IDEAS home Printed from https://ideas.repec.org/a/eee/worbus/v50y2015i4p826-837.html
   My bibliography  Save this article

Arbitrariness of corruption and foreign affiliate performance: A resource dependence perspective

Author

Listed:
  • Petrou, Andreas P.

Abstract

Adopting a resource dependence viewpoint, this study investigates how the arbitrariness of corruption in a host country affects subsidiary performance. Analysis of bank foreign affiliates in 37 host countries shows that the negative effect of arbitrariness on affiliate performance is positively moderated by the strength of the sub-unit's corporate link, and the average number of expatriate managers appointed at the sub-unit. This study extends the literature on corruption by exploring a subtle but damaging dimension for foreign entrants and provides cues to managers for the proactive measures to take when they are likely to experience the arbitrariness of corruption.

Suggested Citation

  • Petrou, Andreas P., 2015. "Arbitrariness of corruption and foreign affiliate performance: A resource dependence perspective," Journal of World Business, Elsevier, vol. 50(4), pages 826-837.
    • Handle: RePEc:eee:worbus:v:50:y:2015:i:4:p:826-837
    DOI: 10.1016/j.jwb.2015.04.004
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1090951615000243
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jwb.2015.04.004?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Utz Weitzel & Sjors Berns, 2006. "Cross-border takeovers, corruption, and related aspects of governance," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 37(6), pages 786-806, November.
    2. Dikova, Desislava, 2009. "Performance of foreign subsidiaries: Does psychic distance matter?," International Business Review, Elsevier, vol. 18(1), pages 38-49, February.
    3. Jakob Svensson, 2003. "Who Must Pay Bribes and How Much? Evidence from a Cross Section of Firms," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(1), pages 207-230.
    4. Jonathan P. Doh & Thomas Lawton & Tazeeb Rajwani, 2012. "Advancing Nonmarket Strategy Research : Institutional Perspectives in a Changing World," Post-Print hal-02276718, HAL.
    5. B Sebastian Reiche & Anne-Wil Harzing & Maria L Kraimer, 2009. "The role of international assignees' social capital in creating inter-unit intellectual capital: A cross-level model," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 40(3), pages 509-526, April.
    6. Kendall Roth & Allen J Morrison, 1992. "Implementing Global Strategy: Characteristics of Global Subsidiary Mandates," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 23(4), pages 715-735, December.
    7. Hellman, Joel S. & Jones, Geraint & Kaufmann, Daniel & Schankerman, Mark, 2000. "Measuring governance, corruption, and State capture - how firms and bureaucrats shape the business environment in transition economies," Policy Research Working Paper Series 2312, The World Bank.
    8. De Haas, Ralph & Naaborg, Ilko, 2006. "Foreign banks in transition countries. To whom do they lend and how are they financed?," MPRA Paper 6320, University Library of Munich, Germany.
    9. Anil K. Gupta & Vijay Govindarajan, 2000. "Knowledge flows within multinational corporations," Strategic Management Journal, Wiley Blackwell, vol. 21(4), pages 473-496, April.
    10. Peter Rodriguez & Donald S Siegel & Amy Hillman & Lorraine Eden, 2006. "Three lenses on the multinational enterprise: politics, corruption, and corporate social responsibility," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 37(6), pages 733-746, November.
    11. Javorcik, Beata S. & Wei, Shang-Jin, 2009. "Corruption and cross-border investment in emerging markets: Firm-level evidence," Journal of International Money and Finance, Elsevier, vol. 28(4), pages 605-624, June.
    12. Yves Doz & C K Prahalad, 1984. "Patterns of Strategic Control Within Multinational Corporations," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 15(2), pages 55-72, June.
    13. Pagano, Michael S., 2008. "Credit, cronyism, and control: Evidence from the Americas," Journal of International Money and Finance, Elsevier, vol. 27(3), pages 387-410, April.
    14. Demirbag, Mehmet & Glaister, Keith W. & Tatoglu, Ekrem, 2007. "Institutional and transaction cost influences on MNEs' ownership strategies of their affiliates: Evidence from an emerging market," Journal of World Business, Elsevier, vol. 42(4), pages 418-434, December.
