1. Academy of Management Journal2007, Vol. 50, No. 6, 1401–1422. DECIDING TO BRIBE: A CROSS-LEVEL ANALYSIS OF FIRM AND HOME COUNTRY INFLUENCES ON BRIBERY ACTIVITY KELLY D. MARTIN Colorado State University JOHN B. CULLEN JEAN L. JOHNSON Washington State University K. PRAVEEN PARBOTEEAH University of Wisconsin–Whitewater Local firms in their home countries often engage in behavior that constitutes corrup- tion, at least through some cultural lenses. One such practice is bribery of public officials. This study uses multilevel theory to address the question of why bribery activity of this type differs among countries. We analyze responses from nearly 4,000 firms worldwide using hierarchical linear modeling to investigate cross-level predic- tions about bribery. Drawing from anomie theory, we find support for country-level cultural and institutional drivers of firm-level bribery. We extend anomie theory by showing how firm-level pressures can encourage the supplying of bribes as a firm strategy. Perspectives spanning multiple levels of analysis Anomie theory (Durkheim, 1897/1966; Merton,provide powerful approaches for studying corpo- 1968), with its basic premise that cultural and so-rate corruption, yet multilevel research on this cial drivers result in conditions in which pressurestopic is remarkably scarce. In particular, a compre- for goal achievement through any means—legiti-hensive and theoretical understanding of bribery, mate or not— displace normative control mecha-especially from the perspective of the suppliers of nisms, provides a powerful foundation for investi-bribes, is practically absent. Adopting a multilevel gating firm ethical behavior and decision makingperspective, we contend that firm-level bribery var- (Cullen, Parboteeah, & Hoegl, 2004).ies significantly with contextual conditions in Building our multilevel arguments on anomiefirms’ home countries and the pressures faced by foundations, we propose that national cultural fac-individual firms. Specifically, we investigate how tors (the extent of an achievement orientation, in-various cultural values and institutional character- group collectivism, and a humane orientation) andistics in different countries influence the bribery social institutions representing a nation’s polityactivities of local firms. We extend theory by in- (welfare socialism and political constraints) ex-cluding individual firm conditions that exacerbate plain bribery by domestic firms. We also argue thatcertain performance pressures and may further pro- firms face local anomic pressures (perceived finan-mote bribery activity. Ultimately, we provide a the- cial constraints and perceived competitive inten-oretically integrated picture of the mechanisms that sity) that further explain a predisposition to bribe.drive firms to supply bribes as a strategic tool in We advance theory and practice by investigatingdealing with local public organizations in their theoretically derived and multilevel factors likelyhome countries. to propagate firms’ propensity to supply bribes to To provide insights into bribery among firms local officials or governments as a mechanism byworldwide and to investigate cultural, institu- which to gain strategic advantage.tional, and organizational drivers of such corrup- Because our research crossed levels of analysis,tion, we draw on what is arguably one of the most we drew on multilevel organization theory to frameinfluential sociological theoretical frameworks. our conceptualization and develop our hypotheses. Multilevel theory permitted us to juxtapose broad societal characteristics with firm-level traits that The authors thank Special Research Forum Coeditor cause organizations to differ from one another inPaul W. Beamish and the three anonymous reviewers for bribery activity. Particularly germane to our inves-their valuable feedback. tigation, furthermore, was the application of multi- 1401Copyright of the Academy of Management, all rights reserved. Contents may not be copied, emailed, posted to a listserv, or otherwise transmitted without the copyright holder’s expresswritten permission. Users may print, download or email articles for individual use only.
2. 1402 Academy of Management Journal Decemberlevel theory to infer firm-level outcomes from the Organization of American States (OAS) Inter-broad societal and institutional variables (e.g., American Convention against Corruption representKlein & Kozlowski, 2000; Kostova, 1999; Rousseau attempts to curtail bribery. These findings and& Fried, 2001; Van der Vegt, Van De Vliert, & agreements suggest that bribery to some extent vi-Huang, 2005). The basic tenets of multilevel theory olates a “hypernorm,” or a standard of right andand methods therefore facilitated our investigation wrong that transcends organizational and nationaland allowed us to advance current perspectives on cultures (Donaldson & Dunfee, 1994, 1999; Spicerbribery as it brews and thrives in countries across et al., 2004). Yet, paradoxically, the extent of brib-the globe. ery varies widely over national contexts (Husted, Our cross-level analysis extends the literature on 1999; Johnson, Kaufmann, McMillan, & Woodruff,multiple fronts. We advance the extant literature on 2000).bribery (e.g., Mauro, 1995; Treisman, 2000) with a Anomie theory suggests that, regardless of themultilevel study examining data on firm-level brib- strength of a hypernorm, the context of a country asery from 3,769 firms concurrently with firm-level well as local firm conditions can create situationspredictors and predictors from country-level insti- in which firm decision makers see violations oftutions and cultural contexts for 38 countries. In hypernorms as justifiable. Although prior researchthe tradition of influential ethics research (e.g., has considered the general ethical reasoning of in-Donaldson & Dunfee, 1994, 1999; Spicer, Dunfee, & dividual managers through a subtype of anomieBailey, 2004; Weaver, Trevino, & Cochran, 1999), ˜ theory (i.e., institutional anomie theory) (Cullen etwe extend multilevel theory by grounding a ubiq- al., 2004), there are no examinations via the lens ofuitous and chronic ethical issue in business, anomie theory of the ethical behaviors of eithernamely bribery, in a powerful theoretical frame- individual managers or organizations from a cross-work, anomie theory. From a managerial perspec- national or multilevel perspective. To fill this gap,tive, we focus on firms themselves—that is, on the we formulate our arguments on a broader, more“supply side” of bribery—thereby offering business general application of anomie theory and focus ondecision makers insights into the various pressures firm-level bribery activity. Specifically, we investi-and practices that are typical of firm interactions gate the phenomenon of local firms supplyingwith local officials. This knowledge may allow bribes to local officials as it relates to national con-firms to better control bribery activity from within text and firm-level pressures.and help avoid the harmful reputational and finan- Bribery activity can involve firms in their homecial effects of punishment through fines and sanc- countries or abroad and can involve the local ortions. Understanding the supply side of bribery, foreign governments with which firms might inter-moreover, may alert firms to the likelihood of such act. Bribery activity, furthermore, may differ on thepractices among their competitors. Through an en- basis of who is supplying as opposed to demandinghanced appreciation of the cultural, institutional, the bribes, and whether public or private sectorand intraorganizational contexts (Johns, 2001; institutions are involved (Cuervo-Cazurra, 2006).Thompson, 1995) associated with firm-level brib- Studies examining demand-side factors in briberyery, firm decision makers will be better equipped to have typically used cross-national data linked tomeet the ethical challenges they encounter. country-level indexes of corruption, such as the Transparency International Corruption Perception Index (CPI) and measures from Political Risk Ser- BRIBERY: A CONCEPTUAL BACKGROUND vices and Freedom House. This research has Remarkably, there is “not a country in the world shown, for example, that weak governments withwhich does not treat bribery as criminal on its unstable political institutions have a difficult timelawbooks” (Noonan, 1984: 702). Consistently, man- preventing their agents from demanding bribesagers of firms worldwide generally consider bribery from local and foreign firms (Shleifer & Vishny,an ethically offensive practice regardless of their 1993). Other studies have shown that national lev-background or nationality (Husted, Dozier, McMa- els of bribery relate to dimensions of culture, socio-hon, & Kattan, 1996). Indeed, data (World Values economic factors (Getz & Volkema, 2001; Husted,Study Group, 2000) confirm that behaviors such as 1999), and historical development (Treisman,tax evasion, buying stolen goods, and committing 2000). Demand-side research has also linked highersuicide are perceived as more justifiable than brib- tax rates to diminished levels of corruption,ery. In the cross-national business context, agree- whereas overregulation has been linked to in-ments such as the Organisation for Economic Co- creased corruption (Friedman, Johnson, Kaufmann,operation and Development (OECD) Convention on & Zoido-Lobaton, 2000). Entry barriers, legal sys-Combating Bribery of Foreign Public Officials and tem effectiveness, and infrastructure services, as
