By Charles E. Stevens (Lehigh University) and Aloysius Newenham-Kahindi (University of Victoria)
The corruption conundrum
Corruption—the abuse of entrusted power for private gain—is a major challenge that a multinational enterprise (MNE) must account for when venturing abroad. Management researchers know quite a bit about how corruption affects MNEs’ strategies: it often serves as a deterrent for FDI, results in a higher preference for non-equity or low-equity entry modes, and is associated with a higher likelihood of exit from a host country, for instance. Intriguingly, however, despite this large and growing body of research that has identified important consequences of corruption for MNEs’ strategy and performance, researchers’ understanding of MNEs’ strategies for managing corruption itself remains limited. Moreover, what is known has primarily been considered from the perspective and the experiences of developed country MNEs. In our forthcoming SMJ article, we seek a better understanding of firms’ options for operating in corrupt host country environments by comparing and contrasting developed country MNEs’ and developing country MNEs’ strategies for managing corruption in the dynamic and complex region of East and Central Africa. In this blog post, we highlight key takeaways from our findings and also discuss the opportunities and challenges for researchers interested in taking a research ‘safari’ (a Swahili word meaning journey or voyage) into Africa.
Uncovering a new approach for managing corruption
For MNEs operating abroad, the power dynamic between themselves and a government official who has the opportunity and power to demand a bribe or accept a proffered one makes them particularly vulnerable to situations where corruption may occur. This is because foreign MNEs often must rely on host country government officials for diverse issues including gaining access to markets, navigating the regulatory environment, importing needed inputs, obtaining work visas for their expatriate staff, and winning tenders for government-sponsored projects. Thus, the literature has typically assumed that firms have two main options for managing corruption: either pay bribes and engage in other corrupt activities (what we term acquiescence strategies), or avoid or minimize investments in countries where corruption is widespread (which we term avoidance strategies).
In our research context, we do indeed find evidence of firms following acquiescence and avoidance strategies. However, we also find firms taking another approach: committing to deeper, larger, and more long-term investments, even in host countries where corruption was pervasive. Interestingly, it was developing country firms—Chinese MNEs in particular—that led the way with this new approach (which we termed an engagement strategy); firms from developed countries have been playing catch-up in recent years. These findings were surprising and counterintuitive, as the conventional wisdom for investing in more corrupt countries is to ‘tread lightly’. At first, we questioned whether these firms were making larger commitments simply because they were more willing to pay bribes as a ‘cost of doing business’. Instead, we found little evidence of this; the more w e probed, the more we understand the conceptual mechanisms underpinning the success of these engagement strategies: tactics designed to maximize the MNE’s local legitimacy in order to decrease the motivation of government actors to demand bribes, along with tactics designed to maximize the MNE’s bargaining power in order to decrease the ability of government actors to demand bribes. The specific approach varied from firm to firm, but hallmarks of an engagement strategy included finding innovative substitutes for corrupt activities, combining for-profit activities with activities designed to increase the social good, leveraging one’s home country government to manage relations with host governments through various ‘carrots and sticks’, and building multi-firm partnerships and coalitions that often spanned industries and home countries.
Our findings emerged from an inductive, qualitative research design that consisted of conducting interviews with over 400 individuals, including expatriate managers, government officials, and institutional researchers. Our research setting was comprised of six countries: Burundi, Democratic Republic of Congo, Kenya, Rwanda, Tanzania, and Uganda. Given the inherent challenges in collecting high quality data on a phenomenon as illicit and shadowy as corruption, it likely would have been difficult—even impossible—without taking such an approach.
Research ‘safari’ into Africa: Opportunities & challenges
Despite the great promise for generating new insights from qualitative work in sub-Saharan Africa, challenges for the researcher exist as well. For instance, as many people in sub-Saharan Africa are multicultural and multilingual, researchers need not only to be linguistically competent but also adept at appreciating the nuances in informants’ responses, in order to establish and maintain trust. Researchers must also adapt their conduct and even their attire depending on the situation. When meeting expatriates, punctuality is important and interview questions must be structured to fit the norms and time constraints of a business meeting. In contrast, more casual dress is often appropriate when meeting community leaders, as is the use of semi-structured or unstructured questions. Allowing the conversation to continue for an hour or two is seen evidence of the interviewer’s genuine interest and respect. A failure to generate rapport may result in respondents simply telling the researcher what they think he or she wishes to hear. Local respondents may assume that researchers go to collect data with preconceived views about Africa, and may craft their responses to fit that narrative—especially if money or gifts are offered to entice involvement in interviews. However, if the researcher is aware of these risks and takes the time to engage with respondents, then interview subjects will understand the lack of preconceptions and respond accordingly. While these challenges may seem daunting, the careful and dedicated researcher can overcome them—having a co-author from the region or help from local research assistants can be an immense help in this regard. This context is a rich and rewarding one for management scholars, and we hope that our research project inspires others to take a ‘research safari’ to Africa.
Watch the video abstract here