Keywords

Introduction

While some have claimed that corruption “greases the wheels” of an economy, recent research has shown that corruption is more like “sand in the wheels” of an economy, negatively affecting foreign direct investment into a country, diminishing economic growth, and otherwise harming society (Ahlstrom, 2010; Li et al., 2015). Due to the various implications and consequences of corruption, scholars have been interested in studying corruption in different countries. Research efforts centering on the supply side of corruption—that, the actors who make bribe payments—have explored both the macro-factors (i.e., at the institutional and national levels of analysis) and the micro-factors (i.e., at the level of small business owners) of this phenomenon. However, efforts focusing on the demand side—the actors who receive bribe payments—have mainly investigated the macro-factors (i.e., institutional and national factors), largely overlooking the micro-level characteristics and processes associated with receiving bribes.

This micro-perspective of the demand side of corruption is important because the people who take bribes likely play a vital role in extracting bribes (Svensson, 2003) from small business owners and are thereby incentivized to maintain corrupt systems for their own benefit. Therefore, in this chapter, we explain how corrupt public officials strategically operate to sustain a corrupt system that is adverse to ethical entrepreneurs and society. Specifically, we elaborate on the micro-processes involved in the demand side of a system that endorses bribery in India’s developing economy. In the study underlying this chapter (Shepherd et al., 2021), we collected data from small business owners, governmentofficials, agents (individuals who connect small business owners and corrupt officials), and employees of local non-governmental organizations (NGOs). The subsequent findings provide new insights for a micro-level understanding of bribery.

By illuminating the micro-processes involved in the demand side of bribery, we provide several insights into entrepreneurial responsesto persistent adversity. First, research has typically ascribed destructive behavior (e.g., corruption) to the morals and ethics of those involved—for instance, claiming only “bad apples” engage in bribery (Ashforth et al., 2008). Therefore, some have argued that removing the “bad apples” is key for organizations to reduce harmful, unethical, and corrupt practices (Trevino & Youngblood, 1990). However, in this chapter, we show that the demand side of bribery strongly influences corruption. Specifically, we show how government organizations’ informal human resources (HR) practices enable bribery by relocating the “good apples” and applying a corrupt selection process that—due to its corrupt nature—has the secondary effect of selecting government officials who are motivated by bribery.

Second, going beyond classifying organizations as either bureaucratic or innovative, risk-taking, and proactive (Covin & Slevin, 1990), we reveal the theoretical mechanisms explaining how the same organization can take on both forms to pursue opportunities for gain by facilitating and maintaining the business of bribery. In our case, this hybrid arose in an informal autonomous venture operating within and alongside a formal bureaucratic organization.

Finally, the innovation literature has mainly emphasized the benefits of including autonomous ventures within larger organizations (Covin & Miles, 1999). In this chapter, we heed calls to investigate the dark and destructive sides of business (Shepherd, 2019), showing how an informal autonomous venture within a government organization participates in and perpetuates corruption—a dark practice that is destructive to the government, local small businesses, and people’s trust in the nation.

Background

Corruption—or the misuse of public office for private gain (Rose-Ackerman, 1978; Treisman, 2000)—is common when doing business in a developing nation (Transparency International, 2010). The most common type of corruptionis bribery, or the illegal use of rewards, gifts, or favors to alter a person’s behavior (Lee & Weng, 2013). Prior research on corruption in general and bribery, in particular, has mainly explored the economic consequences of these practices for specific regions of the world. Moreover, business research on corruption has investigated large established organizations’ use of bribery to deal with government bureaucracy in the short term, compete with local firms, and engage in non-market strategies (Birhanu et al., 2016; Dorobantu et al., 2017).

On the one hand, some scholars have argued that bribery can benefit businesses in countries where the government is rigid, bureaucratic, and slow—also known as the “greasing the wheel” hypothesis (Dreher & Gassebner, 2013). However, Dutta and Sobel (2016) demonstrated that although corruption has a less substantial impact on firms in difficult business climates, corruption still hurts the economy. Corroborating this finding, a line of research has revealed the negative business consequences of bribery—also known as the “sand in the wheels” hypothesis (Li et al., 2015). The primary belief underlying this hypothesis is that efficient governments cultivate economic growth and that corruption signals an inefficient government. For instance, corruption can lead to less foreign direct investment into a nation’s economy, increased transaction costs, and diminished economic growth (Cuervo-Cazurra, 2006; Mauro, 1995). Corruption also negatively affects society because it serves as a regressive tax on the poor and drives entrepreneurs from constructive action to destructive activities (Boudreaux et al., 2018; Tsebelis, 1990).

