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Understanding corruption and firm responses in cross-national firm-level surveys

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  • Nathan M Jensen

    (Department of Political Science, Washington University in St Louis, USA)

  • Quan Li

    (Department of Political Science, Texas A&M University, College Station, USA)

  • Aminur Rahman

    (World Bank Group, Washington, DC, USA)

Abstract

The issue of corruption is important to politicians, citizens, and firms. Since the early 1990s, a large number of studies have sought to understand the causes and consequences of corruption employing firm-level survey data from various countries. While insightful, these analyses have largely ignored two important potential problems: nonresponse and potential false response by the firms. We argue that in politically repressive environments, firms use nonresponse and potential false response as self-protection mechanisms. Corruption is likely understated in such countries. We test our argument using the World Bank enterprise survey data of more than 44,000 firms in 72 countries for the period 2000–2005. We find that firms in countries with less press freedom are more likely to provide nonresponse and false response on the issue of corruption. Therefore ignoring these systematic biases in firms’ responses could result in serious underestimation of the severity of corruption in politically repressive countries. More important, these biases are a rich and underutilized source of information on the political constraints faced by the firms. Firm managers can better evaluate levels of corruption, not only by truthful answers to corruption questions, but also by nonresponses and false responses to such questions.

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Bibliographic Info

Article provided by Palgrave Macmillan in its journal Journal of International Business Studies.

Volume (Year): 41 (2010)
Issue (Month): 9 (December)
Pages: 1481-1504

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Handle: RePEc:pal:jintbs:v:41:y:2010:i:9:p:1481-1504

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Cited by:
  1. Alain Verbeke & Liena Kano, 2013. "The transaction cost economics (TCE) theory of trading favors," Asia Pacific Journal of Management, Springer, Springer, vol. 30(2), pages 409-431, June.
  2. Anna Kochanova, 2012. "The Impact of Bribery on Firm Performance: Evidence from Central and Eastern European Countries," CERGE-EI Working Papers wp473, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
  3. Jensen, Nathan M & Rahman, Aminur, 2011. "The silence of corruption : identifying underreporting of business corruption through randomized response techniques," Policy Research Working Paper Series 5696, The World Bank.
  4. Luminiţa Ionescu & George Lăzăroiu & Gheorghe Iosif, 2012. "Corruption and bureaucracy in public services," The AMFITEATRU ECONOMIC journal, Academy of Economic Studies - Bucharest, Romania, Academy of Economic Studies - Bucharest, Romania, vol. 14(Special N), pages 665-679, November.
  5. Musteen, Martina & Rhyne, Lawrence & Zheng, Congcong, 2013. "Asset or constraint: Corporate reputation and MNCs’ involvement in the least developed countries," Journal of World Business, Elsevier, Elsevier, vol. 48(3), pages 321-328.
  6. Van-Ha Le & Jakob de Haan & Erik Dietzenbacher, 2013. "Do Higher Government Wages Reduce Corruption? Evidence Based on a Novel Dataset," CESifo Working Paper Series 4254, CESifo Group Munich.

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