Cross.level.analaysis.of.Bribery.activities AMJ.2007

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DECIDING TO BRIBE: A CROSS-LEVEL ANALYSIS OF FIRMAND HOME COUNTRY INFLUENCES ON BRIBERY ACTIVITY

KELLY D. MARTINColorado State University

JOHN B. CULLENJEAN L. JOHNSON

Washington State University

K. PRAVEEN PARBOTEEAHUniversity of WisconsinWhitewater

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 publicofficials. This study uses multilevel theory to address the question of why briberyactivity of this type differs among countries. We analyze responses from nearly 4,000firms worldwide using hierarchical linear modeling to investigate cross-level predic-

tions about bribery. Drawing from anomie theory, we find support for country-levelcultural and institutional drivers of firm-level bribery. We extend anomie theory byshowing how firm-level pressures can encourage the supplying of bribes as a firmstrategy.

Perspectives spanning multiple levels of analysisprovide powerful approaches for studying corpo-rate corruption, yet multilevel research on thistopic is remarkably scarce. In particular, a compre-hensive and theoretical understanding of bribery,especially from the perspective of the suppliers of

bribes, is practically absent. Adopting a multilevel

perspective, we contend that firm-level bribery var-ies significantly with contextual conditions infirms home countries and the pressures faced byindividual firms. Specifically, we investigate howvarious cultural values and institutional character-istics in different countries influence the briberyactivities of local firms. We extend theory by in-cluding individual firm conditions that exacerbatecertain performance pressures and may further pro-mote bribery activity. Ultimately, we provide a the-oretically integrated picture of the mechanisms thatdrive firms to supply bribes as a strategic tool in

dealing with local public organizations in theirhome countries.To provide insights into bribery among firms

worldwide and to investigate cultural, institu-tional, and organizational drivers of such corrup-tion, we draw on what is arguably one of the mostinfluential sociological theoretical frameworks.

Anomie theory (Durkheim, 1897/1966; Merton,1968), with its basic premise that cultural and so-cial drivers result in conditions in which pressuresfor goal achievement through any meanslegiti-mate or notdisplace normative control mecha-nisms, provides a powerful foundation for investi-gating firm ethical behavior and decision making

(Cullen, Parboteeah, & Hoegl, 2004).Building our multilevel arguments on anomie

foundations, we propose that national cultural fac-tors (the extent of an achievement orientation, in-group collectivism, and a humane orientation) andsocial institutions representing a nations polity(welfare socialism and political constraints) ex-plain bribery by domestic firms. We also argue thatfirms face local anomic pressures (perceived finan-cial constraints and perceived competitive inten-sity) that further explain a predisposition to bribe.We advance theory and practice by investigating

theoretically derived and multilevel factors likelyto propagate firms propensity to supply bribes tolocal officials or governments as a mechanism bywhich to gain strategic advantage.

Because our research crossed levels of analysis,we drew on multilevel organization theory to frameour conceptualization and develop our hypotheses.Multilevel theory permitted us to juxtapose broadsocietal characteristics with firm-level traits thatcause organizations to differ from one another in

bribery activity. Particularly germane to our inves-tigation, furthermore, was the application of multi-

The authors thank Special Research Forum CoeditorPaul W. Beamish and the three anonymous reviewers fortheir valuable feedback.

Academy of Management Journal

2007, Vol. 50, No. 6, 14011422.

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 holders express

written permission. Users may print, download or email articles for individual use only.


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level theory to infer firm-level outcomes frombroad societal and institutional variables (e.g.,Klein & Kozlowski, 2000; Kostova, 1999; Rousseau& Fried, 2001; Van der Vegt, Van De Vliert, &Huang, 2005). The basic tenets of multilevel theoryand methods therefore facilitated our investigationand allowed us to advance current perspectives on

bribery as it brews and thrives in countries acrossthe globe.Our cross-level analysis extends the literature on

multiple fronts. We advance the extant literature onbribery (e.g., Mauro, 1995; Treisman, 2000) with amultilevel study examining data on firm-level brib-ery from 3,769 firms concurrently with firm-levelpredictors and predictors from country-level insti-tutions and cultural contexts for 38 countries. Inthe tradition of influential ethics research (e.g.,Donaldson & Dunfee, 1994, 1999; Spicer, Dunfee, &Bailey, 2004; Weaver, Trevino, & Cochran, 1999),we extend multilevel theory by grounding a ubiq-uitous and chronic ethical issue in business,namely bribery, in a powerful theoretical frame-work, anomie theory. From a managerial perspec-tive, we focus on firms themselvesthat is, on thesupply side of briberythereby offering businessdecision makers insights into the various pressuresand practices that are typical of firm interactionswith local officials. This knowledge may allowfirms to better control bribery activity from withinand help avoid the harmful reputational and finan-cial effects of punishment through fines and sanc-tions. Understanding the supply side of bribery,

moreover, may alert firms to the likelihood of suchpractices among their competitors. Through an en-hanced appreciation of the cultural, institutional,and intraorganizational contexts (Johns, 2001;Thompson, 1995) associated with firm-level brib-ery, firm decision makers will be better equipped tomeet the ethical challenges they encounter.