Due to concerns regarding corruption’s negative consequences for regional growth, research has examined either the supply side of corruption (i.e., people who pay bribes) or the demand side of corruption (people who receive bribes). Supply-side research has investigated why business people, including managers of large established organizations and small business owners, pay bribes. For instance, studies have shown that managers pay bribes to realize success in transition economies, which are characterized by weak institutions, weak governments, and over-regulation (Friedman et al., 2000; Tonoyan et al., 2010) as well as low in-group collectivism, welfare socialism, and politicalconstraints at the country level (Martin et al., 2007). This research stream has also explored firm-level predictors of firms’ bribe-paying behavior. For instance, in a sample of Ugandan firms, Svensson (2003) showed that bribe paying depends on firms’ “ability to pay” but negatively depends on firms’ “refusal power.” In another supply-side corruption study, Martin et al. (2007) revealed that firms’ bribery is positively related to greater perceived financial constraints and greater perceived competitive intensity.

On the other hand, the demand side of corruption revolves around those who accept bribes. As Martin and colleagues (2007: 1402) noted, “Studies examining demand-side factors in bribery have typically used cross-national data linked to country-level indices of corruption, such as the Transparency International Corruption Perception Index (CPI) and measures from Political Risk Services and Freedom House.” While this national- and institutional-level research on the demand-side aspects of corruption has provided essential insights into why bribery thrives in some locations but not in others, a finer-grained analysis of the contextual processes underlying the demand side of bribery that unfold below the macro-level would be beneficial to further our understanding of this phenomenon. Indeed, when discussing the findings from his supply-side study of Ugandan firms’ bribe payments, Svensson (2003: 207) hinted at the need to further study the micro-processes on the demand side of bribery: “These results suggest that public officials act as price (bribe) discriminators and that prices of public services are partly determined in order to extract bribes.” Thus, instead of focusing on the supply side of bribery, we direct our micro-study toward the micro-aspects of the demand side of bribery. For instance, some governmentofficials may innovate and adapt their behavior to sustain the statusquo of bribery. Therefore, in this chapter, we aim to uncover whether government officials act to pursue bribery-based opportunities and, if so, how they go about exploiting them.

Investigating the micro-processes of the demand side of bribery that maintain corrupt systems is important because although scholars and practitioners have tried to promote policies to fight corruption, “few successes have resulted from the investment... [because] anti-corruption efforts seem to become entangled in the very corrupt networks they were meant to fight” (Persson et al., 2013: 454). Indeed, as Bussell (2012) observed, most studies on corruption have centered on its consequences, with scant research focusing on how corruption is organized—that is, how it is structured and propagated. A recent study proposed that agents play a role in the corruption process, but the authors noted that the literature on these agents in corruption “is surprisingly small” (Drugov et al., 2014: 79). Therefore, in this chapter, we also investigate whether governmentofficials take action to perpetuate corruption and if so, how they are able to overcome the government’s anti-corruption efforts.

Context

We chose to explore bribery in the context of India for two main reasons. First, India is both an entrepreneurial society (i.e., many small businesses already exist and many are created) and a very corrupt system (Shleifer & Vishny, 1993). As a result, numerous government initiatives have been launched to encourage entrepreneurship and curtail corruption. In 2016, for instance, the Indian government took a major step toward curbing corruption by demonetizing large banknotes—namely, eliminating notes for 500 and 1000 rupees—to reduce the negative economic effects of the informal economy. Other government initiatives, such as Digital India, have similarly been implemented to reduce corruption by making government processes more transparent. Narendra Modi, India’s current prime minister, declared Digital India a “people’s movement” as it empowers Indian citizens by enhancing public service delivery to benefit poorer individuals and presenting opportunities to lower corruption (The Economic Times, 2019). These efforts notwithstanding, corruption is still widespread in Indian society (Transparency International Ranking). Second, we decided to direct our attention to the Indian state of Maharashtra, particularly the city of Mumbai, because this region is recognized for its entrepreneurial spirit and has experienced a host of corruption scandals. Furthermore, one of the authors is fluent in the local language (Hindi) and has a strong network in these areas, facilitating access to suitable respondents and data-collection opportunities.

