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Corruption in a Multinational Context: Two Essays Open Access

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This dissertation is comprised of two essays examining the common theme of corruption in a multinational context. It focuses on the strategic and ethics implications that arise at the intersection of business and corruption. This research sheds light on how multinational firms respond to home and host country corruption norms and the complexity firms create by both shaping and being affected by such norms. This dissertation responds to the call for interdisciplinary research by Cheng, Henisz, & Roth (2009) in the study of international business by integrating resource-based view in nonmarket strategy, neo-institutional theory in international business, and business ethics and law in contributing to a comprehensive understanding of corruption. The first essay examines whether firms’ home country corruption norms affect their location choice in foreign expansions, how firms’ bribery experiences work as a nonmarket capability in influencing their foreign expansion strategy, and how bribery ultimately affects firms’ market performance. This research is unique empirically by using a dataset with accurate bribery data at the firm level. The second essay examines strategies to control corruption in a multinational context through examining the normative standard to apply among communities with various corruption norms, and proposes a context-based anti-corruption strategy. It draws from literature on extraterritorial anti-corruption restrictions, Integrative Social Contract Theory (ISCT), mediating institutions theory and industry leaders’ roles in systemic risks, and discusses how a firm from one community can practically fit in another community of different corruption norm or size to maintain both universal principles of justice and diversity among people who need mediating institutions to give meaning and understanding to universal principles. The following is a diagram of the dissertation overview, followed by a summary of each essay.Essay 1 This paper examines the relationship between corruption and nonmarket strategy in a multinational context, using a unique dataset with accurate, firm-specific measures of corruption. The study first examines the effects of home country corruption on firms’ foreign investment location choice. I find that a firm’s home country corruption norm is related to where it invests abroad, but this effect exists only among multinational firms from clean countries. The study then moves beyond the institutional context to explore the rationale behind the heterogeneity among firms from the same home country in compliance with a host government’s bribery request. I propose that a firm’s bribery experience interacts with their home country corruption to affect its foreign investment location choice. Only bribery experience of firms from dirty countries is found to be related to the firms’ foreign location choice. In addition, firm-specific bribery experience is not found to be related to firm performance. My study built a unique dataset using resources from the United Nation’s (UN) Oil-for-Food Program (OFFP)’s investigation information to conduct both country and firm-level analysis. This paper contributes to the strategy and international business literature by expanding the study of corruption from country level to micro level by connecting nonmarket capability through foreign bribery experience to home country corruption, and to the limited literature using OFFP as a unique data source to study firm behaviors.Essay 2The second essay takes up the question of what should be the standard to be used to eradicate corruption across borders. The debate over the viability of extraterritorial application of anti-bribery laws remains thought-provoking when we look at the effectiveness of the OECD Anti-bribery Convention in curbing bribery in the OFFP. My empirical analysis from Chapter 1 shows that firms from countries with extraterritorial legal restrictions do not necessarily refrain themselves from paying bribes in the OFFP. This essay builds on the Salbu-Nichols’ debate, the Integrated Social Contract Theory (ISCT), mediating institutions theory, and the Pelican Gambits theory. It proposes that governments should not be the sole players in combating corruption; local community and corporations which play an important role in shaping corruption norms should be emphasized in an effective anti-corruption strategy. It emphasizes the importance of recognizing the interactive relationship between a community and firms when designing anti-corruption strategy in a global environment. A two-by-two matrix is suggested for designing an effective anti-corruption mechanism.

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