BRIBERY: A CONCEPTUAL BACKGROUND

Remarkably, there is not a country in the worldwhich does not treat bribery as criminal on its

lawbooks (Noonan, 1984: 702). Consistently, man-agers of firms worldwide generally consider briberyan ethically offensive practice regardless of their

background or nationality (Husted, Dozier, McMa-hon, & Kattan, 1996). Indeed, data (World ValuesStudy Group, 2000) confirm that behaviors such astax evasion, buying stolen goods, and committingsuicide are perceived as more justifiable than brib-ery. In the cross-national business context, agree-ments such as the Organisation for Economic Co-operation and Development (OECD) Convention onCombating Bribery of Foreign Public Officials and

the Organization of American States (OAS) Inter-American Convention against Corruption representattempts to curtail bribery. These findings andagreements suggest that bribery to some extent vi-olates a hypernorm, or a standard of right andwrong that transcends organizational and nationalcultures (Donaldson & Dunfee, 1994, 1999; Spicer

et al., 2004). Yet, paradoxically, the extent of brib-ery varies widely over national contexts (Husted,1999; Johnson, Kaufmann, McMillan, & Woodruff,2000).

Anomie theory suggests that, regardless of thestrength of a hypernorm, the context of a country aswell as local firm conditions can create situationsin which firm decision makers see violations ofhypernorms as justifiable. Although prior researchhas considered the general ethical reasoning of in-dividual managers through a subtype of anomietheory (i.e., institutional anomie theory) (Cullen etal., 2004), there are no examinations via the lens ofanomie theory of the ethical behaviors of eitherindividual managers or organizations from a cross-national or multilevel perspective. To fill this gap,we formulate our arguments on a broader, moregeneral application of anomie theory and focus onfirm-level bribery activity. Specifically, we investi-gate the phenomenon of local firms supplying

bribes to local officials as it relates to national con-text and firm-level pressures.

Bribery activity can involve firms in their homecountries or abroad and can involve the local orforeign governments with which firms might inter-

act. Bribery activity, furthermore, may differ on thebasis of who is supplying as opposed to demandingthe bribes, and whether public or private sectorinstitutions are involved (Cuervo-Cazurra, 2006).Studies examining demand-side factors in briberyhave typically used cross-national data linked tocountry-level indexes of corruption, such as theTransparency International Corruption PerceptionIndex (CPI) and measures from Political Risk Ser-vices and Freedom House. This research hasshown, for example, that weak governments withunstable political institutions have a difficult time

preventing their agents from demanding bribesfrom local and foreign firms (Shleifer & Vishny,1993). Other studies have shown that national lev-els of bribery relate to dimensions of culture, socio-economic factors (Getz & Volkema, 2001; Husted,1999), and historical development (Treisman,2000). Demand-side research has also linked highertax rates to diminished levels of corruption,whereas overregulation has been linked to in-creased corruption (Friedman, Johnson, Kaufmann,& Zoido-Lobaton, 2000). Entry barriers, legal sys-tem effectiveness, and infrastructure services, as

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demonstrated in the literature, potentially subvertcorruption across countries (Rodriguez, Uhlen-

bruck, & Eden, 2005). Similarly, unrestrained bu-reaucracy, the rule of law, and political legitimacyhave been shown to inflate national levels of cor-ruption (Ali & Isse, 2003). In yet another stream,researchers have considered the effects of bribery

demands on multinational firms entering localmarkets (e.g., Mauro, 1998; Robertson, 2004; Rob-ertson & Crittenden, 2003; Robertson & Watson,2004), with evidence suggesting that local demandsmay deter entry (e.g., Uhlenbruck, Rodriguez, Doh,& Eden, 2006; Voyer & Beamish, 2004).