The Worlds Bank’s 2018 report on the “ease of doing business” revealed that corruption is the biggest obstacle for doing business in India, in managers’ opinion. Indeed, according to The Economic Times (2008), 60% of business owners have experienced corruption in some form when “doing business.” A significant portion of this corruption occurs when small business owners interact with governmentofficials to acquire clearances, approvals, and/or licenses. Bauhr (2017) referred to this practice as need corruption because these individuals need bribery to gain fair access to the government services they require to run their small businesses. Thus, in the study underlying this chapter, we aimed to garner insights from owners of newly established small businesses as these individuals had to frequently interact with government officials to set up and run their businesses. However, to begin our investigation of corruption, we first interviewed 20 informants, including NGOworkers, local politicians, industry network representatives, and others. This approach provided direct access to these individuals, so we were able to openly discuss the organizing of corruption. Although we initially focused on small business owners and government officials involved in the bribery process, many of our informants mentioned that agents often play a key role in enabling corruption. Agents were referenced so many times in the initial data that we decided to include these actors in our sample for later data collection. In addition, to our surprise, our informants also explained that politicians sometimes act as agents for bribes. For more details on the sample selection, research method, and analysis for the underlying study, see Shepherd et al. (2021).

Findings

Ventures Promoting Corruption Within a Government Organization

We begin by describing the elements of venturing on the demand side of bribery payments. First, our findings show that there is typically a hierarchy of officials who receive bribe payments. For example, Sunil (owner of a small business that produces plastic parts) detailed the bribes he pays to governmentofficials and where he thinks the money goes:

I interact with someone in the middle [of the government bureaucracy]. Twice a year, their senior also visits, and I have to pay more. They are all interlinked. The money I give them is collectively shared between them. The person at the bottom gets the least money, and [the] person with a higher designation gets more.

Likewise, all the governmentofficials we spoke to described how most bribes are divided among a group of government officials who (directly or indirectly) facilitate a government “service.”

These governmentofficials claimed they accept bribes because government jobs pay low wages and are difficult to obtain. Ironically, government officials’ low wages are augmented by bribes, but to obtain these jobs in the first place, many have to pay a bribe. In other words, they pay a bribe to get a job whose income largely comes from bribe payments. For instance, Kiran recounted how he obtained his government job:

This was my father’s job. After he passed away, I should have gotten the job. They kept me waiting for six months. My mother was losing patience—she came with me, told them, “Take what you want but give my son his right.” They took 50,000 rupees [USD 780]. I got the job.

By requiring bribes for government positions, members of this corrupt system can make more money. Moreover, by selecting people who willingly pay a bribe to secure the job, the corrupt system onboard individuals who likely hold attitudes about corruption that align with perpetuating the process—that is, they are unlikely to be whistleblowers. They are probably interested in making a “return” on their “investment.” People who are hired into the corrupt autonomous ventures of government officials but do not have these values (i.e., are not willing to pay or receive bribes) are typically expelled from the group and relocated.

Agentsbrokering briberybetween small business ownersand governmentofficials. Initially, we expected that small business owners pay bribes directly to government officials due to the problems these owners face. However, our findings reveal that agents sometimes facilitate the bribery process. Indeed, some government officials are worried about being caught taking bribes and thus rely on agents: “Agents [are] placed by the officials themselves because they [the officials] can’t ask for money directly—they route it through these agents” (Viki, a small business owner). According to Amit, a broker (Brihanmumbai municipal corporation liaising agent), agents ease some of the frustration small business owners confront when dealing with government bureaucracy by assisting in the bribery process:

Once I tried to get it done directly, but every time I went with my documents, they [governmentofficials] rejected it [the entrepreneur’s application], and after the third visit, one of the officials told me to come through an agent. And when I used an agent, my documents were approved within a day.

