable and potential markets. Thanks to their European Union membership and low labor costs, these markets could offer many investment opportunities to international managers. Consequently, this study focuses on the challenge of corruption encountered by international managers and the necessary precautions before committing financial resources to these countries.
Design/methodology/approach
For this study, 10 informal interviews with presumed providers of illegal services were used to investigate the previously unexplored innovative research question. Informal interviews were conducted with individuals who can be assumed to have experience or knowledge in the field of corruption in multinational corporations.
Findings
The results show the potential impact of corruption on international managers in Eastern Europe.
Originality/value
This study contributes to the literature by examining two forms of corruption: bribing journalists to publish fake news to harm commercial rivals and bribing public officials to manufacture legal proceedings against business competitors. The following will also highlight how a corrupt judicial system can have implications abroad and what problems this may raise for mutual legal assistance.
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This chapter evaluates the cross-national variations in the proportion of employment that is in informal sector enterprises and evaluates competing theories which view these…
Abstract
Purpose
This chapter evaluates the cross-national variations in the proportion of employment that is in informal sector enterprises and evaluates competing theories which view these cross-national variations to result from either economic underdevelopment (modernisation explanation), high taxes, public sector corruption and over-regulation of work and welfare (neo-liberal explanation) or conversely, a lack of intervention in the realm of social protection (political economy explanation).
Methodology/approach
To evaluate these competing explanations, the International Labour Organisation’s (ILO) country surveys that investigate the scale of employment in informal sector enterprise in 43 developing and transition economies, along with the World Bank database of development indicators, are analysed here.
Findings
The finding is that lower levels of employment in informal sector enterprises are closely associated with economic development, lower levels of public sector corruption and state intervention in the form of higher tax rates and social transfers to protect workers from poverty.
Research implications
This chapter reveals the need to move beyond treating these contrasting representations as competing explanations and to recognise how all are required to more fully explain the prevalence of informal sector entrepreneurship.
Practical/social implications
Tackling employment in informal sector enterprise is shown to require broader economic and social policies associated with the modernisation of economies, tax rates, social protection and poverty alleviation.
Originality/value
One of the first evaluations of the competing explanations for why some countries have higher levels of employment in informal sector enterprises.
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Hasan Ghura, Arezou Harraf, Xiaoqing Li and Allam Hamdan
Corruption has been shown to discourage entrepreneurship in both developed and developing countries. However, it is less clear to what extent corruption affects the development of…
Abstract
Purpose
Corruption has been shown to discourage entrepreneurship in both developed and developing countries. However, it is less clear to what extent corruption affects the development of institutions’ impact on entrepreneurial activity in the context of emerging economies, such as those in the post-communist countries. The purpose of this study is to use institutional economics as a conceptual framework to analyse the moderating effect of control of corruption (informal institution) on the relationship between formal institutions (such as the number of procedures, education and training [TEDU], access to finance and technology absorption) and entrepreneurial activity.
Design/methodology/approach
The study used panel data of 14 post-communist countries and different secondary databases from the years 2006-2016.
Findings
The main findings showed the importance of the institutional environment (formal and informal) on encouraging the rates of entrepreneurial activity. Overall, corruption showed that it behaves as a moderator between formal institutions and entrepreneurship. In particular, the evidence from this study showed that formal institutions, such as the number of procedures and TEDU, are more likely to encourage individual’s choice to become an entrepreneur and start a new business activity in post-communist economies that have a perception of lower levels of corruption.
Originality/value
This study has several implications from both theoretical perspectives (advancing the application of institutional economics for the study of entrepreneurship) and from the practical point of view (providing insights for governmental policies interested in fostering higher levels of entrepreneurial activity).
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