What Motivates Participation in Corruption and How Does Such Participation Affect Firm Performance?

Abstract

What motivates local executives to participate in corrupt behaviors, to what extent do external factors such bureaucratic constraints affect bribing, and does bribing affect firm performance? To answer this question, we conduct a mixed methods study where we interview 21 executives in Kyrgyzstan and Georgia and quantitatively analyze World Bank Enterprise Surveys survey data for triangulation and complementary findings. Generally, the findings shed light on what motivates local executives in corrupt environments to decide to participate in bribing – it pays off and it is commonly viewed as acceptable. Interestingly, many qualitative findings differ from quantitative findings. Interviews suggest that informal competition has no effect on bribing or firm performance, whereas quantitative analysis indicates that informal competition has a small but statistically meaningful effect. Findings from the interviews complement the past research suggesting that bribing improves firm performance supporting a “grease the wheels” theory. Overall, the study adds insights into the nascent literature on corruption- especially in former Soviet Republics – and can inform policy makers and practitioners on means for reducing corruption.