Similarly, Saurabh (a fast food shop owner) outlined how these agent relationships work:

At times, after the officials visit, they examine the area and then tell us that they will be issuing a challenge for one fault or another (which actually does not exist). They then send someone from the office to come and meet us. These people will generally try to sell us the bribe offer by telling us, “Why do you want to get in a situation where the challenge is issued? Once you get into this, then you will have to keep making rounds of the office for clarification, etc.” These are the people who will finally tell us that they will settle the matter and help us by stopping the challenge. These are mainly the liaising agents who are basically middlemen who work hand in glove with the officials.

Politicians as agentsof bribery. Our findings also show that politicians play an agent role. Politicians perform a similar function to that of the agents discussed above. However, although they are still connected to governmentofficials, they play a more independent intermediary role (vis-à-vis traditional agents) between small business owners and government officials, couching this brokering position in terms of helping their constituents. Vasim (representative of a small independent political party), for example, described his rationale for serving as an agent:

Yes, because I am elected by the local people here, I have to be ready at all times to all those who come to seek help. I try to help every individual who seeks help from me in terms of training, guidance, water problems, better roads, subsidies for their businesses, helping with getting licenses, etc.

However, our findings also reveal that politicians facilitate and participate in the bribery process themselves, as Jadhav (representative for the women’s wing of a political party) indicated:

I am a part of it. I represent my area at the police station. Whenever something has to be done in my area, people approach me since I live in a slum. Problems like trivial fights, alcoholism, playing cards, and then fighting over money are very common. When people fight, police turn up and take people into custody. After that, their family approaches me and pleads for me to go to the police station to get their family member out. I go to the police station; I speak to the officer. Since I have been doing this for a long time, everybody at the station also knows me well. I go straight to the police officer and ask them to sort out the matter. If the case is serious, we agree that they will pay money plus spend a day or two in custody. If the matter is small, we just ask them to pay up. Money is divided among us. People think I give the whole money to police officials, but I don’t.

Likewise, a government official explained how politicians play the agent role in the bribery process and “take their cut”:

There are instances when these businessmen have links with the politicians, and they, in turn, put pressure on the officials to get the work done. While this happens, the local politicians do get their share of money for helping these businessmen. Also, because the officials are helping them out in getting certain approvals/passing plans, etc., they pay money to the officials as well. It’s a well-defined modus operandi, and these people work in perfect tandem.

It appears politicians even provide new sources of exploitationfor governmentofficials, as one government official described:

In some cases, the local politicians work with the officials to extract money from these businessmen. The ratio of municipal officials to citizens is currently very bad. It is highly impossible for an official to reach out to citizens. In such cases, the local politicians work along with the officials [by] giving them leads on people involved in illegal construction/extension of their business premises, houses, etc. The officials then make a surprise visit to these premises and try to corner the person involved. They scare him with potential action for breaking laws, etc. In such situations, the officials try to put pressure on these people and make them pay money to get let off without any [official] action taken.

Thus, we found that to sidestep the government’s anti-corruption efforts, agents (including politicians) serve as brokers in facilitating small businesses’ bribe payments to government officials.

Anti-corruption Efforts as New Sources of Opportunities for Bribery

According to our findings, all of the people in our study knew about the government’s efforts to curtail corruption by enacting new laws. As reported in a local newspaper, these anti-corruption efforts involved the following:

On January 1, 2014, President Pranab Mukherjee of India signed into law landmark legislation aimed at combating corruption by creating an anti-graft ombudsman with broad powers to prosecute all offending politicians, ministers, and senior civil servants, including the Prime Minister of the country. In a rare show of unity, the ruling Congress Party and main opposition Bharatiya Janata Party both supported approval of the Lokpal [ombudsman, literally protector or caretaker of the people in Hindi] and Lokyukta [ombudsman at the state level] Bill in the lower house (Rajya Sabha) of the Parliament, smoothing the way for its passage in the upper house (Lok Sabha) on December 31, 2013. (Id.) Key stated objectives of the new law are the more effective implementation of the United Nations Convention Against Corruption, which India has ratified, and the prompt and fair investigation and prosecution of cases of corruption. (Library of Congress, 2014)

