Corruption and the role of information

Abstract

Several studies have explored how certain economic and cultural variables affect a country's corruption level. This study extends previous research by not only considering these variables, but also taking into account the impact that information and communication technology can have on corruption. The results indicate that the greater the access to information, the lower the corruption levels. Therefore bridging the digital disparity across countries can also serve to lessen national corruption levels.

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Notes

  1. 1.

    Zhau et al. (2003) highlight different theories related to corruption, including rent-seeking theory (Besley and McLaren, 1993; Schleifer and Vishny, 1993), public choice (Rose-Ackerman, 1978), game theory (Macrae, 1982), transaction cost (Husted, 1994), institutions (North, 1990), and property right theories (Davis, 1977).

  2. 2.

    Tanzi (1998) broadly defines activities that are considered to be illegal, unethical, and/or dishonest business practices in terms of corruption by the bureaucracy or by the political leadership, among others.

  3. 3.

    This relationship has also been highlighted in the Global Corruption Report (2003).

  4. 4.

    Husted (2000) finds that most Latin American countries have high power distances, tend to be collectivistic, are characterized by high levels of uncertainty avoidance, and are mostly masculine, and therefore naturally show a higher propensity towards corruption. Husted (1999) and Sanyal and Samanta (2001) conclude that corrupt countries are ones with high uncertainty avoidance, high masculinity, and high power distance. In addition, Davis and Ruhe (2003) claim that individualism also contributes significantly towards perceived corruption levels, and Getz and Volkema (2001) and Park (2003) also find that power distance and uncertainty avoidance impact on corruption.

  5. 5.

    While Hofstede's research has been criticized, Jaeger (1986), Sondergaard (1994), and Smith et al. (1996) conclude that Hofstede's work is the most comprehensive, and a fair reflection of the broad cultural strokes that define a nation. Other measures of culture have been put forward by Schwartz (1994), Trompenaars and Hampden-Turner (1998), and the World Values Survey (2001).

  6. 6.

    Vitell et al. (1993) suggest that business practices in high uncertainty avoidance societies are more susceptible to corrupt behavior. However, Cohen et al. (1996) find this claim counter-intuitive, as they believe that countries engaged in high levels of uncertainty avoidance tend to have lower levels of corruption.

  7. 7.

    The CPI is compiled by a team of researchers at Göttingen University, headed by Johann Lambsdorff (2003).

  8. 8.

    Treisman (2000), Davis and Ruhe (2003), and Park (2003) use the CPI in their analyses.

  9. 9.

    The 10 organizations are: Freedom House (FH); Gallup International (GI); The Economist Intelligence Unit (EIU); Institute of Management Development (IMD); International Working Group (developing the Crime Victim Survey); Political and Economic Risk Consultancy (PERC); Political Risk Service (PRS); The Wall Street Journal – Central European Economic Review (CEER); World Bank and University of Basel (WB/UB); and World Economic Forum (WEF).

  10. 10.

    The DAI is an index published by the International Telecommunication Union (ITU) (2003) as part of the United Nations’ World Telecommunication Development Report (2003). There are other indices, such as the Networked Readiness Index published by CID (Harvard), and World Bank indicators measuring individual phone line and cellular use, but DAI is the largest, most comprehensive index thus far.

  11. 11.

    Hofstede's measure of national culture is based on the surveys that were conducted during the late 1960s and early 1970s from more than 116,000 employees of 72 IBM international subsidiaries. Initially, Hofstede's surveys assessed personal values and aspirations in the workplace across 53 countries. Using factor analysis, Hofstede developed indices ranging from 0 to 100 to measure power distance, individualism–collectivism, masculinity–femininity, and uncertainty avoidance. The higher the score (from 0 to 100), the more the country is individualistic and masculine, and has a stronger level of uncertainty avoidance with a greater power distance.

  12. 12.

    Hofstede's cultural variables are not reported annually. The values for the cultural variables were collected from Hofstede's 2001 text.

  13. 13.

    Given that the indices are based partially on survey data, the ‘reported’ year for an index is not necessarily the year in which the data were collected. For example, the 2005 CPI is based partially on survey data collected in 2003–2004.

  14. 14.

    Higher values for IDV represent more individualistic societies.

  15. 15.

    The Jarque–Bera test evaluates the null hypothesis that the residuals are normality distributed with unspecified mean and variance against the alternative that the residuals are not normally distributed.

  16. 16.

    The VIF determines the effects of the correlations among the independent variables and their influence on the variances of the regression coefficients (Maddala, 1988; Kennedy, 1992).

  17. 17.

    Kennedy (1992), Studenmund (1992), and Burns and Bush (2003) suggest a cutoff of 10, and Hair et al. (1992) suggest a stricter cutoff of 5.3.

  18. 18.

    Some classic signs of multicollinearity in regression results are insignificant coefficients in conjunction with a high R2 and/or signs of coefficients that are inconsistent with theory. In Model 2, coefficients on GDP and DAI are both significant and have signs that are consistent with theory.

  19. 19.

    Higher values for MAS represent higher levels of masculinity.

  20. 20.

    The F statistic for the partial F test is 24.24 and the critical value is 3.96, yielding a P-value less than 0.0001. This indicates that the null hypothesis that the inclusion of DAI does not significantly increase the explanatory power of the regression model should be rejected.

  21. 21.

    Jain (2001) suggests using a multiple variable approach to cluster analysis.

  22. 22.

    The squared Euclidean distance between countries i and j is defined as , where N is equal to 6, the number of country characteristics considered, c i,n represents characteristic n for country i, andc j represents characteristic n for country j.

  23. 23.

    Sri Lanka has an MAS value of 10.

  24. 24.

    In this case the Mann–Whitney U test evaluates the null hypothesis that the population relative frequency distributions for country clusters i and j are identical (the population mean corruption levels are equal in clusters i and j) against the alternative that the population relative frequency distribution of country cluster i is shifted to the right (or left) of the relative frequency distribution of country j (cluster i has a higher (or lower) corruption level than cluster j).

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Acknowledgements

The authors wish to thank the three anonymous JIBS reviewers and the Departmental Editor, Professor José Manuel Campa, for their helpful comments and suggestions on previous drafts of this manuscript.

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Correspondence to Cassandra E DiRienzo.

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Accepted by José Manuel Campa, Departmental Editor, 30 June 2006. This paper has been with the authors for three revisions.

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DiRienzo, C., Das, J., Cort, K. et al. Corruption and the role of information. J Int Bus Stud 38, 320–332 (2007). https://doi.org/10.1057/palgrave.jibs.8400262

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Keywords

  • corruption
  • information and communication technology
  • culture
  • cluster analysis