The impact of corruption on entry strategy: evidence from telecommunication projects in emerging economies

Citation

(2007), "The impact of corruption on entry strategy: evidence from telecommunication projects in emerging economies", Strategic Direction, Vol. 23 No. 2. https://doi.org/10.1108/sd.2007.05623bad.002

The impact of corruption on entry strategy: evidence from telecommunication projects in emerging economies

The impact of corruption on entry strategy: evidence from telecommunication projects in emerging economies

Uhlenbruck K., Rodriguez P., Doh J., Eden L. Organization Science, May-June 2006, Vol. 17 No. 3

Purpose – to examine the counter-corruption strategies of telecommunications companies when entering markets in emerging economies. Design/methodology/approach – cites prior research that confirmed that corruption decreases inward investment and firm profitability, discusses the pervasiveness and arbitrariness of corruption, defines pervasiveness as the likelihood of encountering corruption when dealing with state officials, and explains that arbitrariness reflects the degree of ambiguity associated with corrupt transactions. Presents hypotheses linking pervasive and arbitrary corruption to non-equity, equity, wholly-owned subsidiary and joint venture with a local partner entry modes, tests the hypotheses by analyzing World Bank data on 220 entry projects in 64 countries, derives measures for the pervasiveness and arbitrariness of corruption from the 1998 World Business Environment Survey, and controls for various country, industry, project and company characteristics. Findings – finds that the pervasiveness of corruption led to use of non-equity entry modes, and reports that joint venture was preferred over wholly-owned subsidiary when arbitrariness was high. Research limitations/implications – focuses on one industry. Originality/value – suggests it is in the interest of multinational companies to counter, and attempt to reduce, corruption.