While our participants knew about these anti-corruption efforts, they also indicated that they had minimal impact, and most people we spoke to (i.e., small business owners, governmentofficials, agents, and politicians) believe all anti-corruption efforts will ultimately be ineffective in India. The government’s implementation of new technology has moved some officials’ work online to lessen bribery for those services and tasks. However, when we asked how the government’s efforts have impacted corruption, Rajesh (owner of a small fabrication business) simply replied, “There is no reduction in corruption. We are still paying bribes the way we had been in the past.” Indeed, most citizens we talked to, including small business owners, believe that the use of bribes is reprehensible but that the “system will not work without bribes” (Amit, owner of a clothing business). Moreover, although the government has made some progress in reducing corruption, one citizen we interviewed was doubtful that it will ever be eliminated in India:

I believe corruption is now everywhere, and no political party can manage to get rid of it completely. I believe the new government is serious and has taken steps like license applications can now be done online, but [I] feel that it just stops there.

Interestingly, some efforts to curb corruption have turned into sources of new corruption themselves. For example, Chetan (representative of a political party) explained that although technology has made receiving bribes for some tasks more difficult (i.e., forms submitted, processed, and monitored online), this process has simply increased the cost of bribes in other critical areas to offset lower bribes in areas impacted by technology. Corroborating this notion, most of the small business owners we talked to stated that the overall cost of bribes is increasing. Further, the government set up cameras to detect corrupt behavior, but according to Chetan, this effort has merely changed how government officials operate to avoid being caught:

There are problems when bribes are given. One has to be careful of how to approach the topic; you cannot be too open. Everybody is scared because there are cameras everywhere. Government officials will never quote openly; they write it on a paper—that is how negotiation happens. The other thing also is that [government] officials who take bribes are now used to it [the bribes] and do not want to work the regular way.

Finally, not only are governmentofficials unwilling to eschew their bribe payments, but small business owners are also unwilling to report these officials’ corrupt behavior. According to our findings, most small business owners think that reporting corruption will not result in a practical response but will instead generate additional difficulties for their businesses in the future. For instance, we asked Viki (owner of a furniture manufacturing business) if he had ever reported corrupt practices, to which he replied (consistent with many of the other small business owners we spoke with), “No, we have never complained about anyone. One can’t take chances of complaining about another because all these people are interlinked. They come to know about the complainant very easily, and once they come to know, they will further harass you.” When we asked Jagrit the same question, he responded with a question of his own: “Who will I complain to? Everybody in the system is corrupt. They will harass me much more. With two young kids, I don’t want to risk it.” Based on these findings, we conclude that corruption is a vicious cycle in which business owners do not report corrupt government officials because they think nothing will be done, but because they do not report such government officials, nothing can be done—a self-fulfilling (yet destructive) prophecy.

A Micro-level Demand-Side Model of Bribery

Figure 7.1 illustrates the primary actors involved in corruption and the flow of bribes in our sample. Building on the findings underlying this figure, we develop a micro-level demand-side model of corruption in the Indian context. As illustrated, two inter-related sub-models comprise this overarching model: (1) bribery in the form of informal autonomous ventures within a bureaucratic organization and (2) agents who broker bribery. We now turn to discuss both of these sub-models.

Fig. 7.1
A flowchart of the corruption cycle includes agent brokering bribery, Bribery via Informal Autonomous Ventures with Bureaucratic Government Organizations. Small business owners pay bribes directly to government officers.

An organizational framework of the flow of corruption payments

Full size image

Bribery Within Government Organizations

Typically, entrepreneurship is conceived as a series of activities organized to make an organization as a whole more innovative, proactive, and risk-taking, through, for instance, internal corporate ventures, external corporate ventures, and/or other forms of strategic renewal (Covin & Miles, 1999). Although top management often drives these efforts through a top-down process, some begin more autonomously at lower organizational levels via a bottom-up process and can ultimately lead to positive changes to firm strategy (Burgelman, 1983, 1991). However, informal autonomous ventures established within the government like the one we studied are driven by government officials’ motivation for personal gain, so their objective is not to change organizational strategy to improve organizational performance. Instead, the objective of these corrupt informal autonomous ventures is to exploit opportunities (that the officials help generate) by executing the tasks they are responsible for but charging small businesses for their “services.” Therefore, in this chapter, we uncovered an interesting interplay between bureaucracy and autonomy unfolding simultaneously in the same organization.