3. 2007 Martin, Cullen, Johnson, and Parboteeah 1403demonstrated in the literature, potentially subvert 2005) challenged this assumption by recognizingcorruption across countries (Rodriguez, Uhlen- that firms do not respond to demands uniformlybruck, & Eden, 2005). Similarly, unrestrained bu- and, moreover, initiate bribery activity indepen-reaucracy, the rule of law, and political legitimacy dently of demand. Thus, in our research we con-have been shown to inflate national levels of cor- sidered the firm the relevant unit of analysis, as-ruption (Ali & Isse, 2003). In yet another stream, suming firms can choose whether to engage inresearchers have considered the effects of bribery bribery activity. This choice, what is more, ac-demands on multinational firms entering local counts for a degree of the variation in bribery ac-markets (e.g., Mauro, 1998; Robertson, 2004; Rob- tivity between firms and countries, as is consistentertson & Crittenden, 2003; Robertson & Watson, with a multilevel perspective.2004), with evidence suggesting that local demandsmay deter entry (e.g., Uhlenbruck, Rodriguez, Doh, BRIBERY AND ANOMIE THEORY& Eden, 2006; Voyer & Beamish, 2004). The above citations illustrate that, heretofore, We appeal to the conceptual foundations of ano-most research has represented efforts to understand mie theory to argue that cultural and social driversthe characteristics of countries or public institu- as well as certain firm-level conditions catalyzetions that affect the demand side of bribery. In bribery activity among firms, as these conditionskeeping with “endogenous harassment” perspec- promote goal achievement through any availabletives (Clarke & Xu, 2002), furthermore, there is means. Anomie theory evolved from the famousoften an central assumption that the only deviance work Suicide: A Study in Sociology, by Emile ´involved in bribery is on the part of those who Durkheim (1897/1966), who proposed the anomiedemand bribes. However, firms may actively and framework to link the societal deterioration of so-purposefully seek the unfair advantages and spe- cial norms through the propagation of moderniza-cial treatments that can result from bribery. Active tion and industrialization to another basic hyper-bribery, which originates on the supply side as a norm violation, the individual act of suicide.strategic influence mechanism, differs from passive Durkheim argued that institutional and culturalbribery, which also originates on the supply side changes associated with modernization encouragedbut is used defensively to avoid sanctions or other a decline of traditional social controls based onpunishments (Wu, 2005). Active bribery involves family and communal relationships, a resultantfirms engaging public officials using the temptation weakening of norms and, in turn, increasedof payments as a method of influence and coercion. deviance.The use of bribery to manipulate business func- Robert Merton (1968) later used the concept oftions such as obtaining contracts, garnering favor- anomie to describe the condition that exists when aable regulatory decisions, and other government or culture values the achievement of ends (primarilypolicy determinations demonstrates that the devi- materialistic and economic ones) over the legiti-ance indicative of bribery frequently originates on macy (ethicality) of the means used to achievethe supply side. In fact, in evidence of the domestic these ends. Merton defined anomie as “a conditionprevalence of bribery, a handful of well-known of normlessness and social disequilibrium wherecompanies including Volkswagen, HealthSouth, the rules once governing conduct have lost theirand Hyundai were recently sanctioned for their savor and force” (1964: 226). Merton also theorizedsupply-side bribery activity in their home countries that when a social system inhibits culturally valued(Jenkins & Williamson, 2005; Johnson, 2006; goal achievement, it incubates a greater propensityJung-A, 2007). to choose deviant means to achieve certain The factors that potentially encourage bribery ac- desirable ends.tivity from the supply side, therefore, are the cen- Beyond the dismantling of individual normativetral focus of our analysis. Such a focus contrasts controls in the face of institutional barriers, norm-with those of prevailing treatments of corrupt ac- lessness may permeate the social structure of firms,tivities in the literature and, as scholars have ar- exerting pressure on them to engage in noncon-gued, warrants increased attention (Clarke & Xu, forming rather than conforming behavior to achieve2002; Rodriguez, Siegel, Hillman, & Eden, 2006; performance goals. Culturally induced perfor-Wu, 2005). Given the clear distinction between de- mance pressures, we argue, elevate rates of briberymand- and supply-side bribery activity, it is sur- among firms. Firms characterized by an anomicprising that the assumption in much of the litera- state deviate from normatively accepted mecha-ture is that the supplier of a bribe is without choice nisms for achieving important outcomes such asor fault. Only recently have bribery researchers profit and productivity. In anomic organizational(e.g., Reinikka & Svensson, 2006; Svensson, 2003, contexts, pressure exists to take any path that leads
4. 1404 Academy of Management Journal Decemberto the achievement of performance goals, regardless Rosenfeld, 2001). That is, according to anomie the-of its acceptability or legitimacy. For these firms, orists, achievement values are “conducive to thebribery can be a path to the achievement of impor- mentality that ‘it’s not how you play the game: it’stant goals. whether you win or lose’” (Messner & Rosenfeld, Attempting to explain how an affluent country 2001: 63). Research also shows that in cultures withlike the United States can have such high crime intense competition for prestige, status, and mate-rates, contemporary anomie theorists (Messner & rial wealth, individuals are more likely to seek spe-Rosenfeld, 1997, 2001; Rosenfeld & Messner, 1997) cial favors to gain advantages over others (Khatri,have noted that both social institutions and cul- Tsang, & Begley, 2006).tural values separately and in combination affect Thus, the central tenets of anomie theory implydeviant behavior by creating a detachment from that highly achievement-oriented societies tend tosocial rules and norms. This detachment increases value individuals and organizations more on thethe willingness of more people to “have no moral basis of what they have done or achieved ratherqualms” (Rosenfeld & Messner, 1997: 214) about than on the basis of the path used to arrive at thosechoosing whatever means are necessary to achieve accomplishments (Rosenfeld & Messner, 1997). Wetheir goals. Anomie theory has been useful in pre- argue that in such contexts, key decision makersdicting rates of deviant behaviors such as property seeking to attain firm outcomes and overall firmcrimes and homicide (Bernberg, 2002; Savolainen, value experience a greater inclination and more2000) and has been shown as useful in explaining pressure toward ethically questionable behaviorsvariation in the ethical reasoning of managers such as bribery.(Cullen et al., 2004); we argue that the theory also Hypothesis 1. A country-level achievement ori-readily extends to the explanation of ethically entation relates positively to local firm briberyquestionable behavior by firms. activity. We frame our examination in the context of an-omie theory to understand the profound effects of According to anomie theory, individualistic con-both institutional and cultural drivers as they pro- cern is a self-centered orientation and egoistic goalmote bribery activity. Importantly, in keeping with pursuit (Messner & Rosenfeld, 2001). In more indi-a multilevel approach, anomie theory also suggests vidualistic cultures, calculative relationships basedthat certain firm-level factors may exacerbate pres- upon a concern for the satisfaction of needs are thesures for deviance—in this case, bribery. Accord- norm (Jackson, 2001; Robertson & Fadil, 1999). In-ingly, we propose both country-level and organiza- dividualistic cultural values set up conditions in ation-level characteristics theoretically derived from firm for behaviors that exclusively emphasize theanomie frameworks and articulate their relation- firm’s pursuits and interests without accounting forships with firm reports of bribery activity. ethical consequences, which is consistent with the central tenets of anomie theory. Ultimately, indi- vidualistic cultures disproportionately emphasize HYPOTHESES goal achievement even at the expense of social relationships and connections (Khatri et al., 2006).Country-Level Drivers of Bribery: In contrast, as cultures emphasize values rootedNational Culture in belongingness within larger groups, tribes, and The central premises of anomie theory suggest even nations, a society becomes increasingly col-that the cultural value of an achievement orienta- lectivist. Collectivist cultures emphasize the notiontion plays a central role in firm-level deviance. An that societal members are fundamentally interde-achievement orientation has been considered a fun- pendent and deemphasize individual goal achieve-damental determinant of self-worth that is based on ment. Moreover, societal members acknowledgereaching certain goals (Trompenaars & Hampden- both duties and obligations to other members withTurner, 1998). Successful goal accomplishment be- whom they are culturally intertwined (Triandis,comes the primary measure of value in highly 1995). From the perspective of anomie theory, suchachievement-oriented cultures (Cullen et al., 2004; social integration should reduce temptations toHusted, 1999). According to the tenets of anomie bribe as a deviant means to achieve firm financialtheory, such a vigorous emphasis on goal achieve- success or other accomplishments. Indeed, in col-ment can create for firms a “strain of inflated ex- lectivist cultures, should group interests be pur-pectations” (Zahra, Priem, & Rasheed, 2005: 808), a sued by a deviant means, it would likely involvepressure to meet organizational ends at the expense cronyism, a practice facilitated by the social net-of following commonly prescribed and accepted work ties indicative of such a culture (Khatri et al.,methods for achieving these ends (Messner & 2006). That is, the group member cohesion that is
