2 Investment Risks Corruption and Bribery

2 Investment Risks Corruption and Bribery -...

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Bribery Cross-Cultural Management Spring 2011 Gosia A. Langa
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Corruption Government corruption:  the abuse (or misuse) of  public power for private (personal) benefit Fosters attitude of ‘don’t ask, don’t tell’ Some argue that corruption can help foreign firms  overcome difficulties in foreign markets However, costs of corruption are very substantial And so firms choosing to engage in corruption often  acquire lots of long-term costs
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Dimensions of Corruption:   Pervasiveness Pervasiveness (or level):  number and  frequency of transactions with which a firm  deals over a course of a fixed time period that  involve illicit activities If corruption is predictable, firms can budget for  these expenditures
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Dimensions of Corruption:  Arbitrariness Arbitrariness (uncertainty):  the extent to which  firms know to whom to pay, how much, and  whether payments will result in delivery of  promised goods or services Lack of coordination among corrupt agents increases  arbitrariness Arbitrariness reduces firm’s ability to evaluate costs
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Refusal to engage in cooperation (corruption in  this case) may result in loss of a big contract but  compliance does not guarantee success and can  leave a company vulnerable to further demands Firms may not have clear guidelines on what to  do in those situations
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2 Investment Risks Corruption and Bribery -...

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