The above citations illustrate that, heretofore,most research has represented efforts to understandthe characteristics of countries or public institu-tions that affect the demand side of bribery. Inkeeping with endogenous harassment perspec-tives (Clarke & Xu, 2002), furthermore, there isoften an central assumption that the only devianceinvolved in bribery is on the part of those whodemand bribes. However, firms may actively andpurposefully seek the unfair advantages and spe-cial treatments that can result from bribery. Active

bribery, which originates on the supply side as astrategic influence mechanism, differs from passive

bribery, which also originates on the supply sidebut is used defensively to avoid sanctions or otherpunishments (Wu, 2005). Active bribery involvesfirms engaging public officials using the temptationof payments as a method of influence and coercion.The use of bribery to manipulate business func-

tions such as obtaining contracts, garnering favor-able regulatory decisions, and other government orpolicy determinations demonstrates that the devi-ance indicative of bribery frequently originates onthe supply side. In fact, in evidence of the domesticprevalence of bribery, a handful of well-knowncompanies including Volkswagen, HealthSouth,and Hyundai were recently sanctioned for theirsupply-side bribery activity in their home countries(Jenkins & Williamson, 2005; Johnson, 2006;

Jung-A, 2007).The factors that potentially encourage bribery ac-

tivity from the supply side, therefore, are the cen-tral focus of our analysis. Such a focus contrastswith those of prevailing treatments of corrupt ac-tivities in the literature and, as scholars have ar-gued, warrants increased attention (Clarke & Xu,2002; Rodriguez, Siegel, Hillman, & Eden, 2006;Wu, 2005). Given the clear distinction between de-mand- and supply-side bribery activity, it is sur-prising that the assumption in much of the litera-ture is that the supplier of a bribe is without choiceor fault. Only recently have bribery researchers(e.g., Reinikka & Svensson, 2006; Svensson, 2003,

2005) challenged this assumption by recognizingthat firms do not respond to demands uniformlyand, moreover, initiate bribery activity indepen-dently of demand. Thus, in our research we con-sidered the firm the relevant unit of analysis, as-suming firms can choose whether to engage in

bribery activity. This choice, what is more, ac-

counts for a degree of the variation in bribery ac-tivity between firms and countries, as is consistentwith a multilevel perspective.

BRIBERY AND ANOMIE THEORY

We appeal to the conceptual foundations of ano-mie theory to argue that cultural and social driversas well as certain firm-level conditions catalyze

bribery activity among firms, as these conditionspromote goal achievement through any availablemeans. Anomie theory evolved from the famouswork Suicide: A Study in Sociology, b y EmileDurkheim (1897/1966), who proposed the anomieframework to link the societal deterioration of so-cial norms through the propagation of moderniza-tion and industrialization to another basic hyper-norm violation, the individual act of suicide.Durkheim argued that institutional and culturalchanges associated with modernization encourageda decline of traditional social controls based onfamily and communal relationships, a resultantweakening of norms and, in turn, increaseddeviance.

Robert Merton (1968) later used the concept of

anomie to describe the condition that exists when aculture values the achievement of ends (primarilymaterialistic and economic ones) over the legiti-macy (ethicality) of the means used to achievethese ends. Merton defined anomie as a conditionof normlessness and social disequilibrium wherethe rules once governing conduct have lost theirsavor and force (1964: 226). Merton also theorizedthat when a social system inhibits culturally valuedgoal achievement, it incubates a greater propensityto choose deviant means to achieve certaindesirable ends.

Beyond the dismantling of individual normativecontrols in the face of institutional barriers, norm-lessness may permeate the social structure of firms,exerting pressure on them to engage in noncon-forming rather than conforming behavior to achieveperformance goals. Culturally induced perfor-mance pressures, we argue, elevate rates of briberyamong firms. Firms characterized by an anomicstate deviate from normatively accepted mecha-nisms for achieving important outcomes such asprofit and productivity. In anomic organizationalcontexts, pressure exists to take any path that leads

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to the achievement of performance goals, regardlessof its acceptability or legitimacy. For these firms,

bribery can be a path to the achievement of impor-tant goals.

Attempting to explain how an affluent countrylike the United States can have such high crimerates, contemporary anomie theorists (Messner &

Rosenfeld, 1997, 2001; Rosenfeld & Messner, 1997)have noted that both social institutions and cul-tural values separately and in combination affectdeviant behavior by creating a detachment fromsocial rules and norms. This detachment increasesthe willingness of more people to have no moralqualms (Rosenfeld & Messner, 1997: 214) aboutchoosing whatever means are necessary to achievetheir goals. Anomie theory has been useful in pre-dicting rates of deviant behaviors such as propertycrimes and homicide (Bernberg, 2002; Savolainen,2000) and has been shown as useful in explainingvariation in the ethical reasoning of managers(Cullen et al., 2004); we argue that the theory alsoreadily extends to the explanation of ethicallyquestionable behavior by firms.