5. 2007 Martin, Cullen, Johnson, and Parboteeah 1405characteristic of collectivist cultures should deter the prevalence of political constraints. To advanceanomie and henceforth firm behaviors such as brib- the extant literature (e.g., Kostova, 1999), we focusery aimed at forwarding self-interested goals and on these two aspects of a polity as likely to be moreaspirations. relevant than others to firm-level bribery activity. According to anomie theory, polities with more Hypothesis 2. Country-level in-group collectiv- social welfare structures isolate individuals and ism relates negatively to local firm bribery firms from the “vicissitudes of the market” (Mess- activity. ner & Rosenfeld, 1997: 1394) and help prevent a A humane orientation is primarily concerned “self-serving economic system where everyonewith relationships and the intricacies of the ways looks out for his/her own interests” (Ralston, Holt,people treat one another. Culture research has stip- Terpstra, & Kai-Cheng, 1997: 80) Indeed, in coun-ulated certain values that are characteristic of a tries dominated by welfare socialism, firms strivesociety with a highly humane orientation (Triandis, to meet societal goals rather than the more individ-1995) and defined this orientation in terms of “the ualistic, self-interested goals that predominate indegree to which an organization or society encour- the absence of welfare socialist policies (Tsoukas,ages and rewards individuals for being fair, altru- 1994). Furthermore, in these societies, the conse-istic, friendly, generous, caring, and kind to others” quences of business failures are “softened” or per-(Triandis, 1995: 569). Societies with a highly hu- haps even prevented (Tsoukas, 1994: 31), thus re-mane orientation, what is more, report fewer patho- ducing pressures for firms to succeed at all cost.logical and psychological maladies among their Anomie theory dictates that when institutionalmembers (Alas, 2006). safeguards are in place in the form of protective In societies measuring low on humane orienta- services and resources received as entitlements,tion, we argue, the instability of relationships both rather than from success in competitive markets,within and between firms results in an overarching there is less need to achieve desired ends usinglack of social support. Grounding the idea of a deviant means. Evidence supports this argumenthumane orientation in the central premises of ano- (e.g., Messner & Rosenfeld, 1997; Savolainen,mie theory, we theorize that a lack of social support 2000), demonstrating the effectiveness of socialleads to anomic conditions that increase the ten- welfare policies in reducing crimes such as theftdency of managers to advance themselves and their and homicide.firm’s economic performance by any means possi- Enhanced security through institutional safe-ble. Consequently, according to anomie theory, de- guards, we argue, diminishes the temptation forviant behaviors performed to advance firm inter- managers to resort to illegitimate means of sustain-ests, such as bribery, increase. In contrast, ing their firms and achieving basic security forparticipants in a humanely oriented society typi- themselves and their employees (Merton, 1964,cally sacrifice self-interested and hedonic goals for 1968). The presence of institutional safeguardsthemselves and their firms in favor of promoting seems particularly relevant for small to medium-and sustaining the good of others (Schwartz & Bil- sized firms, as both the owners and employees ofsky, 1990). As does collectivism, a humane orien- these firms face liabilities of size that increase ratestation implies greater social integration and thus of failure (Aldrich & Auster, 1986; Freeman, Car-lower anomie as well as fewer illegitimate firm roll, & Hannan, 1983). This study focused on suchbehaviors. firms, which we consider “typical,” because small size is prevalent worldwide. In Europe, for exam- Hypothesis 3. A country-level humane orienta- ple, over 99 percent of firms are small to medium- tion relates negatively to local firm bribery sized (European Commission, 2004). Although the activity. benefits of welfare socialism may be less relevant to managers in the world’s large firms, in the typical smaller firms studied here, the vulnerability of bothCountry-Level Drivers of Bribery: managers and workers to firm success and failure isSocial Institutions likely much greater, and thus social welfare bene- In addition to national cultural values, various fits resonate more.strains of anomie theory, from Durkheim in the late Firms operating under extensive welfare social-1800s to Messner and Rosenfeld more recently ism are ultimately less at the whim of competitive(2001), have advanced the notion that social insti- market forces and face less pressure to use briberytutions can drive or inhibit anomic conditions and or other illegitimate means to achieve success andresulting deviance. Below we consider two societal survival. Alternatively, when few if any welfarecharacteristics: the extent of welfare socialism and safety nets exist, a society may become a kleptoc-
6. 1406 Academy of Management Journal Decemberracy (Andreski, 1968). Normlessness, as fostered Messner & Rosenfeld, 2001) scholars argue thatthrough anomie, abounds as firms strive to ensure most modern societies have developed economicfinancial security by any means available. As firms systems that are not embedded in or regulated byattempt to compete in kleptocratic societies, we other social institutions. A major proposition inexpect that illegitimate means to achieve business anomie research (e.g., Messner & Rosenfeld, 2001)ends frequently emerge in the form of unofficial is that the separation of the economic values ofcompensation, or bribery. self-achievement from traditional institutional con- trols, such as those embedded in family and reli- Hypothesis 4. Country-level welfare socialism gion, breaks down normative controls (Bernberg, relates negatively to local firm bribery activity. 2002). This dominance of values related to self- By political constraints, we mean governmental achievement by economic success encourages peo-“checks and balances” in the form of regulations ple and firms to succumb to the cultural drivers ofthat are imposed to limit and constrain the powers anomie. In such instances, the calculative logic ofof politicians and lawmakers. Such checks and bal- supplying bribes to achieve economic ends at theances also can enable or constrain a country’s man- expense of ethically prescribed methods ofagers and firms (Delios & Henisz, 2000, 2003; Go- achievement prevails.erzen & Beamish, 2003; Henisz & Delios, 2001; Lu, Social institutions including welfare safety nets2002; Spencer, Murtha, & Lenway, 2005). Linking and political constraints, therefore, may have im-back to the central tenets of anomie theory, we portant moderating influences on the effects of cul-theorize that countries with high levels of political ture (Henisz, 2004) and the subsequent propagationconstraints should provide credible and legitimate of anomie, and hence bribery. A close examinationinstitutional environments discouraging deviant of the anomie framework illuminates moderationbehavior, including bribery among local officials hypotheses, suggesting that social welfare policiesand local firms. Conversely, countries with politi- have contingent relationships with other drivers ofcal hazards—that is, few checks on the discretion of anomie in predicting deviant behaviors (Savol-regulators who deal with business firms—tend to ainen, 2000). Similarly, studies investigating polit-encourage or even propagate bribery (Henisz, ical hazards as applied to various mechanisms of2000). Countries in which political leaders enjoy business and organization have posited a criticalsubstantial discretion promote unpredictable and role for political constraints as a moderating forceat times even arbitrary law enforcement. In other in a number of relationships (e.g., Delios & Henisz,words, a lack of political constraints allows ano- 2003; Henisz & Zelner, 2005). To advance thesemie, or the condition of normative instability, to premises and extend the anomie theoretical frame-flourish. According to anomie theory, because work, we argue that the cultural drivers (anfirms and their decision makers can see the poten- achievement orientation, in-group collectivism,tial effectiveness of offering bribes to policy makers and a humane orientation) of anomie and hencein these environments, arbitrary political and ad- bribery activity can be muted or enhanced by socialministrative discretion makes activities like bribery welfare policies and by political constraints.attractive for firms. In contrast, the enforcement of political con- Hypothesis 6a. The extent of welfare socialismstraints on government leaders, limiting their dis- moderates the relationship between local brib-cretion in policy formulation and transformation, ery and cultural values in such a way that thetends to mute anomic conditions among local positive effect of an achievement orientationfirms. A system of checks and balances in the po- on bribery is reduced as welfare socialismlitical arena stabilizes and legitimizes a national increases.political environment overall (Henisz, 2004), sup- Hypothesis 6b. The extent of welfare socialismpressing the potentially anomic conditions that re- moderates the relationship between local brib-sult in deviant acts such as supplying bribes. ery and cultural values in such a way that the Hypothesis 5. Country-level political con- negative effect of in-group collectivism on brib- straints relate negatively to local firm bribery ery is enhanced as welfare socialism increases. activity. Hypothesis 6c. The extent of welfare socialism The conceptual premises of anomie theory also moderates the relationship between local brib-suggest interactive relationships among social in- ery and cultural values in such a way that thestitutions and cultural values (Savolainen, 2000). negative effect of a humane orientation onFollowing the tradition of Polanyi (1957), in recent bribery is enhanced as welfare socialismwork advancing anomie theory (Bernberg, 2002; increases.
