Journal of International Business Studies

, Volume 41, Issue 9, pp 1481–1504 | Cite as

Understanding corruption and firm responses in cross-national firm-level surveys

Article

Abstract

The issue of corruption is important to politicians, citizens, and firms. Since the early 1990s, a large number of studies have sought to understand the causes and consequences of corruption employing firm-level survey data from various countries. While insightful, these analyses have largely ignored two important potential problems: nonresponse and potential false response by the firms. We argue that in politically repressive environments, firms use nonresponse and potential false response as self-protection mechanisms. Corruption is likely understated in such countries. We test our argument using the World Bank enterprise survey data of more than 44,000 firms in 72 countries for the period 2000–2005. We find that firms in countries with less press freedom are more likely to provide nonresponse and false response on the issue of corruption. Therefore ignoring these systematic biases in firms’ responses could result in serious underestimation of the severity of corruption in politically repressive countries. More important, these biases are a rich and underutilized source of information on the political constraints faced by the firms. Firm managers can better evaluate levels of corruption, not only by truthful answers to corruption questions, but also by nonresponses and false responses to such questions.

Keywords

corruption nonresponse false response political freedom firm-level surveys 

Notes

Acknowledgements

Equal authorship is implied. The authors thank Lorraine Eden, Witold Henisz, Aart Kraay, Andrew Stone, Vincent Palmade, Matt Gabel, Layna Mosley, Eddy Malesky, Tom Kenyon, the anonymous referees, the participants at the Political Risk in Emerging Markets Conference, Washington University, at St Louis, March 2007, and the Midwest Political Science Association Conference, Chicago, April 2007, for their comments. Greg Allen, Daehee Bak, Ekrem Karakoc, and Sam Snideman provided research assistance. David Stewart helped the authors with their numerous queries related to the surveys. Nathan Jensen's research was funded by the Weidenbaum Center on the Economy, Government, and Public Policy at Washington University. The views expressed in this paper are solely those of the authors, and they do not necessarily represent the views of the World Bank, its Board of Directors, or the countries they represent. The authors are responsible for all the errors.

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Copyright information

© Academy of International Business 2010

Authors and Affiliations

  1. 1.Department of Political ScienceWashington University in St LouisUSA
  2. 2.Department of Political ScienceTexas A&M University, College StationUSA
  3. 3.World Bank GroupWashingtonUSA

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