We frame our examination in the context of an-omie theory to understand the profound effects of

both institutional and cultural drivers as they pro-mote bribery activity. Importantly, in keeping witha multilevel approach, anomie theory also suggeststhat certain firm-level factors may exacerbate pres-sures for deviancein this case, bribery. Accord-ingly, we propose both country-level and organiza-tion-level characteristics theoretically derived from

anomie frameworks and articulate their relation-ships with firm reports of bribery activity.

HYPOTHESES

Country-Level Drivers of Bribery:National Culture

The central premises of anomie theory suggestthat the cultural value of an achievement orienta-tion plays a central role in firm-level deviance. Anachievement orientation has been considered a fun-

damental determinant of self-worth that is based onreaching certain goals (Trompenaars & Hampden-Turner, 1998). Successful goal accomplishment be-comes the primary measure of value in highlyachievement-oriented cultures (Cullen et al., 2004;Husted, 1999). According to the tenets of anomietheory, such a vigorous emphasis on goal achieve-ment can create for firms a strain of inflated ex-pectations (Zahra, Priem, & Rasheed, 2005: 808), apressure to meet organizational ends at the expenseof following commonly prescribed and acceptedmethods for achieving these ends (Messner &

Rosenfeld, 2001). That is, according to anomie the-orists, achievement values are conducive to thementality that its not how you play the game: itswhether you win or lose (Messner & Rosenfeld,2001: 63). Research also shows that in cultures withintense competition for prestige, status, and mate-rial wealth, individuals are more likely to seek spe-

cial favors to gain advantages over others (Khatri,Tsang, & Begley, 2006).Thus, the central tenets of anomie theory imply

that highly achievement-oriented societies tend tovalue individuals and organizations more on the

basis of what they have done or achieved ratherthan on the basis of the path used to arrive at thoseaccomplishments (Rosenfeld & Messner, 1997). Weargue that in such contexts, key decision makersseeking to attain firm outcomes and overall firmvalue experience a greater inclination and morepressure toward ethically questionable behaviorssuch as bribery.

Hypothesis 1. A country-level achievement ori-entation relates positively to local firm briberyactivity.

According to anomie theory, individualistic con-cern is a self-centered orientation and egoistic goalpursuit (Messner & Rosenfeld, 2001). In more indi-vidualistic cultures, calculative relationships basedupon a concern for the satisfaction of needs are thenorm (Jackson, 2001; Robertson & Fadil, 1999). In-dividualistic cultural values set up conditions in afirm for behaviors that exclusively emphasize the

firms pursuits and interests without accounting forethical consequences, which is consistent with thecentral tenets of anomie theory. Ultimately, indi-vidualistic cultures disproportionately emphasizegoal achievement even at the expense of socialrelationships and connections (Khatri et al., 2006).

In contrast, as cultures emphasize values rootedin belongingness within larger groups, tribes, andeven nations, a society becomes increasingly col-lectivist. Collectivist cultures emphasize the notionthat societal members are fundamentally interde-pendent and deemphasize individual goal achieve-

ment. Moreover, societal members acknowledgeboth duties and obligations to other members withwhom they are culturally intertwined (Triandis,1995). From the perspective of anomie theory, suchsocial integration should reduce temptations to

bribe as a deviant means to achieve firm financialsuccess or other accomplishments. Indeed, in col-lectivist cultures, should group interests be pur-sued by a deviant means, it would likely involvecronyism, a practice facilitated by the social net-work ties indicative of such a culture (Khatri et al.,2006). That is, the group member cohesion that is



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characteristic of collectivist cultures should deteranomie and henceforth firm behaviors such as brib-ery aimed at forwarding self-interested goals andaspirations.

Hypothesis 2. Country-level in-group collectiv-ism relates negatively to local firm briberyactivity.

A humane orientation is primarily concernedwith relationships and the intricacies of the wayspeople treat one another. Culture research has stip-ulated certain values that are characteristic of asociety with a highly humane orientation (Triandis,1995) and defined this orientation in terms of thedegree to which an organization or society encour-ages and rewards individuals for being fair, altru-istic, friendly, generous, caring, and kind to others(Triandis, 1995: 569). Societies with a highly hu-mane orientation, what is more, report fewer patho-

logical and psychological maladies among theirmembers (Alas, 2006).In societies measuring low on humane orienta-

tion, we argue, the instability of relationships bothwithin and between firms results in an overarchinglack of social support. Grounding the idea of ahumane orientation in the central premises of ano-mie theory, we theorize that a lack of social supportleads to anomic conditions that increase the ten-dency of managers to advance themselves and theirfirms economic performance by any means possi-

ble. Consequently, according to anomie theory, de-viant behaviors performed to advance firm inter-

ests, such as bribery, increase. In contrast,participants in a humanely oriented society typi-cally sacrifice self-interested and hedonic goals forthemselves and their firms in favor of promotingand sustaining the good of others (Schwartz & Bil-sky, 1990). As does collectivism, a humane orien-tation implies greater social integration and thuslower anomie as well as fewer illegitimate firm

behaviors.