    15. Stijn Claessens & Neeltje Van Horen, 2014. "Foreign Banks: Trends and Impact," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 46(s1), pages 295-326, February.
    16. Luo, Yadong, 2005. "Toward coopetition within a multinational enterprise: a perspective from foreign subsidiaries," Journal of World Business, Elsevier, vol. 40(1), pages 71-90, February.
    17. Rajwani, Tazeeb & Liedong, Tahiru Azaaviele, 2015. "Political activity and firm performance within nonmarket research: A review and international comparative assessment," Journal of World Business, Elsevier, vol. 50(2), pages 273-283.
    18. Bruce Kogut & Harbir Singh, 1988. "The Effect of National Culture on the Choice of Entry Mode," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 19(3), pages 411-432, September.
    19. Shang-Jin Wei, 1997. "Why is Corruption So Much More Taxing Than Tax? Arbitrariness Kills," NBER Working Papers 6255, National Bureau of Economic Research, Inc.
    20. Nell, Phillip C. & Puck, Jonas & Heidenreich, Stefan, 2015. "Strictly limited choice or agency? Institutional duality, legitimacy, and subsidiaries’ political strategies," Journal of World Business, Elsevier, vol. 50(2), pages 302-311.
    21. Petrou, Andreas P. & Thanos, Ioannis C., 2014. "The “grabbing hand” or the “helping hand” view of corruption: Evidence from bank foreign market entries," Journal of World Business, Elsevier, vol. 49(3), pages 444-454.
    22. Park, Junghee, 2012. "Corruption, soundness of the banking sector, and economic growth: A cross-country study," Journal of International Money and Finance, Elsevier, vol. 31(5), pages 907-929.
    23. Nathan M Jensen & Quan Li & Aminur Rahman, 2010. "Understanding corruption and firm responses in cross-national firm-level surveys," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 41(9), pages 1481-1504, December.
    24. Shige Makino & Chung-Ming Lau & Rhy-Song Yeh, 2002. "Asset-Exploitation Versus Asset-Seeking: Implications for Location Choice of Foreign Direct Investment from Newly Industrialized Economies," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 33(3), pages 403-421, September.
    25. Klaus Uhlenbruck & Peter Rodriguez & Jonathan Doh & Lorraine Eden, 2006. "The Impact of Corruption on Entry Strategy: Evidence from Telecommunication Projects in Emerging Economies," Organization Science, INFORMS, vol. 17(3), pages 402-414, June.
    26. Julian M Birkinshaw & Allen J Morrison, 1995. "Configurations of Strategy and Structure in Subsidiaries of Multinational Structure," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 26(4), pages 729-753, December.
    27. Luo, Yadong & Zhao, Hongxin, 2004. "Corporate link and competitive strategy in multinational enterprises: a perspective from subsidiaries seeking host market penetration," Journal of International Management, Elsevier, vol. 10(1), pages 77-105.
    28. Seung-Hyun Lee & Kyeungrae Oh & Lorraine Eden, 2010. "Why Do Firms Bribe?," Management International Review, Springer, vol. 50(6), pages 775-796, December.
    29. Shang-Jin Wei, 2000. "How Taxing is Corruption on International Investors?," The Review of Economics and Statistics, MIT Press, vol. 82(1), pages 1-11, February.
    30. Ingmar Björkman & Wilhelm Barner-Rasmussen & Li Li, 2004. "Managing knowledge transfer in MNCs: the impact of headquarters control mechanisms," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 35(5), pages 443-455, September.
    31. Duanmu, Jing-Lin, 2011. "The effect of corruption distance and market orientation on the ownership choice of MNEs: Evidence from China," Journal of International Management, Elsevier, vol. 17(2), pages 162-174, June.
    32. Pranab Bardhan, 1997. "Corruption and Development: A Review of Issues," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1320-1346, September.
    33. Robert Salomon & Zheying Wu, 2012. "Institutional distance and local isomorphism strategy," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 43(4), pages 343-367, May.
    34. Phillip M Rosenzweig & Nitin Nohria, 1994. "Influences on Human Resource Management Practices in Multinational Corporations," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 25(2), pages 229-251, June.
    35. Petrou, Andreas, 2007. "Multinational banks from developing versus developed countries: Competing in the same arena?," Journal of International Management, Elsevier, vol. 13(3), pages 376-397, September.