7. 2007 Martin, Cullen, Johnson, and Parboteeah 1407 Hypothesis 7a. The extent of political con- decision makers might allow a firm to receive the straints moderates the relationship between lo- same advantages firms without financial con- cal bribery and cultural values in such a way straints enjoy. that the positive effect of an achievement ori- Hypothesis 8. Greater perceived financial con- entation on bribery is reduced as political con- straints relate positively to local firm bribery straints increase. activity within countries. Hypothesis 7b. The extent of political con- Deviant behavior at the organization level, ac- straints moderates the relationship between lo- cording to anomie theory, is clearly linked to a cal bribery and cultural values in such a way number of firm pressures. When firms must vie that the negative effect of in-group collectivism with competitors for scarce resources, for example, on bribery is enhanced as political constraints they likely encounter heightened pressure to suc- increase. ceed and perhaps even to survive (Baucus & Near, Hypothesis 7c. The extent of political con- 1991; Vaughn, 1997). Research has demonstrated straints moderates the relationship between lo- that when managers interpret their competitive en- cal bribery and cultural values in such a way vironment to be less than munificent (Staw & Szwa- that the negative effect of a humane orienta- jkowski, 1975), the likelihood of firm-level devi- tion on bribery is enhanced as political con- ance increases. Research on strategic groups and straints increase. competitive positioning has also shown that com- petitive rivalry may be more salient when per- ceived as coming from within a firm’s set of rele-Firm-Level Drivers of Bribery vant strategic groups rather than from outside Going beyond the country-level contextual pre- important groups (Cool & Dierickx, 1993; Mc-dictors of bribery, anomie theory and, in particular, Namara, Deephouse, & Luce, 2003).Merton’s (1964, 1968) exposition of the theory sug- Appealing to the central premises of anomie the-gest firm-level predictors of bribery. Following this ory, we advance the view that when rivalry amonglogic, when firms face factors that obstruct or pre- a firm’s core group of competitors is strong andvent accomplishment of critical goals, there is competitive intensity is threatening, firms are morestrain and, in turn, a greater likelihood that the likely to resort to deviant behaviors like bribery asfirms will use illegitimate means to achieve their a strategy for achieving goals. In particular, bribingends. Performance and profitability goals can cre- public officials for special treatment or other ben-ate significant pressures for firms and, when legit- efits may present an opportunity by which a firmimate means to attain these important goals fail, can undermine its rivals. As the degree of per-normative structures may decay, leading firms to ceived competition grows, firms may be increas-find deviant alternatives. In these situations, illicit ingly likely to resort to behaviors such as bribery asbehaviors such as bribery may become increasingly they struggle to gain a foothold among keyattractive as strategies for goal achievement. In competitors.evaluating anomie at the firm level, conditions that Hypothesis 9. Greater perceived competitivemay generate active, supply-side bribery, or bribery intensity relates positively to local firm briberyas a firm strategy, warrant investigation. activity within countries. As a case in point, certain financial constraintscan increase firms’ propensity to resort to corruptbehaviors such as bribery to overcome limitations METHODSand “get things done.” One such use of bribery may Survey Instrument and Samplebe to influence key public officials to create oppor-tunities that might otherwise not exist for a firm To test our predictions regarding bribery by localowing to financial constraints (Cuervo-Cazurra, firms within their cultural, national, and organiza-2006). We argue that the extent to which a firm’s tional contexts, we assembled a multilevel data setdecision makers perceive that financial constraints of firm-level and country-level information. Theare blocking goal achievement significantly height- firm-level data came from a comprehensive multi-ens that firm’s temptation to engage in bribery ac- national study, the World Business Environmenttivity. Anomie theory suggests that, in light of per- Survey (WBES, 2000), conducted by the Worldformance pressures on firms to grow and survive, Bank in 80 countries. World Bank researchers lo-when obstructed financially, firms are increasingly cated in the various countries conducted personallikely to engage in bribery to remove such obsta- interviews with prequalified firm representatives.cles. Actively supplying bribes to influence public Survey instruments were translated and back-trans-
8. 1408 Academy of Management Journal Decemberlated to ensure consistency. The survey contained naire captured this focus, as each question wasitems involving corruption in local practices, in- prefaced with the following instructions: “Your an-cluding the prevalence of bribery. Further informa- swers should reflect only your perception and ex-tion regarding the WBES is available from the World perience of doing business in your country.”Bank Governance Group (www.worldbank.org). We used items based on the WBES to formulate a In the World Bank data on 80 countries, appro- multiple-item measure of bribery centered on thepriate country-level data were available for 38 prevalence of and the degree to which firms engagecountries. Limits on the availability of appropriate in bribery activity. Items evaluating the extent tocultural and social institution data and the reliabil- which firms “pay some irregular ‘additional pay-ity of our dependent variable measure reduced the ments’ to get things done” and whether “firms likesample size. In keeping with cross-national re- yours typically make extra, unofficial payments tosearch prescriptions (Singh, 1995), for each country public officials” comprised our measure (responsewe computed reliability coefficients for the bribery scale: 1, “always true,” to 6, “never true”). Weactivity measure. To ensure the construct equiva- reverse-coded the items so that higher scores rep-lence of the bribery measure, we retained countries resented greater bribery activity. The six-item mea-that had alpha reliability coefficients of .70 or sure is reliable at an alpha of .86. The Appendixgreater. Compilation of available country-level data provides further details for this and the other mea-resulted in our final sample of 38 countries.1 sures used in our study. Because we were interested in local firms’ brib- Our measure has the special advantage of directing of their home country governments, we elimi- assessment and with that, substantive and theoret-nated firms with any percentage of foreign owner- ical benefits that resonate with bribery and ethicsship from the analysis. This comprised less than 20 researchers (Morgan, 1993). We verified the con-percent of the original sample, and controlling in struct validity of our bribery measure on the basisthe analysis for percentage of foreign ownership of high positive correlations with available corrup-did not affect the results. Thus, for the sake of tion indexes such as the Transparency Interna-clarity we elected to remove the firms with some tional CPI; however, because other recent researchforeign ownership. The final sample consisted of has reported extensive validation for several com-3,769 firms. The majority of firms in our sample ponents of the WBES bribery items (Uhlenbruck etoperated primarily in service- or manufacturing- al., 2006), we do not report validation statisticsbased industries, with nearly 50 percent being in here.2 The face validity of our measure, coupledservices, approximately 30 percent in manufactur- with evidence of convergent, nomological, and dis-ing, and the remainder distributed over agriculture, criminant validity, allows us confidence in ourconstruction management, and other industries. multiple-item, self-report bribery measure.Consistently with the overall sample of the WBES, National culture. For the cultural attributes in-and representative of firms worldwide, the majority cluded in our study—that is, achievement orienta-(85%) of the firms in our sample were small to tion, in-group collectivism, and humane orienta-medium-sized in that each had fewer than 100 em- tion—we used measures from the Globalployees and sales of less than US$10 million annu- Leadership and Organizational Behavior Effective-ally. The median age of the firms in our sample was ness (GLOBE) study (House, Hanges, Javidan, Dorf-18 years at the time of the WBES data collection. man, & Gupta, 2004). Inspired by earlier cultural research (e.g., Hofstede, 1980; Hofstede & Bond, 1988; Trompenaars & Hampden-Turner, 1998),Variables and Data Sources House and colleagues conducted a broadly based, Bribery activity: Operationalization and con- cross-national, cross-industry study involving 62struct validation. To operationalize supply-side countries to advance and refine cultural variables.bribery, whereby firms attempt to gain advantages The GLOBE measures and their operationalizationsby inducing public officials to misuse their posi- align theoretically with our anomie-theory-derivedtion or authority, we drew from managerial self- arguments. Moreover, the approach used in thereports regarding firm bribery activity and its fre- GLOBE study and the earlier work, assigning cul-quency. For the scope of our question, we were tural scores to each country (see Cullen et al., 2004;interested in bribery occurring within a firm’shome country. The wording of the WBES question- 2 Full details of the construct validation, including statistics demonstrating the convergent, discriminant, 1 For a list of the countries in our sample, please refer and nomological validity of the bribery measure, areto Table 1. available from the authors upon request.
