Greasing Dirty Machines: Evidence of Pollution-Driven Bribery in China
Environmental pollution has become a serious challenge in emerging markets. Using a unique survey of privately owned enterprises in China, this paper investigates how polluting firms respond to institutional pressures. We find that polluting firms conform to external pressures by combining relational activities and clean technology investments. However, some polluting firms alleviate regulative pressures by bribing government officials, which represents an unethical relational strategy to manage political relationship. We further analyze the contingency on firm-level political connection and local institutional conditions. Political connection buffers firms from institutional demand and demotivates firms’ willingness to respond to institutional pressures; stronger local civic activism and better bureaucratic governance curb the pollution-driven bribery, but they are not strong enough to enhance environmentally friendly practices. Collectively, our study demonstrates how polluting firms navigate institutional pressures in emerging markets, and it particularly highlights the pollution-driven bribery as an obstacle to sustainability.
KeywordsEnvironmental pollution Institutional pressures Bribery Corruption Emerging markets
JEL ClassificationsD73 M14 Q56
I thank the editor (Cory Searcy) and two anonymous reviewers for their constructive comments. I am grateful to Thomas Riise Johansen and Thomas Plenborg for their comments on earlier versions of this paper, and I also appreciate the comments and suggestions from Hang Dong, Jesper Haga, Junqi Liu, Kim Pettersson, Thomas Poulsen, Carsten Rohde, Chaoyuan She, Tim Neerup Themsen, Zhifang Zhang, and participants of the European Accounting Association Annual Congress, the Nordic Accounting Conference, and the seminar at Copenhagen Business School. I would also thank the Research Center for Private Enterprises at the Chinese Academy of Social Sciences for sharing the data. The usual disclaimers apply.
Compliance with Ethical Standards
Conflict of interest
The authors declare that they have no conflict of interest related to this work.
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