Advertisement

Journal of Business Ethics

, Volume 88, Supplement 4, pp 841–849 | Cite as

Are Corruption Indices a Self-Fulfilling Prophecy? A Social Labeling Perspective of Corruption

  • Danielle E. Warren
  • William S. Laufer
Article

Abstract

Rankings of countries by perceived corruption have emerged over the past decade as leading indicators of governance and development. Designed to highlight countries that are known to be corrupt, their objective is to encourage transparency and good governance. High rankings on corruption, it is argued, will serve as a strong incentive for reform. The practice of ranking and labeling countries “corrupt,” however, may have a perverse effect. Consistent with Social Labeling Theory, we argue that perceptual indices can encourage the loss of needed investment and, thus, contribute to higher rates of corruption within unfavorably ranked countries. In effect, corruption indices may inhibit foreign direct investment, the effect of which is to encourage the status quo in terms of corruption ranking. Using an experimental study design, we test the effects of country corruption rankings on the assessment of country investment desirability and find ranking exposure causes shifts in country investment desirability for 10 of 12 countries studied. These findings suggest that corruption rankings, which are based on perceptions of corruption, may cause country isolation and a reduction in legitimate means of investment.

Keywords

corruption collective action network governance 

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

Notes

Acknowledgments

We would like to thank Gem Guiang for her excellent research assistance and the Zicklin Center for Business Ethics Center for funding this project.

Tom Dunfee affected our development as academics. This article reflects Tom’s influence on our scholarship in two ways. It advances the discussion of corruption, a topic that was an ongoing concern of Tom’s. It also reflects Tom’s approach to scholarship – to thoughtfully question even those concepts that are widely accepted and respected. Here we question the legitimacy and influence of popular corruption rankings because of their empirical shortcomings and potential damage to developing economies. We will sorely miss hearing Tom’s critique of our work and seeing a warm grin spread across his face as we exchange ideas. More than anything, we will miss Tom’s mentorship, leadership and unwavering integrity.

References

  1. Alesina, A. and B. Weder: 2002, `Do Corrupt Governments Receive Less Foreign Aid?', The American Economic Review 92, 1126–1137.Google Scholar
  2. Becker, H. S. 1963. Outsiders: Studies in the sociology of deviance. New York: The Free Press.Google Scholar
  3. Dunfee, T.W. & Hess, D. 2001. Getting from Salbu to the ‘Tipping Point’: The role of corporate action Within a portfolio of anti-corruption strategies. Northwestern Journal of International Law & Business, 21(2) 471-490.Google Scholar
  4. Galtung, F. 2005 “Measuring the Immeasurable: Boundaries and Functions of (Macro) Corruption Indices,” in F. Galtung & C. Sampford (eds.), Measuring Corruption. London: Ashgate.Google Scholar
  5. Goffman, E. 1963. Stigma: Notes on the management of spoiled identity. Englewood Cliffs, NJ: Prentice-Hall.Google Scholar
  6. Goldsmith, A. A. 1999. Slapping the grasping hand: Correlates of political corruption in emerging markets. American Journal of Economics & Sociology, 58:865-883.CrossRefGoogle Scholar
  7. Habib, M. & Zurawicki, L. 2002. Corruption and Foreign Direct Investment, Journal of International Business Studies 33: 291-307.CrossRefGoogle Scholar
  8. Hess, D. and Dunfee, T.W.: 2000, ‘Fighting Corruption: A Principled Approach’, Cornell International Law Journal, 33 (3), 593-626.Google Scholar
  9. Husted, B. W. 1999. Wealth, Culture, and Corruption. Journal of International Business Studies, 30: 339-359.CrossRefGoogle Scholar
  10. Johnston, M. 2004. Comparing corruption: Participation, institutions, and development. In Heffernan, W. C. & Kleinig, J. (Eds). Private and Public Corruption. Lanham, Maryland: Rowman & Littlefield Publishers, Inc., pp. 275-322.Google Scholar
  11. Lambsdorff, J. G. 2003. How corruption affects persistent capital flows, Economics of Governance, 4: 229-243.CrossRefGoogle Scholar
  12. Laufer, W. S. 2006. The importance of cynicism and humility: Anti-corruption partnerships with the private sector. Development Outreach, 8: 18-21.Google Scholar
  13. Maragay, F. V.: 2006, `Corruption Survey Lacks Transparency', Manila Standard, November 10, 2006.Google Scholar
  14. Nelken, D. & Levi, M. 1996. The corruption of politics and the politics of corruption: An overview. Journal of Law and Society, 23: 1-17.CrossRefGoogle Scholar
  15. O’Higgins, E. R. E. 2006. Corruption, underdevelopment, and extractive resource industries: Addressing the vicious cycle. Business Ethics Quarterly, 16: 235-254.Google Scholar
  16. PR Newswire: 2008, `Dow Jones Announces Partnership with Transparency International’, October 23, 2008. 8:00 AM GMT.Google Scholar
  17. Rodriquez, P., Uhlenbruck, K., Eden, L. 2005. Government Corruption and the Entry Strategies of Multinationals, Academy of Management Review , 30: 383-396.Google Scholar
  18. Steensma, H.K., Tihanyi, L., Lyles, M. A. & Dhanaraj, C. 2005. The evolving value of foreign partnerships in transitioning economies, Academy of Management Journal, 48: 213-235.Google Scholar
  19. The Economist: 2008, `Asia: The graft-busters strike against Indonesia’s anti-corruption drive', September 27, 2008.Google Scholar
  20. Transparency International. 2006. Corruption perceptions index. Berlin: Transparency International. Google Scholar
  21. Warren, D.E. 2003. “Constructive and destructive deviance in organizations.” Academy of Management Review, 28: 622-632.CrossRefGoogle Scholar
  22. Warren, D. E. 2007. “Corporate scandals and spoiled identities: How organizations shift stigma to employees.” Business Ethics Quarterly, 17: 477-496.Google Scholar
  23. Wilhelm, P.G. 2002. International validation of the corruption perception index: Implications for business ethics and entrepreneurship education. Journal of Business Ethics, 35:177-189.CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media B.V. 2010

Authors and Affiliations

  1. 1.Rutgers Business School, Newark & New BrunswickNewarkU.S.A.
  2. 2.The Wharton SchoolUniversity of PennsylvaniaPhiladelphiaU.S.A.

Personalised recommendations