Hypothesis 3. A country-level humane orienta-tion relates negatively to local firm briberyactivity.

Country-Level Drivers of Bribery:Social Institutions

In addition to national cultural values, variousstrains of anomie theory, from Durkheim in the late1800s to Messner and Rosenfeld more recently(2001), have advanced the notion that social insti-tutions can drive or inhibit anomic conditions andresulting deviance. Below we consider two societalcharacteristics: the extent of welfare socialism and

the prevalence of political constraints. To advancethe extant literature (e.g., Kostova, 1999), we focuson these two aspects of a polity as likely to be morerelevant than others to firm-level bribery activity.

According to anomie theory, polities with moresocial welfare structures isolate individuals andfirms from the vicissitudes of the market (Mess-

ner & Rosenfeld, 1997: 1394) and help prevent aself-serving economic system where everyonelooks out for his/her own interests (Ralston, Holt,Terpstra, & Kai-Cheng, 1997: 80) Indeed, in coun-tries dominated by welfare socialism, firms striveto meet societal goals rather than the more individ-ualistic, self-interested goals that predominate inthe absence of welfare socialist policies (Tsoukas,1994). Furthermore, in these societies, the conse-quences of business failures are softened or per-haps even prevented (Tsoukas, 1994: 31), thus re-ducing pressures for firms to succeed at all cost.Anomie theory dictates that when institutionalsafeguards are in place in the form of protectiveservices and resources received as entitlements,rather than from success in competitive markets,there is less need to achieve desired ends usingdeviant means. Evidence supports this argument(e.g., Messner & Rosenfeld, 1997; Savolainen,2000), demonstrating the effectiveness of socialwelfare policies in reducing crimes such as theftand homicide.

Enhanced security through institutional safe-guards, we argue, diminishes the temptation formanagers to resort to illegitimate means of sustain-

ing their firms and achieving basic security forthemselves and their employees (Merton, 1964,1968). The presence of institutional safeguardsseems particularly relevant for small to medium-sized firms, as both the owners and employees ofthese firms face liabilities of size that increase ratesof failure (Aldrich & Auster, 1986; Freeman, Car-roll, & Hannan, 1983). This study focused on suchfirms, which we consider typical, because smallsize is prevalent worldwide. In Europe, for exam-ple, over 99 percent of firms are small to medium-sized (European Commission, 2004). Although the

benefits of welfare socialism may be less relevant tomanagers in the worlds large firms, in the typicalsmaller firms studied here, the vulnerability of bothmanagers and workers to firm success and failure islikely much greater, and thus social welfare bene-fits resonate more.

Firms operating under extensive welfare social-ism are ultimately less at the whim of competitivemarket forces and face less pressure to use briberyor other illegitimate means to achieve success andsurvival. Alternatively, when few if any welfaresafety nets exist, a society may become a kleptoc-



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racy (Andreski, 1968). Normlessness, as fosteredthrough anomie, abounds as firms strive to ensurefinancial security by any means available. As firmsattempt to compete in kleptocratic societies, weexpect that illegitimate means to achieve businessends frequently emerge in the form of unofficialcompensation, or bribery.

Hypothesis 4. Country-level welfare socialismrelates negatively to local firm bribery activity.

By political constraints, we mean governmentalchecks and balances in the form of regulationsthat are imposed to limit and constrain the powersof politicians and lawmakers. Such checks and bal-ances also can enable or constrain a countrys man-agers and firms (Delios & Henisz, 2000, 2003; Go-erzen & Beamish, 2003; Henisz & Delios, 2001; Lu,2002; Spencer, Murtha, & Lenway, 2005). Linking

back to the central tenets of anomie theory, wetheorize that countries with high levels of politicalconstraints should provide credible and legitimateinstitutional environments discouraging deviant

behavior, including bribery among local officialsand local firms. Conversely, countries with politi-cal hazardsthat is, few checks on the discretion ofregulators who deal with business firmstend toencourage or even propagate bribery (Henisz,2000). Countries in which political leaders enjoysubstantial discretion promote unpredictable andat times even arbitrary law enforcement. In otherwords, a lack of political constraints allows ano-mie, or the condition of normative instability, to

flourish. According to anomie theory, becausefirms and their decision makers can see the poten-tial effectiveness of offering bribes to policy makersin these environments, arbitrary political and ad-ministrative discretion makes activities like briberyattractive for firms.