9. 2007 Martin, Cullen, Johnson, and Parboteeah 1409Parboteeah & Cullen, 2003), has been advocated in contained five items. The central concepts mea-the literature (Smith, 2006). sured were sensitivity, friendliness, generosity, It is also noteworthy that the GLOBE researchers other regarding, and tolerance despite mistakesassessed their cultural dimensions in the form of (House et al., 2004). In essence, the measure isboth “should be” judgments (i.e., “the way things derived from managers’ ideas of compassion thatshould be”) and “what is” judgments (i.e., “the way are theoretically characteristic of a humane orien-things are”). Because we were interested in deeply tation. The humane orientation measure as admin-held and aspirational value systems, in keeping istered by the GLOBE researchers was reliable at anwith past research (Parboteeah, Cullen, & Lim, alpha level of .88.2004), we used the “should be” measures from the Social institutions. For country-level social insti-GLOBE study. This approach also avoided the high tutions, we used accepted operationalizations oflevel of disagreement that would have been likely institutional variables from the political economicswith use of the “what is” GLOBE measures, which and sociology literatures (e.g., Esping-Anderson,assess what actually exists (Javidan, House, Dorf- 1990) and prior measurements of institutional vari-man, Hanges, & de Luque, 2006; Peterson, 2004). ables from business and management research (e.g.,Furthermore, we used the adjusted scores for the Cullen et al., 2004; Delios & Henisz, 2000). HavingGLOBE measures (House et al., 2004: 742–747), no single published source, as with the GLOBEallowing the elimination of culturally biased re- study variables, we instead reviewed the literaturesponse patterns (for instance, Asian respondents to identify operationalizations and then searchedavoiding the extremes of a scale or Mediterranean secondary data sources to develop each measure.respondents favoring the midpoints), which can The Appendix lists these measures and their indi-potentially affect hypothesis testing (Triandis, vidual items.1994). Details and sample items of the GLOBE mea- We derived our measure of the extent of welfaresures are located in the Appendix. socialism in a society from the extant literature For the variable achievement orientation, we (Cullen et al., 2004; Parboteeah & Cullen, 2003).drew on the performance orientation items in the Data came from the International Labour Organiza-GLOBE study, which measure the extent to which a tion’s 2000 World Labor Report (http://www.society “encourages and rewards group members ilo.org) and the United Nations Development Pro-for performance improvement and excellence” gram’s 2002 Human Development Report. Drawing(House, Javidan, Hanges, & Dorfman, 2002: 6). The on research on welfare socialism (i.e., Esping-work of Trompenaars and Hampden-Turner (1998) Anderson, 1990), we included public social secu-provided the foundation for the GLOBE measure of rity expenditure as a percentage of gross domesticperformance orientation. For the final measure, product (GDP) and benefit levels in the form ofcomprised of four items, the GLOBE scholars re- pensions as a percentage of GDP. As economistsported an alpha coefficient of .72.3 (e.g., Durham, 1999; Johnson et al., 2000) have rec- The GLOBE study assessed the in-group collec- ommended, the measure also included total gov-tivism component of culture with four items ernment expenditure as a percentage of GDP. Thisloosely based on Hofstede (1980). The GLOBE index infers institutional safeguards through wel-study formulated the measure of in-group collectiv- fare safety nets and other redistributive servicesism by restructuring the earlier work and focusing resulting from increasing levels of government in-on collective beliefs that a group’s members should tervention. This three-item measure is reliable at antake pride in one another’s work and accomplish- alpha level of .78.ments. Respondents were queried on the extent to We employed a commonly accepted measure ofwhich such accomplishments were considered political constraints, specifically, the Political Con-honorable for the group as a whole (House et al., straint Index developed by Henisz (2000, 2002), a2004). The measure tapped the values of group structurally derived and internationally compara-cohesiveness and loyalty, which are consistent ble assessment of constraints on policy formulationwith collectivism. The collectivism measure was and adaptation in a majority of the world’s coun-reliable at an alpha level of .77. tries. Because we were interested in bribery by The GLOBE measure for humane orientation local firms of their home country governments, the political constraint measure was particularly rele- vant to our analysis. It focuses on critical attributes 3 For the national culture variables, limited informa- of a polity grounded in notions of checks and bal-tion was disclosed on the actual scale items included and ances for national political institutions. The indexthe measure validation procedures. The information we assesses the existence and strength of veto power inreport is that available from House et al. (2004). a nation’s political system and examines the distri-
10. 1410 Academy of Management Journal Decemberbution of office holders with various political pref- dent variables on bribery activity from potentialerences over and within government branches. The effects of national wealth or affluence, we con-measure has been used extensively in international trolled for GDP. Following prior research (e.g., Cu-business research (e.g., Delios & Henisz, 2000, ervo-Cazurra, 2006; Wu, 2005), we obtained GDP2003; Goerzen & Beamish, 2003; Henisz & Delios, from the 2002 United Nations Human Development2001; Lu, 2002). Report and logarithmically transformed those Firm characteristics. To test our firm-level hy- values.potheses regarding the organizational conditions Demands for bribes may vary with the industry inthat, according to anomie theory, potentially influ- which a firm operates. Indeed, prevailing industryence bribery activity, we used data from the WBES cultures can set the tone for a host of firm interac-evaluating managerial perceptions of firm financial tions, including those with public officials, possi-constraints and managerial perceptions of firm bly playing a role in deviant behavior (Daboub,competitive intensity. We derived the managerial Rasheed, Priem, & Gray, 1995). Research has alsoassessment of financial constraints measure from demonstrated that industry characteristics maymultiple items characterizing the extent to which shape public officials’ perceptions of firms’ will-the respondents believed financial issues obstructed ingness to pay, and thus impact the demanding offirm growth and development. In particular, these bribes (Clarke & Xu, 1999). Because industry char-firm managers assessed the extent to which they be- acteristics more closely resemble demand-side phe-lieved various financial blocks limited performance, nomena, we did not develop hypotheses regardingincluding collateral requirements, unfavorable inter- industry influences on bribery. We did, however,est rates, lack of firm-retained earnings, local banks’ include industry as a control variable in our anal-lack of resources, and access to nonbank equity in- ysis to rule out any potentially confounding effectsvestors. Our seven-item measure of managers’ assess- it might have on our dependent variable. Becausement of their firms’ financial constraints retained de- the majority of the firms comprising our samplesirable measurement properties and was reliable at an operated in manufacturing and service industries,alpha level of .76. we employed dummy variables indicating member- We derived a measure designed to assess the ship in manufacturing, service, and all otherrelevant number of competitors in a firm’s primary industries.strategic group to formulate our variable manage- We included three firm-level controls represent-rial assessment of competitive intensity. The WBES ing two constructs. First, the extent of a firm’sinstrument asked managers to evaluate the number government ownership has been linked to briberyof significant rivals their firms regarded as viable activity (Clarke & Xu, 2002), traditionally having acompetitive threats in their major product catego- negative effect. The underlying logic is that if aries. Because we were interested in individual government has a stake in a firm, it is less likely tofirms’ evaluations of the rivalry, or competitive in- solicit bribes from that firm. We used a firm’s per-tensity, they encountered, the perceived number of centage of state ownership, as measured in thesignificant competitors in a strategic group was an WBES, as a control variable in our models.appropriate indicator (Barnett, 1997; McNamara et Firm size has been linked to firm illegal behavioral., 2003). Indeed, some have argued that tradi- and corruption occurring as a function of demand-tional proxy measures and objective indicators side characteristics (e.g., Baucus & Near, 1991;such as concentration ratios (e.g., the Herfindahl Daboub et al., 1995; Kaufmann & Wei, 1999). Theo-index) are inferior to self-reports of competition in ries of endogenous harassment (Wu, 2005), for exam-reflecting beliefs in a firm (Cool & Dierickx, 1993) ple, connect firm size to potential vulnerability toand are therefore inadequate for assessing manage- bribery demands. Our sample consisted primarily,rial perceptions of firm competitive rivalry. but not exclusively, of small and medium-sized firms, Control variables. To isolate the supply-side in- which typify the world’s overall population of firms.fluences on bribery activity, we included a number In particular, to remove the effects of firm size relat-of control variables that are related at least in part ing to the demand side of bribery activity, we usedto potential demand-side contaminants. At the two common indicators of firm size: number of em-country level, previous research has shown that ployees and dollar value of sales (Kimberly, 1976), asnational wealth is negatively related to corruption formulated by the WBES researchers.(Ades & DiTella; 1999; Nwabuzor, 2005; Wu, 2005).One explanation of this negative relationship is Analysis: Hierarchical Linear Modelingthat underpaid government workers may demandbribes to supplement their poor salaries (Nwabu- We were interested in the variance in local firm-zor, 2005). To segregate the effects of our indepen- level bribery activity explained by a number of both
