Bending the rules, breaking the rules: How corruption and lobbying affect the investment market selection of Swedish firms

Abstract

There is stark evidence that many policies which influence firm gains from engaging in FDI (such as tax and trade policies) are targeted by lobbying groups and that corruption can be an important determinant of market attractiveness. The scarce research that exists on firm behaviour, corruption and lobbying shows that these activities can be regarded as alternative, and interdependent, influence forms. This paper provides the novel contribution of investigating how the market infiltration of corruption and lobbying affects the firm's investment decision. We identify the interdependent effects using census data for Swedish manufacturing firms that allows a complete identification of the firm's market selection. Our results reveal that these private–public sector links influence the firm's investment decision differently, as market selection is deterred by corruption and stimulated by lobbying, and that they function as substitutes. We show that the stimulating lobbying effect largely can be attributed to its interdependency with corruption, which suggests that firms are more shielded from corruption in lobbying environments. Further investigation reveals that the corruption and lobbying effects are not always representative of larger firms: The largest firms are undeterred by corruption in markets where lobbying forms an integral part of the business environment and larger firms are not stimulated by lobbying in markets largely void of corruption.

Corruption as distinct crime: the need to reconceptualise internal control on controlling bureaucratic occupational fraud

“…The current study supports the research on perpetrators’ decision-making suggesting that few perpetrators consider the absence of internal controls when deciding to commit an offence (Borisov et al , 2016; Allen, 2002; Thede and Gustafson, 2017). This result indicates that we need some extension and integration for internal control, to fully and efficiently highlight how fraud acts are triggered by environmental conditions.…”

Effects of corruption on foreign direct investment: Evidence from Swedish multinational enterprises

“…There are exceptions to this behavior, however, as very large and high-tech MNEs are undeterred by corruption. This result is consistent with prior evidence that strong bargaining power (i.e., political influence) can shield the organization against corruption (Hakkala Nilsson et al, 2008;Svensson, 2003;Thede and Gustafson, 2017). As high-tech MNEs are also stimulated by corruption experience, the results indicate that they learn to use this power (i.e., political influence) to get favorable treatment in corrupt systems.…”

“…There are reasons to expect that they adjust, however, to reduce susceptibility to corruption pressure, buy down (more costly) administrative barriers and/or bribe to gain favorable treatment. Enterprises can use bargaining power to counteract corrupt pressure (Bennedsen et al, 2011;Thede and Gustafson, 2017) or adopt local business norms (Kaufmann, 2004;Søreide, 2006) to reduce costs and capitalize on investments.…”

On the Positioning and Market Selection of Opera Performance Art Based on Industrial Data Mining

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