Different role of lobbying and bribery on the firm performance in emerging markets

Abstract

Purpose Firms influence a government to their advantage in one of two ways: either through lobbying a government to change the rule, or through bribing bureaucrats to circumvent the rule. The purpose of this paper is to investigate whether and under what conditions do corporate political activities facilitate firm growth in a multinational context, especially in developing economies. Design/methodology/approach This study is based on the data of the World Bank’s Enterprise Survey, conducted by the World Bank in the 2002 to 2006 period in 12 countries. To deal with a multilevel structure, the authors applied multilevel regression as the main analysis method. Findings The analysis reveals that both political activities are prevalent in emerging markets, but they play very different roles on firm growth. The authors also find that the effect of lobbying is more pronounced in politically durable countries where firms can secure their vested benefits by lobbying. Originality/value The paper contributes to the corporate political activities literature by investigating the distinguishing and contingent role of bribery and lobbying on firm performance.

Tensions and Struggles in Tackling Bribery at the Firm Level: Perspectives from Buddhist-Enacted Organizational Leaders

“…Bribery can be a fee (Grzywacz et al 2004) that firms pay to avoid hassles, disadvantages, or unfair treatment. Furthermore, bribery can exist in a passive form, not to gain exclusive benefits, but rather to break even (Yim et al 2017).…”

“…In emerging markets, the bargaining power of government officials can be powerful as they seek private gain from their relationship with firms (Lee et al 2010). The pervasiveness of country-level corruption and level of institutional development both influence the act of bribery (Yim et al 2017). Martin et al (2007) found that the bribery activities of local firms are affected by various cultural values and institutional characteristics.…”

“…Corruption and bribery have detrimental effects at the firm and national levels (Asiedu and Freeman 2009;Cuervo-Cazurra 2008. Involvement in bribery increases the possibility that a firm can become vulnerable to future exploitation by a corrupt government (Yim et al 2017). A study by Kaufmann and Wei (2000) rejected the claim that the corruption that is part of some Asian cultures does not hamper business.…”

“…There are also short-and long-term perspectives on bribery. For instance, bribery paid as 'protection money' to corrupt bureaucrats is only helpful in maintaining the present business, but not for the growth of the firm in the long run as firms can become trapped in a cycle of exploitation (Yim et al 2017). Further, in the long term, acts of bribery can lead to serious consequences such as reliance on bribes, damage to reputation, and career and legal penalties including prison sentences (Krammer 2017).…”

A Conglomerate’s Effort for Co-Prospering with Its Subcontractors and Firm Value: Evidence from Korea

“…Another perspective on this adverse consequence is related with the political CSR. Fooks, Gilmore, and Collin [28] and Cai, Jo, and Pan [29] examine the controversial industry, such as tobacco and gambling industry, and argue that firms in these industries conduct CSR only to neutralize the forced policy and regulatory pressure. In 2018, Lee Jae-yong, the vice president of Samsung and only son of South Korean electronics giant has been jailed for five years as part of a whopping corruption scandal that also prompted the impeachment of the Korean former President Park Geun-hye.…”