In contrast, the enforcement of political con-straints on government leaders, limiting their dis-cretion in policy formulation and transformation,tends to mute anomic conditions among localfirms. A system of checks and balances in the po-litical arena stabilizes and legitimizes a national

political environment overall (Henisz, 2004), sup-pressing the potentially anomic conditions that re-sult in deviant acts such as supplying bribes.

Hypothesis 5. Country-level political con-straints relate negatively to local firm briberyactivity.

The conceptual premises of anomie theory alsosuggest interactive relationships among social in-stitutions and cultural values (Savolainen, 2000).Following the tradition of Polanyi (1957), in recentwork advancing anomie theory (Bernberg, 2002;

Messner & Rosenfeld, 2001) scholars argue thatmost modern societies have developed economicsystems that are not embedded in or regulated byother social institutions. A major proposition inanomie research (e.g., Messner & Rosenfeld, 2001)is that the separation of the economic values ofself-achievement from traditional institutional con-

trols, such as those embedded in family and reli-gion, breaks down normative controls (Bernberg,2002). This dominance of values related to self-achievement by economic success encourages peo-ple and firms to succumb to the cultural drivers ofanomie. In such instances, the calculative logic ofsupplying bribes to achieve economic ends at theexpense of ethically prescribed methods ofachievement prevails.

Social institutions including welfare safety netsand political constraints, therefore, may have im-portant moderating influences on the effects of cul-ture (Henisz, 2004) and the subsequent propagationof anomie, and hence bribery. A close examinationof the anomie framework illuminates moderationhypotheses, suggesting that social welfare policieshave contingent relationships with other drivers ofanomie in predicting deviant behaviors (Savol-ainen, 2000). Similarly, studies investigating polit-ical hazards as applied to various mechanisms of

business and organization have posited a criticalrole for political constraints as a moderating forcein a number of relationships (e.g., Delios & Henisz,2003; Henisz & Zelner, 2005). To advance thesepremises and extend the anomie theoretical frame-

work, we argue that the cultural drivers (anachievement orientation, in-group collectivism,and a humane orientation) of anomie and hence

bribery activity can be muted or enhanced by socialwelfare policies and by political constraints.

Hypothesis 6a. The extent of welfare socialismmoderates the relationship between local brib-ery and cultural values in such a way that thepositive effect of an achievement orientationon bribery is reduced as welfare socialismincreases.

Hypothesis 6b. The extent of welfare socialismmoderates the relationship between local brib-ery and cultural values in such a way that thenegative effect of in-group collectivism on brib-ery is enhanced as welfare socialism increases.

Hypothesis 6c. The extent of welfare socialismmoderates the relationship between local brib-ery and cultural values in such a way that thenegative effect of a humane orientation onbribery is enhanced as welfare socialismincreases.



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Hypothesis 7a. The extent of political con-straints moderates the relationship between lo-cal bribery and cultural values in such a waythat the positive effect of an achievement ori-entation on bribery is reduced as political con-straints increase.

Hypothesis 7b. The extent of political con-

straints moderates the relationship between lo-cal bribery and cultural values in such a waythat the negative effect of in-group collectivismon bribery is enhanced as political constraintsincrease.

Hypothesis 7c. The extent of political con-straints moderates the relationship between lo-cal bribery and cultural values in such a waythat the negative effect of a humane orienta-tion on bribery is enhanced as political con-straints increase.

Firm-Level Drivers of Bribery

Going beyond the country-level contextual pre-dictors of bribery, anomie theory and, in particular,Mertons (1964, 1968) exposition of the theory sug-gest firm-level predictors of bribery. Following thislogic, when firms face factors that obstruct or pre-vent accomplishment of critical goals, there isstrain and, in turn, a greater likelihood that thefirms will use illegitimate means to achieve theirends. Performance and profitability goals can cre-ate significant pressures for firms and, when legit-

imate means to attain these important goals fail,normative structures may decay, leading firms tofind deviant alternatives. In these situations, illicit

behaviors such as bribery may become increasinglyattractive as strategies for goal achievement. Inevaluating anomie at the firm level, conditions thatmay generate active, supply-side bribery, or briberyas a firm strategy, warrant investigation.