11. 2007 Martin, Cullen, Johnson, and Parboteeah 1411country-level and firm-level predictors. Thus, our lyzed the effects of firm-level variables separatelyquestion mandated a multilevel modeling tech- within each country using the HLM procedure withnique in which the variance could be partitioned random effects. This means that the hypothesizedbetween the country-level and firm-level variables. predictors of bribery activity at the firm level (levelTo draw valid conclusions from our question, it 1) were based on deviation from local norms. Inwas essential that we evaluate the distinct country addition, centering our firm-level variables fromand firm effects on bribery activity separately, country-level means produced within-countrywithout discarding potentially critical variance slopes that were based on deviations from local(Hofmann, 1997). For these reasons, we employed norms. The level 2 hypotheses tested with randomhierarchical linear modeling (HLM) with restricted effects intercepts-as-outcomes models, in turn, pre-maximum-likelihood estimation (Bryk & Rauden- dicted differences in the country means of firm-bush, 1992). The HLM approach has been advo- level bribery, adjusting for within-country firm-cated for its ability to estimate within- and be- level effects and controls.tween-group variance simultaneously and toexamine “the influence of higher level units on RESULTSlower level outcomes while maintaining the appro-priate level of analysis” (Hofmann, 1997: 726). Table 1 shows the correlation matrix and de- Using HLM, we simultaneously estimated our scriptive statistics for the variables in the study atcountry- and firm-level parameters without sample both level 1 (firm) and level 2 (country). As noted,size distorting the results, as characteristically oc- we weighted the correlations by sample size to givecurs with ordinary least squares (OLS) methods. equal and proportionate weighting to the variousUnderlying the logic of HLM is the computation of nations. We attached country-level indicators toparameter estimates and standard errors by weight- individual firms to calculate correlation coeffi-ing group-level sample size by reliabilities at the cients both within and across levels of analysis.individual level (in this case, level 1) for the de- Because of the counterweighting, the correlationspendent variables within each group (level 2). The among level 2 variables are the same as those forestimates typically correspond closely to OLS esti- the 38 countries if estimated separately.mates, except that the level 2 standard errors avoid Table 2 presents the results for the three modelsthe deflation inherent in OLS. Since our hypothe- specified above. Model 1 shows the results of test-ses evaluated main and interactive effects of level 2 ing our main effects hypotheses at the country levelvariables on the country-mean level 1 outcome and at the firm level. Models 2 and 3 show the(bribery) adjusted for within-country level 1 pre- results of testing the moderation hypotheses. Sep-dictors, we used random effects intercept-as-out- arate models were necessary because the parametercomes models to test our hypotheses, consistently estimates for the main effects variables were notwith previous management research (Cullen et al., interpretable independent of their product terms.2004; Parboteeah & Cullen, 2003). We employed Indeed, once product terms are entered into anproduct terms to test for interactions of the cultural equation, the interaction consists of both the mainvariables with welfare socialism and political con- and product terms (Cohen et al., 2003).straints, respectively. We computed the variance explained by the total To analyze the effects of perceived financial con- model as well as at the various levels of analysisstraints, perceived competitive intensity, and our using techniques recommended by Bryk and Rau-firm-level controls, we centered the level 1 vari- denbush (1992: 19). The country-level variables ex-ables at the group mean (i.e., country). The pattern plained 36 percent of the between-country varianceof results was the same as that for uncentered data, for model 1, 32 percent for model 2, and 35 percentbut the results were stronger with centered data, for model 3. Following multilevel theoretical pre-suggesting better estimates for the level 1 group- scriptions (e.g., Bryk & Raudenbush, 1992), we alsocentered data (Hofmann & Gavin, 1998). Since in- estimated the total model-explained variance per-teraction effects using product terms were tested at centages, which were 54 percent for model 1, 55level 2, we followed the Bryk and Raudenbush percent for model 2, and 54 percent for model 3.(1992) and Cohen, Cohen, West, and Aiken (2003) Country-level results, adjusted for individualrecommendations to center data (level 2) at the firm-level differences, showed the presence or ab-grand mean when including interaction effects. sence of support for our hypotheses regarding cul-With the exception of the change in metrics, the tural and social predictors of local bribery activity.results were identical to those produced with stan- Hypothesis 1, involving the cultural value of andardized and unstandardized variables. achievement orientation, was not supported, as a It is of theoretical relevance to note that we ana- country’s level of achievement orientation did not
12. 1412 Academy of Management Journal December TABLE 1 Descriptive Statistics and Cross-Level Correlationsa, b Variable Mean s.d. 1 2 3 4 5 6 7 8 9 10 11 12 13 1. Bribery 8.71 7.54 (.86)Country level—Level 2 2. Achievement orientation 6.03 0.31 .13 (.72) 3. In-group collectivism 5.78 0.32 Ϫ.24 Ϫ.54 (.77) 4. Humane orientation 5.44 0.22 Ϫ.10 Ϫ.16 .25 (.88) 5. Welfare socialism 0.00 0.86 Ϫ.27 Ϫ.01 .15 .20 (.78) 6. Political constraints 0.62 0.23 Ϫ.24 Ϫ.29 .09 .01 .36Firm level—Level 1 7. Financial constraints 9.90 7.33 .14 .17 Ϫ.09 Ϫ.05 Ϫ.10 Ϫ.07 (.76) 8. Competitive intensity 2.33 0.67 .34 .26 Ϫ.21 Ϫ.15 Ϫ.07 Ϫ.25 .03Control 9. GDPc 11.00 0.88 Ϫ.22 Ϫ.13 .22 .23 .31 .36 Ϫ.05 Ϫ.1310. Manufacturing 0.29 0.46 .05 .02 Ϫ.01 Ϫ.11 Ϫ.04 Ϫ.07 .07 .03 Ϫ.0111. Services 0.44 0.50 Ϫ.10 Ϫ.01 Ϫ.05 .07 .16 .04 Ϫ.09 Ϫ.04 .08 Ϫ.5812. State ownership 6.96 23.52 Ϫ.03 Ϫ.10 .08 .05 .07 .04 Ϫ.04 Ϫ.06 .11 Ϫ.03 .0113. Number of employees 1.78 0.71 Ϫ.05 Ϫ.09 .02 .04 .10 .03 Ϫ.04 Ϫ.12 .08 Ϫ.15 .14 .2014. Sales revenues 3.02 2.66 .15 .14 Ϫ.04 Ϫ.05 Ϫ.18 Ϫ.27 .06 .13 Ϫ.11 .05 Ϫ.01 Ϫ.06 Ϫ.27 a n ϭ 3,769, level 1; n ϭ 38, level 2. Sampled countries were Albania, Argentina, Bolivia, Brazil, Canada, Colombia, Costa Rica, Ecuador,Egypt, El Salvador, France, Georgia, Germany, Guatemala, Hungary, India, Indonesia, Italy, Kazakhstan, Malaysia, Mexico, Namibia,Nigeria, Philippines, Poland, Portugal, the Russian Federation, Singapore, Slovenia, South Africa, Spain, Sweden, Turkey, the UnitedStates, the United Kingdom, Venezuela, Zambia, and Zimbabwe. We computed correlations by assigning country-level variables to eachorganization within a given country. To avoid considering a country with a larger sample size disproportionately, we counterweighted theindicators by sample size. Thus, the country-level correlations are equivalent to correlations based on the country-level sample size. b Correlations of .03 or greater are significant at p Ͻ .05. Correlations greater than .05 are significant at p Ͻ .01. c Mean and standard deviation are in billions of dollars.have a significant main effect on bribery activity, gest that the effects of cultural values on bribery arealthough the relationship was positive, as pre- not necessarily universal but are likely moderateddicted. For Hypothesis 2, we posited that lower by a country’s institutional context. We examinedlevels of in-group collectivism increase the preva- these relationships by testing the interaction effectslence of bribery activity. With a statistically signif- between the cultural values and bribery, as moder-icant estimate of –9.26 for in-group collectivism ated by the institutions of welfare socialism and(␥02j, p Ͻ .001), we found support for this hypothe- political constraints. These interactions producedsis, confirming that more individualistic societies strong and significant results and perhaps the mostare likely to have more local bribery activity. As interesting findings for this multilevel study ofstated in Hypothesis 3, we expected that a low bribery. Figures 1, 2, and 3 show plots of the inter-emphasis on the cultural value of a humane orien- action effects posited in the moderation hypothe-tation results in more bribery activity. Although ses. We plotted interactions using standardizedthis relationship was negative as predicted, the pa- scores for bribery activity and the independentrameter estimate was not statistically significant. variables. Thus, all variables could be plotted on Our hypotheses dealing with social institutions the same scale rather than individually on uniquefocused on two political elements, the extent of metrics. Plots show the effects of the culture vari-state welfare socialism and the extent of political ables at illustrative high (ϩ 1 s.d.) and low (– 1 s.d.)constraints on government. With regard to Hypoth- levels of the institutional moderators.esis 4, we found support for the premise that the Supporting Hypothesis 6a, the level of welfaregreater the extent of welfare socialism in an econ- socialism significantly impacts the relationship be-omy, the less prevalent local bribery is (␥04j ϭ tween national achievement orientation and brib-–1.92, p Ͻ .05). Hypothesis 5, regarding the effects ery activity (␥07j ϭ –3.60, p Ͻ .01). This significantof political constraints, was also supported, dem- interaction effect shows that under conditions ofonstrating that stronger political constraints in a lower welfare socialism, the cultural value of ansociety reduce local bribery (␥05j ϭ –5.13, p Ͻ .10). achievement orientation becomes a strong predic-More subtle interpretations of anomie theory sug- tor of bribery activity (see Figure 1). Conversely,
13. 2007 Martin, Cullen, Johnson, and Parboteeah 1413 TABLE 2 Results for HLM Analysis of Firm-Level Bribery Activitya Parameter Estimates Model 1 Model 2 Model 3 Hypothesized Variables Sign b s.e. b s.e. b s.e.Country-level hypotheses—Level 2 National culture Achievement orientation (␥01j) ϩ 3.06 2.76 1.80 2.88 3.95† 2.73 In-group collectivism (␥02j) Ϫ Ϫ9.26*** 2.59 Ϫ9.65*** 2.57 Ϫ9.90*** 2.53 Humane orientation (␥03j) Ϫ Ϫ2.74 3.28 Ϫ10.83* 4.61 Ϫ5.43† 3.66 Social institutions Welfare socialism (␥04j) Ϫ Ϫ1.92* 0.95 Ϫ1.76* 0.90 Ϫ1.58* 0.93 Political constraints (␥05j) Ϫ Ϫ5.13† 3.68 Ϫ6.16* 3.43 Ϫ7.79* 4.11 Interaction effects Achievement orientation ϫ welfare socialism (␥07j) Ϫ Ϫ3.60** 1.39 In-group collectivism ϫ welfare socialism (␥08j) Ϫ 2.25* 0.94 Humane orientation ϫ welfare socialism (␥09j) Ϫ Ϫ2.19† 1.38 Achievement orientation ϫ political constraints (␥10j) Ϫ Ϫ1.64* 0.89 In-group collectivism ϫ political constraints (␥11j) Ϫ 2.28* 1.04 Humane orientation ϫ political constraints (␥12j) Ϫ Ϫ0.87 0.84Firm-level hypotheses—Level 1 Financial constraints (␤1j) ϩ 0.11*** 0.02 0.12*** 0.02 0.12*** 0.02 Competitive intensity (␤2j) ϩ 0.39* 0.18 0.39* 0.18 0.39* 0.18Control GDP (␥06j) Ϫ1.72* 0.92 Ϫ0.72 0.96 Ϫ0.85 1.00 Manufacturing (␤3j) 0.07 0.39 0.12 0.39 0.14 0.39 Services (␤4j) Ϫ0.14 0.31 Ϫ0.05 0.31 Ϫ0.06 0.31 State ownership (␤5j) Ϫ0.02*** 0.01 Ϫ0.02*** 0.01 Ϫ0.02*** 0.01 Number of employees (␤6j) Ϫ0.56** 0.21 Ϫ0.57** 0.21 Ϫ0.57** 0.21 Sales revenues (␤7j) 0.11* 0.06 0.12† 0.39 0.11† 0.06 a Level 1 n ϭ 3,769; level 2 n ϭ 38. GDP was log-transformed prior to analysis. † p Ͻ .10 * p Ͻ .05 ** p Ͻ .01 *** p Ͻ .001 FIGURE 1 Achievement Orientation at Selected Levels of Welfare Socialism and Political Constraintsa a Values for bribery and achievement orientation are standardized.when a country’s polity has higher levels of welfare The relationships of bribery activity with the cul-socialism, an achievement-oriented culture re- tural values of in-group collectivism (␥08j ϭ 2.25,duces bribery activity. p Ͻ .05) and a humane orientation (␥09j ϭ –2.19,
