Corruption and the role of information
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Corruption and the role of information Cassandra E DiRienzo1, Jayoti Das1, Kathryn T Cort2 and John Burbridge Jr1 1 Koury Business Center, Elon University, Elon, USA; 2School of Business and Economics, North Carolina A & T State University, Greensboro, USA
Correspondence: Dr Cassandra E DiRienzo, Koury Business Center, Elon University, Campus Box 2075, Elon, NC 27244, USA. Tel: þ 1 336 278 5959; Fax: þ 1 336 278 5952; E-mail: [email protected]
Received: 20 October 2004 Revised: 17 May 2006 Accepted: 30 June 2006
Abstract Several studies have explored how certain economic and cultural variables affect a country’s corruption level. This study extends previous research by not only considering these variables, but also taking into account the impact that information and communication technology can have on corruption. The results indicate that the greater the access to information, the lower the corruption levels. Therefore bridging the digital disparity across countries can also serve to lessen national corruption levels. Journal of International Business Studies (2007) 38, 320–332. doi:10.1057/palgrave.jibs.8400262 Keywords: corruption; information and communication technology; culture; cluster analysis
Introduction As all aspects of globalization become critical to the successful transaction of international business, greater attention must be paid to the manner by which countries conduct their external and internal affairs. The community of nations can no longer afford to ignore the corrupt and unethical behavior of its representatives. Corruption can result in a misallocation of resources, creating biases against projects and practices that are efficient (Macrae, 1982; Alam, 1995). Corruption can also disrupt international trade and investment and distort public policy (Mauro, 1995; Gastanga et al., 1998; Wei, 1999; Zhao et al., 2003). Kehoe (1998) notes that corrupt practices such as bribes, kickbacks, and gifts raise the real and hidden cost of doing international business, which negatively affects consumers. While consumers suffer as a result of corrupt practices, Ghosal and Moran (2005) clearly warn multinationals that the effect of corrupt behavior will have a detrimental impact on their status in the world community. They point out that multinationals will lose their influence as well as their effectiveness when they sacrifice their social legitimacy by engaging in corrupt practices. Further, a country’s reputation with respect to corruption will influence institutions such as the World Bank, International Monetary Fund, and multinational financial organizations as to whether they will support investment in such a country (RoseAckerman, 1978). By assuming rational behavior, corruption can be modeled as a gamble where firms and individuals within a country weigh the expected benefits from corruption against the expected social, psychological, economic, and financial costs. When considering the costs and benefits ass
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