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Does bribery help or hurt firm growth around the world?

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Abstract

Does bribery help or hurt firm growth? Some suggest that bribery greases the wheel of commerce, while others believe that bribery sands the wheel of growth. We argue that firms endogenously choose their level of bribery according to their environments and that the benefits and costs may differ for different types of bribery. Specifically, small firms are more likely to be forced to engage in bribery, while big firms may strategically engage in bribery. Utilizing a large, cross-country survey sample involving 2,686 firms in 48 countries, we find that firms choose a higher level of bribery when embedded in under-developed market-supporting institutions. After controlling for endogenous bribery choices, bribery hurts firm growth for small and medium-sized firms, but not for large firms.

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Notes

  1. This statement, on the decreasing proportion of state-owned banks due to privatization, refers to the situation when the survey was undertaken during 1999–2000. With the 2008 bail-outs of banks throughout the world, the proportion of state-owned banks has been increasing more recently.

  2. For example, in the newly independent Baltic state of Lithuania, a total of approximately 3,200 new laws were passed between 1991 and 1996. Many of these laws were not well prepared and were amended frequently. The value-added tax law, for instance, was amended 18 times over four years (Kriauciunas, 2006: 172). This experience is not alone among many emerging economies going through rapid institutional transitions.

  3. http://publications.worldbank.org/ecommerce/catalog/product?item_id=1923391

  4. The three theoretical constructs are also regressed on the amount of time senior managers spent with government agents (not reported here). We find that low quality in the three institutional dimensions also significantly increases senior managers’ time spent in cultivating ties with government agents.

  5. This may more likely be the case for those firms in or from the US and the UK, where there are more strict anti-corruption regulations and laws. However, when we exclude those firms, our results remain the same.

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Authors and Affiliations

  1. Cox School of Business, Southern Methodist University, Dallas, TX, 75205, USA

    Jessie Qi Zhou

  2. Jindal School of Management, University of Texas at Dallas, Box 830688, SM 43, Richardson, TX, 75083, USA

    Mike W. Peng

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  1. Jessie Qi Zhou
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Correspondence to Jessie Qi Zhou.

Additional information

This research has been supported in part by the National Science Foundation (CAREER SES 0552089), and the University of Texas at Dallas Provost’s Distinguished Professorship. The views expressed are ours and not necessarily those of the funding organizations. Earlier versions were presented at Academy of International Business (Quebec, Canada, July 2005) and Academy of Management (Atlanta, August 2006). We thank David Ahlstrom, Jay Anand, Jay Barney, Mona Makhija, Rae Pinkham, Peter Rodriguez, and Oded Shenkar for helpful comments and discussions.

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Zhou, J.Q., Peng, M.W. Does bribery help or hurt firm growth around the world?. Asia Pac J Manag 29, 907–921 (2012). https://doi.org/10.1007/s10490-011-9274-4

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