14. 1414 Academy of Management Journal December FIGURE 2 In-Group Collectivism at Selected Levels of Welfare Socialism and Political Constraintsa a Values for bribery and in-group collectivism are standardized. FIGURE 3 Humane Orientation at Selected Levels of Welfare Socialisma a Values for bribery and humane orientation are standardized.p Ͻ .10) had significant interactions with the extent (i.e., bribery-inhibiting) effects of in-group collec-of welfare socialism. Contrary to Hypothesis 6b, the tivism (see Figure 2). Finally, the prediction thatnegative effects of in-group collectivism on bribery political stability moderates the relationship be-were muted as the degree of welfare socialism in- tween the cultural value of a humane orientationcreased (see Figure 2). Perhaps we see here an and bribery was not supported.offsetting of loyalty, with loyalty to proximal In contrast to main effects, the interaction effectsgroups being stronger than that to society as a elaborated the conditions under which the culturalwhole. However, supporting Hypothesis 6c, the variables behaved as anticipated in anomie theory.bribery-activity-reducing effects of a humane orien- In keeping with a more complex interactive view oftation were enhanced at higher levels of welfare anomie theory, as welfare socialism and the stabil-socialism. The steeper slope for high welfare social- ity gained through political constraints increase,ism in Figure 3 depicts this relationship. the bribery-predicting effects of these cultural vari- The results for Hypotheses 7a and 7b, regarding ables were inflated or depleted.the moderating effects of political constraints, fol- The results shown in Table 2 indicate support forlowed a pattern similar to those of welfare social- our firm-level hypotheses. Hypothesis 8 predictsism. Consistently with Hypothesis 7a, the negative that perceived financial constraints on a firm haveinteraction between an achievement orientation a significant effect on the likelihood of the firm’sand political constraints (␥10j ϭ –1.64, p Ͻ .05) engaging in bribery activity. The data supportedshowed that bribery activity was negatively related this argument, with firm financial constraints hav-to an achievement orientation under conditions of ing a positive, significant effect on bribery activityhigher political constraints and positively related (␤1j ϭ 0.11, p Ͻ .001). Hypothesis 9 was supported,under lower political constraints (see Figure 1). demonstrating that the competitive intensity per-Contrary to Hypothesis 7b, the significant interac- ceived by firms’ managers is likely to increase brib-tion of in-group collectivism with political con- ery activity (␤2j ϭ 0.39, p Ͻ .05). The data suggeststraints (␥11j ϭ 2.28, p Ͻ .05) showed that greater that more perceived strategic group rivalry and,political constraints reduced the generally negative ultimately, the extent to which firms’ decision
15. 2007 Martin, Cullen, Johnson, and Parboteeah 1415makers believe that they must compete for re- impact of culture on bribery. These moderating re-sources, likely increase bribery. In sum, the results lationships refine and advance the theoretical as-provide preliminary evidence for the powerful ef- sertions of anomie theory. In particular, our resultsfects of anomie generated at the firm level as well as specify instances in which national cultural effectsat the country level. on bribery activity may be either muted or en- With regard to our control variables, GDP was a hanced by the extent to which two mechanisms,statistically significant (␥06j ϭ –1.72, p Ͻ .05) pre- welfare socialism and political constraints, aredictor of bribery activity in model 1. This effect, present in a society. We believe that our findings,however, diminished in the more complex models. grounded in the larger framework of anomie theory,These results suggest that although more affluent represent significant extensions of the theoreticalcountries have less bribery, various combinations domain.of cultural values and institutional context might Our findings emphasize that higher levels of wel-offset this effect. Industry was not a significant fare socialism and political constraints offset thedeterminant of bribery. Although we presented no power of those cultural values hypothesized byformal hypotheses considering the effect of a firm’s anomie theory to make goal achievement more im-industry on bribery activity, we suspected the in- portant than the legitimacy of the means used tofluence of the country-level variables would over- achieve the goals. These findings are independentwhelm any lower-level industry effects. The per- of national wealth, which has often been assumedcentage of state or government ownership of a firm to be the major driver of bribery. Without an insti-was significantly, inversely related to bribery activ- tutional framework that mutes the effects of ano-ity, as we suspected it would be, and in keeping mie-driving cultural values, our findings suggest,with past research (␤5j ϭ – 0.02, p Ͻ .001). Firm size firms likely engage in more bribery to achieve theirmeasured as number of employees was signifi- goals.cantly and negatively related to bribery (␤6j ϭ Our firm-level sample consisted largely of small– 0.56, p Ͻ .01). Size indicated by sales revenues, to medium-sized firms, as one would expect, givenhowever, was a positive predictor (␤7j ϭ 0.11, p Ͻ that most firms in the world are small to medium-.05). sized. However, as we noted above, managers in larger firms may be less dependent on the supports provided by welfare socialism, a condition that DISCUSSION AND IMPLICATIONS would reduce its ability to limit bribery. Although The advantages of multilevel theory and methods we did not formally hypothesize such a reduction,allowed our study to span a variety of national we conducted an ex post facto analysis of this pos-contexts and nearly 4,000 firms from 38 countries. sibility by dividing the sample into small and largeIn the spirit of enhancing multilevel theory and firms and then examining the effects of welfareresearch, we drew from classic sociological theory socialism on bribery for these subgroups. Not sur-and extended it to a multilevel framework testing prisingly, welfare socialism had a significantlyhypotheses relating broad country- and firm-level more pronounced effect in reducing bribery forvariables to managerial reports of firm bribery. We smaller firms, although the direction of the effectadvance anomie theory, furthermore, by applying remained negative for both groups. These resultsits central premises to firm-level phenomena in support the liability of size argument that small andaddition to cultural and societal factors. Our mul- medium-sized firms are more vulnerable to com-tilevel framework lends theoretical support and petitive forces and perhaps face more pressure toprovides empirical evidence for anomic conditions deviate when their polity fails to provide adequateperpetuated at both the societal and the firm levels. security nets. This conclusion may suggest futureTo our knowledge, our theoretical extension of an- research opportunities, given that the majority ofomie to the firm level is a novel contribution, ad- the world’s firms are small to medium-sized andvancing the anomie theoretical framework beyond that these firms are instrumental in their nations’the more traditionally studied societal conditions. GDPs and economic growth (Beck, Demirgu¸-Kunt, ¨cIn addition, our results provide support for the & Levine, 2003).influence on bribery activity of cultural values, in- According to anomie theory, more individualis-cluding an achievement orientation, collectivism, tic countries instill stronger drives for success atand a humane orientation, and the complexities of the expense of the collective and therefore havetheir interactions with polities. more societal actors that choose deviance or illegit- Specifically, both the extent of welfare socialism imate routes to success. Supporting this position,and the degree of political constraints present in a we found that collectivism reduced bribery. How-society have important moderating effects on the ever, one paradoxical finding was that the institu-
16. 1416 Academy of Management Journal Decembertional mechanisms designed to make competition part of their local competitors, who may also usemore equitable and predictable (political con- bribery to gain strategic advantages.straints) and failure less catastrophic (welfare so- Our results provide a clearer picture of briberycialism) muted the generally deviance-reducing ef- evolving from the supply side, which may benefitfects of collectivism. One possible explanation is local strategic decision making. When grapplingthat the society-wide benefits that accrue from na- with daily operations, for example, firms mighttional political systems may counter loyalties to better evaluate their domestic markets in view ofmore proximal groups in collectivist cultures. cultural and institutional forces that may impede In our extension of anomie theory to the firm efforts to conduct business ethically. Top-levellevel, findings suggest that perceived pressures in a firm decision makers are also better prepared tolocal environment produce anomic strain and in- mitigate employees’ offering or supplying bribescrease bribery activity. Specifically, the data sup- when the decision makers are aware of contextualported our notion that managerial perceptions of combinations that promote such behavior. Contri-financial constraints increase the supplying of butions of knowledge in this domain allow localbribes to public officials who might help “get decision makers acting on behalf of resource-things done.” Also as hypothesized, perceived constrained firms to make insightful strategic deci-competitive intensity significantly and positively sions based on informed and validated criteria toimpacted the likelihood of a firm’s engaging in achieve optimal outcomes, even in highly compet-bribery. In the logic of anomie theory, the greater itive environments.the perceived competitive intensity, conceptual-ized