Moreover, due to the promise of bottom-up innovation, the management literature has highlighted the importance of hiring practices (i.e., income, promotion, and other rewards) that ensure the “right” people are in the “right” positions to make organizations more entrepreneurial for the benefit of customers, organizations, and other stakeholders (Morris et al., 2010). However, our findings reveal a different approach for the demand side of corruption, resulting in the following propositions: (1) Individuals are selected into corrupt informal autonomous ventureswithin government departments based on bribe payments, thereby creating a selection process of adding members to these ventures that both make venture members money and selects people who already demonstrate approval of corruption. (2) This selection process goes hand in hand with a de-selection process that relocates venture members who hold alternative attitudes toward corruption and bribery (i.e., an unaccepting view of corruption). Thus, unlike traditional organizations, in which diversity is critical (Burgers & Covin, 2016), corrupt informal autonomous ventures within government departments profit from increased homogeneity (at least when it comes to attitudes toward corruption for exploiting bribery opportunities). (3) Although autonomous ventures involved in the development of innovative products, services, and processes typically reveal their activities to top management (Burgelman, 1983, 1991; Burgelman & Grove, 2007), autonomous ventures involved in the demand-side entrepreneurship of corruption strive to sustain their autonomy by staying “hidden” from their organizations’ top management (or top management in the hierarchy of these corrupt informal autonomous ventures). (4) As discussed earlier, as the government innovates to eliminate corruption (e.g., by introducing new technology to detect bribery), the system of corruption, including both the informal autonomous ventures within government departments and the agents who facilitate their corrupt behavior, also innovates to overcome the government’s efforts and continue the statusquo of corruption.

For this statusquoof bribery to change, victims need to report instances of bribery and provide relevant information. However, people seem unwilling to do so because they fear that blowing the whistle on corrupt behavior will only result in suffering without any meaningful change. It appears that only some type of social movement can provide the collective action needed to dismantle this powerful system.

Agents Brokering Bribery

Our demand-side model of bribery also offers new insights regarding how agents facilitate bribery. In particular, we extend the idea that people can pursue potential opportunities by playing the role of broker between two parties (Burt, 2000, 2005). For example, Williams and Shepherd (2018) demonstrated that some entrepreneurs act as brokers to generate positive outcomes for communities. We extend this work to the destructive side, showing how brokerage can facilitate unlawful transactions that are costly to society at large (e.g., the negative relationship between bribery and both the economy and society). Interestingly, in the study underlying this chapter, the government implemented new technology to curtail corruption. Still, the new technology has created the opportunity for agents to emerge to facilitate the demand side of corruption. These agents are a means to circumvent government efforts to facilitate bribery. In other words, government anti-corruption efforts can ultimately make the opportunity to act as an agent to facilitate bribes more appealing.

Furthermore, politicians sometimes exploit the opportunity for personal gain by facilitating bribe payments between their constituents and governmentofficials. In the context of our study, politicians’ activities are different from those of the other agents as they seem to represent both sides of a bribery transaction. In addition, although politicians’ personal gain from these transactions is sometimes money (like the other agents), it can also take other forms, including votes, influence, and power. More research on these agents of bribery is needed, especially work on politicians’ activities. We acknowledge the difficulties associated with conducting this kind of research. Indeed, through our interviews, we found that politicians tend to be “cagier” about their behavior than the other agents and government officials. However, we believe there are interesting research opportunities to study politicians embedded in corrupt systems.