As a case in point, certain financial constraintscan increase firms propensity to resort to corrupt

behaviors such as bribery to overcome limitationsand get things done. One such use of bribery may

be to influence key public officials to create oppor-tunities that might otherwise not exist for a firmowing to financial constraints (Cuervo-Cazurra,2006). We argue that the extent to which a firmsdecision makers perceive that financial constraintsare blocking goal achievement significantly height-ens that firms temptation to engage in bribery ac-tivity. Anomie theory suggests that, in light of per-formance pressures on firms to grow and survive,when obstructed financially, firms are increasinglylikely to engage in bribery to remove such obsta-cles. Actively supplying bribes to influence public

decision makers might allow a firm to receive thesame advantages firms without financial con-straints enjoy.

Hypothesis 8. Greater perceived financial con-straints relate positively to local firm briberyactivity within countries.

Deviant behavior at the organization level, ac-cording to anomie theory, is clearly linked to anumber of firm pressures. When firms must viewith competitors for scarce resources, for example,they likely encounter heightened pressure to suc-ceed and perhaps even to survive (Baucus & Near,1991; Vaughn, 1997). Research has demonstratedthat when managers interpret their competitive en-vironment to be less than munificent (Staw & Szwa-jkowski, 1975), the likelihood of firm-level devi-ance increases. Research on strategic groups andcompetitive positioning has also shown that com-petitive rivalry may be more salient when per-ceived as coming from within a firms set of rele-vant strategic groups rather than from outsideimportant groups (Cool & Dierickx, 1993; Mc-Namara, Deephouse, & Luce, 2003).

Appealing to the central premises of anomie the-ory, we advance the view that when rivalry amonga firms core group of competitors is strong andcompetitive intensity is threatening, firms are morelikely to resort to deviant behaviors like bribery asa strategy for achieving goals. In particular, bribingpublic officials for special treatment or other ben-efits may present an opportunity by which a firm

can undermine its rivals. As the degree of per-ceived competition grows, firms may be increas-ingly likely to resort to behaviors such as bribery asthey struggle to gain a foothold among keycompetitors.

Hypothesis 9. Greater perceived competitiveintensity relates positively to local firm briberyactivity within countries.

METHODS

Survey Instrument and Sample

To test our predictions regarding bribery by localfirms within their cultural, national, and organiza-tional contexts, we assembled a multilevel data setof firm-level and country-level information. Thefirm-level data came from a comprehensive multi-national study, the World Business EnvironmentSurvey (WBES, 2000), conducted by the WorldBank in 80 countries. World Bank researchers lo-cated in the various countries conducted personalinterviews with prequalified firm representatives.Survey instruments were translated and back-trans-



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lated to ensure consistency. The survey containeditems involving corruption in local practices, in-cluding the prevalence of bribery. Further informa-tion regarding the WBES is available from the WorldBank Governance Group (www.worldbank.org).

In the World Bank data on 80 countries, appro-priate country-level data were available for 38

countries. Limits on the availability of appropriatecultural and social institution data and the reliabil-ity of our dependent variable measure reduced thesample size. In keeping with cross-national re-search prescriptions (Singh, 1995), for each countrywe computed reliability coefficients for the briberyactivity measure. To ensure the construct equiva-lence of the bribery measure, we retained countriesthat had alpha reliability coefficients of .70 orgreater. Compilation of available country-level dataresulted in our final sample of 38 countries.1

Because we were interested in local firms brib-ing of their home country governments, we elimi-nated firms with any percentage of foreign owner-ship from the analysis. This comprised less than 20percent of the original sample, and controlling inthe analysis for percentage of foreign ownershipdid not affect the results. Thus, for the sake ofclarity we elected to remove the firms with someforeign ownership. The final sample consisted of3,769 firms. The majority of firms in our sampleoperated primarily in service- or manufacturing-

based industries, with nearly 50 percent being inservices, approximately 30 percent in manufactur-ing, and the remainder distributed over agriculture,

construction management, and other industries.Consistently with the overall sample of the WBES,and representative of firms worldwide, the majority(85%) of the firms in our sample were small tomedium-sized in that each had fewer than 100 em-ployees and sales of less than US$10 million annu-ally. The median age of the firms in our sample was18 years at the time of the WBES data collection.

Variables and Data Sources

Bribery activity: Operationalization and con-

struct validation. To operationalize supply-sidebribery, whereby firms attempt to gain advantagesby inducing public officials to misuse their posi-tion or authority, we drew from managerial self-reports regarding firm bribery activity and its fre-quency. For the scope of our question, we wereinterested in bribery occurring within a firmshome country. The wording of the WBES question-

naire captured this focus, as each question wasprefaced with the following instructions: Your an-swers should reflect only your perception and ex-perience of doing business in your country.