in terms of the important strategic groups rel- Conclusions and Future Researchevant to a firm, the greater the likelihood of thefirm’s resorting to deviant means to compete. Our research objective was to cross levels of anal- These two effects substantiate our assertions that ysis to juxtapose the underlying tenets of anomiefirms likely supply bribes as a strategic response to theory with reports from individual firms regardinglocal competitive and constraining conditions. their experience with bribery. The broader im-Specifically, to achieve competitive advantage in plications of our multilevel analysis advance andanomic situations, firms’ managers are more likely refine the foundational premises of anomie theoryto choose deviant means (i.e., bribery) to create articulated by Durkheim (1897/1966) and lateropportunities and remove barriers to their success. Merton (1968) and Messner and Rosenfeld (2001),Importantly, our methodology allows us to observe illustrating the cultural, institutional, and organi-these firm-level effects within countries, evidenc- zational drivers that set the stage for firm-level de-ing that the positive effects of competition and fi- viance. Ultimately, societal pressures are so greatnancial constraints on bribery occur relative to lo- that they propagate behaviors defying hypernorms,cal norms. That is, regardless of the degree to which some of civilizations’ most deeply held beliefs. An-bribery is a common practice in a country, in keep- omie provides a theoretical explanation for why aing with anomie theory, the unique pressures firms behavior like bribery, which has been universallyface increase their propensity to bribe. denounced as wrong, continues to thrive in firms worldwide. This theoretical framework allowed us to understand why behaviors such as bribery differ by country. Finally, anomie theory has proven in-Managerial Implications sightful with regard to firm-level phenomena as The findings of our analyses inform firms and well. Our extended analyses of firm financial con-their decision makers on many fronts. The country- straints and competitive intensity allowed us tolevel conditions found to be significant drivers of broaden the tenets of anomie theory to the organi-bribery are characteristic of achievement-oriented, zation level, ultimately advancing theory. The re-individualistic (as opposed to collectivist) societies sults signify the potential value of applying ourwith a low emphasis on humane values. Our results broadly based framework as a cross-level explana-may inform company boards of directors about the tory backdrop in global managerial research.potential for bribery activity by their firms, helping Our analysis was limited by the sample size of 38facilitate company-wide compliance with regard to countries, which restricted the number of level 2bribery behaviors. By understanding local cultural variables we could include as controls owing toconditions and institutional forces, firms may diag- relatively low statistical power and the risk of typenose a priori the potential pressure to bribe they are 2 error. Beyond the theoretically compelling andlikely to face in their home countries. What is more, unique combination of variables included in ourfirms might better anticipate such behavior on the analysis, a number of nation-level controls could
17. 2007 Martin, Cullen, Johnson, and Parboteeah 1417have been included. For example, in considering mists’ tendency to only look at the demand side, itinstitutions related to polities, the extent of the rule is unlikely that deviance occurs only on one side.of law and the degree of economic freedom present Certainly, both firms and government officials canin a country have been examined as nation-level use bribery to serve their self-interested ends, war-factors involved in corruption (Nwabuzor, 2005). ranting balanced examination.Although these variables have conceptual (favor- Our analysis provides insight into the organiza-able institutional conditions for business) and em- tional, cultural, and institutional drivers of briberypirical (correlations greater than .5) overlap with activity among local firms in their home countries.the Henisz measure of political constraints, we did Accordingly, we are better equipped to understandexamine their effects in exploratory analyses. En- how bribery can occur under certain combinationssuring confidence in the strength of our models, the of local conditions. In light of the conclusions de-presence of these added controls had minimal ef- rived from our cross-level investigation, we hopefects on our results, reducing the significance level that broad-based anomie theoretical perspectivesof one interaction to slightly above .1 because of the will continue to explain elusive and troublesomedecrease in statistical power. Consistently with phenomena impacting firms, their stakeholders,previous findings, both had negative relationships and society in general.with bribery activity. Additional social institutionscould have been examined as well. Specifically, REFERENCESnonstate welfare nets such as family or religionmay moderate the effects of national culture on Ades, A., & Di Tella, R. 1999. Rents, competition, and corruption. 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21. 2007 Martin, Cullen, Johnson, and Parboteeah 1421 b. To get licenses and permits 2. Benefit levels in the form of pensions as percentage of c. To deal with taxes and tax collection GDP. d. To gain government contracts 3. Overall government expenditure as percentage of e. When dealing with customs/imports GDP.National Culture Variables (Source: GLOBE Study) Political Constraints (Source: Henisz Political Con- Unless otherwise is indicated, the response scale for straint Index)all items ranged from 1, ϭ “strongly agree,” to 7, 1. Number of independent branches of government (ex-“strongly disagree.” ecutive, upper/lower legislative, judiciary, subfederal Achievement Orientation (␣ ϭ .72) institutions) with veto power over policy change. 2. Extent of alignment across branches of government.1. I believe that teen-aged students should be encour- 3. Extent of preference heterogeneity within each legis- aged to strive for continuously improved perfor- lative branch. mance. (reverse-coded).2. In this society, major rewards are based on only per- Firm-Level Variables (Source: World Bank World Busi- formance effectiveness. ness Environment Survey)3. In this organization, employees should be encouraged to strive for continuously improved performance. (re- Managerial Assessment of Financial Constraints (␣ ϭ verse-coded). .76)4. I believe that people should set challenging goals for “Please judge how problematic these different financ- themselves. ing issues are for the operation and growth of your busi- ness.” The response scale for these items ranged from 1,In-Group Collectivism (␣ ϭ .77) “no obstacle,” to 4, “major obstacle.”1. In this society, children should take pride in the in- 1. Collateral requirements of banks/financial institu- dividual accomplishments of their parents. (reverse- tions. coded). 2. High interest rates.2. In this society, parents should take pride in the indi- 3. Banks lack money to lend. vidual accomplishments of their children. (reverse- 4. Access to non bank equity/investors/partners. coded) 5. Access to lease finance for equipment.3. In this organization, group members should take pride 6. Inadequate credit/financial information on customers. in the individual accomplishments of their group. 7. Financing from retained earnings. (reverse-coded)4. In this organization, group managers should take pride in the individual accomplishments of group Managerial Assessment of Competitive Intensity members. “Regarding your firm’s major product line, how many competitors do you face in your markets?” Responses to Humane Orientation (␣ ϭ .88) this item were categorical. The following four items were all reverse-coded. Control Variables1. In this society, people should be encouraged to be GDP (Source: United Nations Human Development Re- “very concerned about others”/“not at all concerned port) about others.” Gross domestic product in U.S. dollars.2. In this society people should be encouraged to be “very sensitive toward others”/“not at all sensitive Manufacturing (Source: World Bank World Business toward others.” Environment Survey)3. In this organization, people should be encouraged to Dummy variable for firms in manufacturing industries. be “very concerned about others”/“not at all con- Services (Source: WBES) cerned about others.” Dummy variable for firms in services industries.4. In this organization people should be encouraged to be “very sensitive toward others”/“not at all sensitive Government Ownership (Source: WBES) toward others.” Percentage of state ownership.Social Institution Variables Number of Employees (Source: WBES) Welfare Socialism (␣ ϭ .78. Sources: International La- 1. Number of full-time employees.bour Organization and United Nations Human Develop- 2. Number of part-time employees.ment Report) Sales Revenues (Source: WBES)1. Public social security expenditure as percentage of Dollar value of sales (categorical responses, adjusted to gross domestic product (GDP). U.S. dollars).
22. 1422 Academy of Management Journal DecemberKelly D. Martin (firstname.lastname@example.org) is Jean L. Johnson (email@example.com) is the Gardner O.an assistant professor of marketing at Colorado State Hart Distinguished Professor of Marketing at Washing-University. She received her Ph.D. from Washington ton State University. She received her Ph.D. from theState University. Her research interests involve market- University of Nebraska. Her research focuses on mar-ing strategy with ethical implications, interfirm relation- keting strategy, interfirm relationships, and capabilitiesships, the role of marketing in society, and the effects of and learning in firms.institutions, social norms, and culture on organizations. K. Praveen Parboteeah (firstname.lastname@example.org) is an associateJohn B. Cullen (email@example.com) is a professor of man- professor of management at the University of Wisconsin–agement at Washington State University. He received his Whitewater. He received his Ph.D. in international manage-Ph.D. from Columbia University. His major research in- ment from Washington State University. His research inter-terests include the effects of social institutions and na- ests include the development of alternative cross-leveltional culture on ethical outcomes and work values, the models of national culture to explain cross-national differ-management of trust and commitment in international stra- ences in individual behaviors. He is also interested in ethics,tegic alliances, ethical climates in multinational organiza- ethical climates, cross-national religiosity, and technologytions, and the dynamics of organizational structure. and innovation management issues.