Does bribing lead to extra convenience or is it a barrier to longitudinal growth? Empirical evidence from South American Firms

Purpose - This paper aims to study how firms’ longitudinal and dynamic growth will be affected by their bribing decisions to address the controversies existing in the extant literature on the impacts of briberies. Design/methodology/approach - The authors acquired information from Enterprise Survey by the World Bank and compiled a unique panel data set including firms from five South American countries between 2006 and 2017. The authors used multiple methods to estimate firms’ productivity. A comprehensive inspection of firms’ longitudinal development using a two-step estimation method that addressed the endogeneity issue was then conducted. Findings - Bribery could significantly shorten the waiting time for resources to become available. However, bribery also substantially and robustly slows down firms’ productivity growth over time. Meanwhile, a bribing firm is very likely to bribe again in the future. Originality/value - This paper contributes to the extant literature by pioneering the empirical study of firms’ bribing decisions and their longitudinal growth. First, the authors constructed unique panel data and established a longitudinal investigation upon firms’ dynamic growth after bribing, filling the literature gap by studying the time-lagging effect of bribery on firms’ growth. Second, the authors performed a comprehensive overview of South American firms’ growth by looking into the dynamics of their production, employment, resource delay and productivity across years. Third, the authors found that bribing exerted contingent impacts upon firms’ growth, reconciling the mixed evidence in the literature.