Discussion

While prior research has studied corruption in entrepreneurship, little attention has been given to the micro-level demand side of corruption. However, this inattention is problematic because bribery is largely known to be destructive, particularly in developing economies (Dutta & Sobel, 2016; Li et al., 2015; Mauro, 1995). In this chapter and the study it is based on, we address this scholarly neglect of the micro-level attributes and processes of receiving bribes. In particular, we focus on the demand-side processes involved in governmentofficials’ and agents’ exploitation of opportunities to receive (and facilitate) bribes for personal gain to explain why and how this practice persists despite efforts to stop it. Accordingly, we developed our model by revealing the processes behind illegal transactions between government officials, agents, and small business owners. Since so little research exists on this topic at the micro-level, our qualitative findings provide new insights into how corruption is organized among these individuals.

Based on these findings, we offer a broader theoretical model of the demand side of corruption in Fig. 7.2. Specifically, in this model, government departments entail both bureaucracy and informal autonomous ventures. The informal autonomous ventures deliberately slow down the bureaucratic processes implemented to regulate small business practices, so the government officials in these ventures can personally gain by offering corrupt services to speed up the bureaucracy. In response, the bureaucracy (i.e., the government) has introduced numerous efforts to lessen corruption. In turn, the informal autonomous ventures sidestep these anti-corruption efforts by innovating, such as by using agents (including politicians) to broker bribe payments from small business owners to “grease the wheels” of this system. Although both the corrupt government officials in the informal autonomous ventures and the agents that broker their bribes benefit from corruption, this behavior harms society because the additional business costs are passed on to consumers, and the costs stemming from the ineffective government are borne by society members. Despite these costs to society, corruption continues because the informal autonomous ventures within the government circumvent anti-corruption efforts by innovating. Society members hesitate to report corruption because they believe doing so will not have the desired effect and could even be harmful.

Fig. 7.2
A flow chart depicts the informal autonomous ventures, agents, and small businesses associated with each other. Bureaucracy implements anticorruption efforts. Corruption is destructive to society.

A model of organizing corruption

Full size image

This overarching model has four primary implications, which we hope encourage further theorizing on this important topic. First, work on the destructive side of business has focused either on the people engaged in the harmful action (i.e., a micro-perspective; e.g., individuals as “bad apples”) or on the structure of the economy (i.e., a macro-perspective; e.g., the “rules of the game”). However, in this chapter, we provide a mid-range theory in which bribery (as a type of destructive behavior for society) is organized within government departments. Thus, whereas organizations are often considered either bureaucratic or autonomous (Covin & Slevin, 1990), in this chapter, we show that both bureaucracy and autonomy can coexist to enable bribery. Specifically, corrupt officials can deliberately slow down government processes to increase demand for corruption. Individuals involved in informal autonomous ventures inside bureaucracy can then exploit these opportunities to receive bribes. According to our findings, these informal autonomous ventures even have their own HR practices, such as requiring people to pay a bribe to obtain a government job, whereby they can then collect bribes from others. Importantly, individuals who have different attitudes about corruption (i.e., those unwilling to take bribes) are relocated from these ventures to ensure the ongoing exploitation of these bribery-based opportunities. Future research can draw on the entrepreneurship and innovation literatures to clarify why some organizations (e.g., within departments of large government organizations) aid in this type of informal autonomous behavior. We hope future research can extend the organizing literature to help bureaucracies become more efficient (thereby reducing the need for bribes to “grease the wheels”) and build on the entrepreneurship literature to elucidate how individuals inside informal autonomous ventures can be stopped from exploiting demand-side opportunities for bribery.

Second, the social network literature has shown how brokers link previously disconnected groups (Burt, 2000, 2005). By revealing that agents engage in brokering (i.e., connecting businesspeople and governmentofficials) to sidestep anti-corruption efforts, we offer a new brokering perspective that sheds light on the demand-side role of brokering in the corruption process. In particular, government measures to eliminate corruption generate opportunities for new brokering relationships to circumvent those measures. Building on the social network literature, future research can theorize and empirically test how agents maintain their brokering positions over extended periods for personal gain and how others can offset these agents by decreasing their power to eliminate corruption from the demand side and thus benefit small businesses and society.

