Companies operating in developing countries find new way to counteract corruption

(Reference image from Pxhere).

New research published in the Strategic Management Journal shows that companies working in countries where corruption is rampant are able to operate better when they make deeper, long-term commitments.

According to the lead author of the study, Charles E. Stevens, associate professor of management at Lehigh University’s College of Business, this approach means leaving behind the two dominant strategies when dealing with corruption in developing countries: “Play the game,” meaning pay bribes or engage in corrupt activities, or “leave the table” by avoiding investing in places where corruption is widespread. 

To reach this conclusion, Stevens and his colleague Aloysius Newenham-Kahindi, associate professor at the University of Victoria, surveyed people that are or have been faced with corruption directly, among them 445 individuals representing industries such as mining, construction, manufacturing, energy, and telecommunications in both developed and developing country firms. They also polled 126 host country government officials and employees; 34 local private-sector employees; 44 local institutional researchers; and 142 members of the general public. 

Developing country firms, many of them from China, have been taking an unexpected engagement strategy that tends to involve greater commitments

The researchers found that within the last decade, a number of developing country firms, many of them from China, were taking an unexpected engagement strategy that tended to involve greater commitment and greater investment to countries where there was more corruption.

“Many of these firms were following rather interesting and complex strategies – many that involved multiple actors – that were designed at minimizing the ability of host-country actors to request bribes by maximizing their bargaining power or by minimizing the motivation of host-country actors to request bribes by increasing their legitimacy,” Stevens said in a media statement.

According to the scholar, this paper fills an important gap in corruption literature by increasing the understanding of the options and strategies that firms have at their disposal when they invest in countries where corruption is a greater problem.

“We hope that this research allows firms, governments, and the general public to achieve economic prosperity, reduce corruption, and create mutually-beneficial solutions through investment and growth,” Stevens said. “Firms shouldn’t automatically be afraid to invest in countries where risks like corruption are present. Such countries present many challenges, but for firms that go in with a comprehensive plan, are prepared to make a long-term commitment, and find ways to leverage partnerships with governments and other firms, the rewards can be worth the risks.”

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