    36. Klaus E. Meyer & Saul Estrin & Sumon Kumar Bhaumik & Mike W. Peng, 2009. "Institutions, resources, and entry strategies in emerging economies," Strategic Management Journal, Wiley Blackwell, vol. 30(1), pages 61-80, January.
    37. Amy J Hillman & William P Wan, 2005. "The determinants of MNE subsidiaries' political strategies: evidence of institutional duality," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 36(3), pages 322-340, May.
    38. Pei Sun & Kamel Mellahi & Eric Thun, 2010. "The dynamic value of MNE political embeddedness: The case of the Chinese automobile industry," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 41(7), pages 1161-1182, September.
    39. Yulin Fang & Guo‐Liang Frank Jiang & Shige Makino & Paul W. Beamish, 2010. "Multinational Firm Knowledge, Use of Expatriates, and Foreign Subsidiary Performance," Journal of Management Studies, Wiley Blackwell, vol. 47(1), pages 27-54, January.
    40. Y Luo, 2003. "Market-seeking MNEs in an emerging market: How parent–subsidiary links shape overseas success," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 34(3), pages 290-309, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Cao, Mingchun & Alon, Ilan, 2021. "Overcoming the liability of foreignness – A new perspective on Chinese MNCs," Journal of Business Research, Elsevier, vol. 128(C), pages 611-626.
    2. Samuel Kwesi Dunyo & Samuel Amponsah Odei, 2023. "Firm-Level Innovations in an Emerging Economy: Do Perceived Policy Instability and Legal Institutional Conditions Matter?," Sustainability, MDPI, vol. 15(2), pages 1-24, January.
    3. Gundelach, Henrik & Nielsen, Bo Bernhard, 2023. "Subsidiary performance measurement in international business research: A systematic review and future directions," Journal of Business Research, Elsevier, vol. 169(C).
    4. Peter Rodgers & Peter Stokes & Shlomo Tarba & Zaheer Khan, 2019. "The Role of Non-market Strategies in Establishing Legitimacy: The Case of Service MNEs in Emerging Economies," Management International Review, Springer, vol. 59(4), pages 515-540, August.
    5. Bahoo, Salman & Alon, Ilan & Paltrinieri, Andrea, 2020. "Corruption in international business: A review and research agenda," International Business Review, Elsevier, vol. 29(4).
    6. Belaounia, Samia & Tao, Ran & Zhao, Hong, 2024. "Director foreign experience: Geographic specificity and value implication," International Review of Financial Analysis, Elsevier, vol. 91(C).
    7. Wu, Yan & Yang, Yong & Mickiewicz, Tomasz, 2023. "Corruption, the digital sectors, and the profitability of foreign subsidiaries in emerging markets," Journal of Business Research, Elsevier, vol. 161(C).
    8. Kim, Huong Trang & Papanastassiou, Marina & Nguyen, Quang, 2017. "Multinationals and the impact of corruption on financial derivatives use and firm value: Evidence from East Asia," Journal of Multinational Financial Management, Elsevier, vol. 39(C), pages 39-59.
    9. Michael A. Sartor & Paul W. Beamish, 2020. "Integration-oriented strategies, host market corruption and the likelihood of foreign subsidiary exit from emerging markets," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 51(3), pages 414-431, April.
    10. Valentino, Alfredo & Mayrhofer, Ulrike & Caroli, Matteo, 2022. "Internal and external drivers of anticorruption policies in multinationals," International Business Review, Elsevier, vol. 31(6).
    11. Michael A. Sartor & Paul W. Beamish, 2020. "Private Sector Corruption, Public Sector Corruption and the Organizational Structure of Foreign Subsidiaries," Journal of Business Ethics, Springer, vol. 167(4), pages 725-744, December.
    12. Xu, Kai & Hitt, Michael A. & Brock, David & Pisano, Vincenzo & Huang, Lulu S.R., 2021. "Country institutional environments and international strategy: A review and analysis of the research," Journal of International Management, Elsevier, vol. 27(1).
    13. De Beule, Filip & Klein, Martin & Verwaal, Ernst, 2020. "Institutional quality and inclusive strategies at the base of the pyramid," Journal of World Business, Elsevier, vol. 55(5).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Petrou, Andreas P. & Thanos, Ioannis C., 2014. "The “grabbing hand” or the “helping hand” view of corruption: Evidence from bank foreign market entries," Journal of World Business, Elsevier, vol. 49(3), pages 444-454.