Third, together with the previous point on social networks, our findings offer insights into the relational view of corruption. The relational view of corruption centers on the “social interactions and networks among corrupt actors” and underscores the importance of trust and networks of participants (Jancsics, 2014: 358). In our study, we uncovered an informal HR management strategy used to ensure trust among members of autonomous ventures within the government. This strategy entails selecting new members by requiring them to pay a bribe for entry and relocating those officials deemed untrustworthy by current venture members. Moreover, we found that anti-corruption efforts can plant seeds of doubt in the minds of venture members regarding customers’ (e.g., small business owners’) trustworthiness, thereby motivating the autonomous ventures to make the bribery process more socially complex by adding agents to broker relationships. Thus, from the relational view of corruption, these informal autonomous ventures engender trust among their members. When doubts about potential customers’ trustworthiness arise, they use agents (who they do trust) to broker transactions.

Finally, although numerous anti-corruption efforts have been introduced, most of these efforts have failed to eradicate bribery. Indeed, such efforts heavily depend on people reporting corrupt officials to authorities, who can then take the necessary steps to punish those involved (Persson et al., 2013). However, our findings reveal why some people (in our case, small business owners) do not report corruption. Namely, some people fail to report corruption not because they are unaware of the behavior or its negative consequences but because they believe nothing can or will be done about it. In other words, some people believe bribery is too entrenched to be stopped. These findings align with research exploring the social trap of corruption (Rothstein, 2005). According to this research, anti-corruption efforts fail because they are established on the basis that corruption is a principal-agent problem, such as monitoring and punishment. However, in a system in which most people believe that corruption will persist, including corruption by the “principles” (as in our study), anti-corruption efforts will almost certainly fail because regular people refuse to report corruption, and the corrupt refuse to forego their corrupt behavior as they believe everyone else is also participating in corruption (Tonoyan et al., 2010). Thus, it appears a social movement is required to fight need corruption (e.g., bribery to gain fair access to government services) more than to fight greed corruption (e.g., bribery payments to give bribers privileged access to illicit benefits) because the former impacts more people, is more conspicuous, and has more immediate consequences than greed corruption (Bauhr, 2017). The little research exploring the collective action problem of corruption, particularly from a micro-perspective, has mainly taken a supply-side approach. We hope our micro-level demand-side perspective of bribery complements this important research stream on the collective action problem of corruption, which has primarily focused on a more macro-level analysis for understandable reasons. Future research has the opportunity to build on the learned helplessness, learned hopelessness, and social movement literatures to provide a deeper understanding of more effective anti-corruption efforts, including how a social movement can disrupt the demand side of corruption by increasing confidence that there has been a significant change toward rejecting corrupt practices—that is, that the social trap of corruption has been broken.

Furthermore, formal anti-corruption institutions have been established worldwide, and myriad guidelines and regulatory frameworks have been developed to curtail corruption. However, we reveal that there can be informal autonomous ventureswithin government bureaucracy with characteristics that contradict the legitimate objectives of government departments. At their core, these informal autonomous ventures slow down the bureaucratic processes implemented to regulate small business practices to increase demand for corrupt services. These ventures also sidestep new regulations, thereby making them ineffective. To solve this problem, enough trust needs to be established in bribe payers (small business owners, customers, and other members of society) to get them to report corruption and believe that their reporting will positively impact ending this behavior. Moreover, measures need to be taken to reduce the power of corrupt officials in informal autonomous ventures, perhaps by implementing more regulated HR processes. Our findings also suggest the need to pay more attention to the agents who facilitate corrupt transactions. Rotating staff members could be a precautionary measure because doing so could undermine the trust within and disrupt the operations of the informal autonomous ventures in which corruption occurs.

Conclusion

In this chapter, we examined the micro-level demand-side factors and practices of bribery in the developing context of India. According to our findings, some individuals take advantage of governmentanti-corruption efforts to become agents who broker deals between small business owners and government officials. We also revealed two systems within some governments: a bureaucratic system that obstructs small businesses and an autonomous (albeit illegally venturing) system that harnesses HR practices to facilitate bribery. These two government systems have a somewhat symbiotic relationship. Given the negative consequences stemming from bribery in terms of impeding the operations of small businesses and the development of both economies and societies, we hope this chapter and the underlying study serve as a basis for future research on ending the statusquo of bribery.