briberyininternationaltransactions - Journal of Business...

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Bribery in International Business Transactions Christopher Baughn Nancy L. Bodie Mark A Buchanan Michael B. Bixby ABSTRACT. Globalization leads to cross-border business transactions between societies with very different norms and regulations regarding bribery. Bribery in international business transactions can be seen as a function of not only the demand for such bribes in different countries, but the supply, or willingness to provide bribes by multinational firms and their representatives. This study addresses the propensity of firms from 30 different countries to engage in international bribery. The study incorporates both domestic (economic development, culture, and domestic corruption in the supplying country) and international factors (those countries’ patterns of trade and involvement in international accords) in explaining the willingness to bribe abroad. The propensity to provide bribes was the lowest when corruption was not tolerated in the multi- national firms’ home countries, when the firms’ countries were signatories of the Organization for Economic Cooperation and Development (OECD) anti-bribery convention, and when those countries traded heavily with wealthier nations. Further, these findings are maintained when controlling for levels of economic development and cultural values in the supplying country. In terms of culture, firms from high power distance countries showed a somewhat greater propensity for providing bribes in transactions with less-developed nations. KEY WORDS: Bribe Payer’s Index, bribery, corruption, institutional theory, international trade, OECD conven- tion Introduction Although the issue of corruption has been a political and societal issue for centuries, globalization has brought increased attention to the issue and renewed it as a subject of widespread concern. Over the last 50 years, bribery, a key facet of corruption, has accompanied the large growth in international trade and investment (Lambsdorff, 2007 ; Moss, 1997 ). The increasing number of cross-border business transac- tions has connected societies with very different cus- toms and practices regarding bribery. Multinational ±rms have often traded payoffs for favorable consid- eration by decision makers to win contracts, reduce import duties, or receive favorable interpretations of laws affecting the ±rm. While bribery by foreign ±rms and their representatives appears to be most ²agrant in the public works construction and defense sectors, it is also quite common in oil/gas, real estate, telecommu- nications, and power generation/transmission. Sub- sidiary companies of multinationals, and particularly the purchasing, export, marketing and sales depart- ments are the most likely to be involved in bribery and corruption (Transparency International, 2002 , 2006a ).
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This note was uploaded on 01/31/2012 for the course EXPOSITORY 101 taught by Professor Mr during the Spring '06 term at Rutgers.

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briberyininternationaltransactions - Journal of Business...

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