    2. Hitt, Michael A. & Li, Dan & Xu, Kai, 2016. "International strategy: From local to global and beyond," Journal of World Business, Elsevier, vol. 51(1), pages 58-73.
    3. Lee, Jeoung Yul & Jiménez, Alfredo & Choi, Seong-jin & Choi, Yun Hyeong, 2022. "Ideological polarization and corporate lobbying activity: The contingent impact of corruption distance," Journal of Business Research, Elsevier, vol. 141(C), pages 448-461.
    4. Michael A Sartor & Paul W Beamish, 2018. "Host market government corruption and the equity-based foreign entry strategies of multinational enterprises," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 49(3), pages 346-370, April.
    5. Cuervo-Cazurra, Alvaro, 2016. "Corruption in international business," Journal of World Business, Elsevier, vol. 51(1), pages 35-49.
    6. Yadong Luo & Huan Zhang & Juan Bu, 2019. "Developed country MNEs investing in developing economies: Progress and prospect," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 50(4), pages 633-667, June.
    7. Klaus E. Meyer & Chengguang Li & Andreas P. J. Schotter, 0. "Managing the MNE subsidiary: Advancing a multi-level and dynamic research agenda," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 0, pages 1-39.
    8. Michailova, Snejina & Mustaffa, Zaidah, 2012. "Subsidiary knowledge flows in multinational corporations: Research accomplishments, gaps, and opportunities," Journal of World Business, Elsevier, vol. 47(3), pages 383-396.
    9. Rekha Rao-Nicholson & Liudmyla Svystunova, 2020. "Assessing the Role of Host Country Human Rights Protection on Multinational Enterprises’ Choice of Investment Strategy," Management International Review, Springer, vol. 60(2), pages 177-209, April.
    10. Yi, Jingtao & Teng, Da & Meng, Shuang, 2018. "Foreign ownership and bribery: Agency and institutional perspectives," International Business Review, Elsevier, vol. 27(1), pages 34-45.
    11. Klaus E. Meyer & Chengguang Li & Andreas P. J. Schotter, 2020. "Managing the MNE subsidiary: Advancing a multi-level and dynamic research agenda," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 51(4), pages 538-576, June.
    12. 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.
    13. Gossel, Sean Joss, 2018. "FDI, democracy and corruption in Sub-Saharan Africa," Journal of Policy Modeling, Elsevier, vol. 40(4), pages 647-662.
    14. Cao, Mingchun & Alon, Ilan, 2021. "Overcoming the liability of foreignness – A new perspective on Chinese MNCs," Journal of Business Research, Elsevier, vol. 128(C), pages 611-626.
    15. Wu, Tao & Delios, Andrew & Chen, Zhaowei & Wang, Xin, 2023. "Rethinking corruption in international business: An empirical review," Journal of World Business, Elsevier, vol. 58(2).
    16. Jonas Puck & Markus K. Hödl & Igor Filatotchev & Hans-Georg Wolff & Benjamin Bader, 2016. "Ownership mode, cultural distance, and the extent of parent firms’ strategic control over subsidiaries in the PRC," Asia Pacific Journal of Management, Springer, vol. 33(4), pages 1075-1105, December.
    17. Shantanu Banerjee & Sunil Venaik, 2018. "The Effect of Corporate Political Activity on MNC Subsidiary Legitimacy: An Institutional Perspective," Management International Review, Springer, vol. 58(5), pages 813-844, October.
    18. White, George O. & Boddewyn, Jean J. & Galang, Roberto Martin N., 2015. "Legal system contingencies as determinants of political tie intensity by wholly owned foreign subsidiaries: Insights from the Philippines," Journal of World Business, Elsevier, vol. 50(2), pages 342-356.
    19. Rodolphe Durand & Robert M. Grant & Tammy L. Madsen & Sinziana Dorobantu & Aseem Kaul & Bennet Zelner, 2017. "Nonmarket strategy research through the lens of new institutional economics: An integrative review and future directions," Strategic Management Journal, Wiley Blackwell, vol. 38(1), pages 114-140, January.
    20. Mehmet Demirbag & Ekrem Tatoglu & Keith W. Glaister, 2010. "Institutional and Transaction Cost Influences on Partnership Structure of Foreign Affiliates," Management International Review, Springer, vol. 50(6), pages 709-745, December.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:worbus:v:50:y:2015:i:4:p:826-837. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/wps/find/journaldescription.cws_home/620401/description#description .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.