We used items based on the WBES to formulate amultiple-item measure of bribery centered on theprevalence of and the degree to which firms engage

in bribery activity. Items evaluating the extent towhich firms pay some irregular additional pay-ments to get things done and whether firms likeyours typically make extra, unofficial payments topublic officials comprised our measure (responsescale: 1, always true, to 6, never true). Wereverse-coded the items so that higher scores rep-resented greater bribery activity. The six-item mea-sure is reliable at an alpha of .86. The Appendixprovides further details for this and the other mea-sures used in our study.

Our measure has the special advantage of directassessment and with that, substantive and theoret-ical benefits that resonate with bribery and ethicsresearchers (Morgan, 1993). We verified the con-struct validity of our bribery measure on the basisof high positive correlations with available corrup-tion indexes such as the Transparency Interna-tional CPI; however, because other recent researchhas reported extensive validation for several com-ponents of the WBES bribery items (Uhlenbruck etal., 2006), we do not report validation statisticshere.2 The face validity of our measure, coupledwith evidence of convergent, nomological, and dis-criminant validity, allows us confidence in our

multiple-item, self-report bribery measure.National culture. For the cultural attributes in-

cluded in our studythat is, achievement orienta-tion, in-group collectivism, and humane orienta-tionwe used measures from the GlobalLeadership and Organizational Behavior Effective-ness (GLOBE) study (House, Hanges, Javidan, Dorf-man, & Gupta, 2004). Inspired by earlier culturalresearch (e.g., Hofstede, 1980; Hofstede & Bond,1988; Trompenaars & Hampden-Turner, 1998),House and colleagues conducted a broadly based,cross-national, cross-industry study involving 62

countries to advance and refine cultural variables.The GLOBE measures and their operationalizationsalign theoretically with our anomie-theory-derivedarguments. Moreover, the approach used in theGLOBE study and the earlier work, assigning cul-tural scores to each country (see Cullen et al., 2004;

1 For a list of the countries in our sample, please referto Table 1.

2 Full details of the construct validation, includingstatistics demonstrating the convergent, discriminant,and nomological validity of the bribery measure, areavailable from the authors upon request.



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Parboteeah & Cullen, 2003), has been advocated inthe literature (Smith, 2006).

It is also noteworthy that the GLOBE researchersassessed their cultural dimensions in the form of

both should be judgments (i.e., the way thingsshould be) and what is judgments (i.e., the waythings are). Because we were interested in deeply

held and aspirational value systems, in keepingwith past research (Parboteeah, Cullen, & Lim,2004), we used the should be measures from theGLOBE study. This approach also avoided the highlevel of disagreement that would have been likelywith use of the what is GLOBE measures, whichassess what actually exists (Javidan, House, Dorf-man, Hanges, & de Luque, 2006; Peterson, 2004).Furthermore, we used the adjusted scores for theGLOBE measures (House et al., 2004: 742747),allowing the elimination of culturally biased re-sponse patterns (for instance, Asian respondentsavoiding the extremes of a scale or Mediterraneanrespondents favoring the midpoints), which canpotentially affect hypothesis testing (Triandis,1994). Details and sample items of the GLOBE mea-sures are located in the Appendix.

For the variable achievement orientation, wedrew on the performance orientation items in theGLOBE study, which measure the extent to which asociety encourages and rewards group membersfor performance improvement and excellence(House, Javidan, Hanges, & Dorfman, 2002: 6). Thework of Trompenaars and Hampden-Turner (1998)provided the foundation for the GLOBE measure of

performance orientation. For the final measure,comprised of four items, the GLOBE scholars re-ported an alpha coefficient of .72.3

The GLOBE study assessed the in-group collec-tivism component of culture with four itemsloosely based on Hofstede (1980). The GLOBEstudy formulated the measure of in-group collectiv-ism by restructuring the earlier work and focusingon collective beliefs that a groups members shouldtake pride in one anothers work and accomplish-ments. Respondents were queried on the extent towhich such accomplishments were considered

honorable for the group as a whole (House et al.,2004). The measure tapped the values of groupcohesiveness and loyalty, which are consistentwith collectivism. The collectivism measure wasreliable at an alpha level of .77.

The GLOBE measure for humane orientation

contained five items. The central concepts mea-sured were sensitivity, friendliness, generosity,other regarding, and tolerance despite mistakes(House et al., 2004). In essence, the measure isderived from managers ideas of compassion thatare theoretically characteristic of a humane orien-tation. The humane orientation measure as admin-

istered by the GLOBE researchers was reliable at analpha level of .88.Social institutions.For country-level social insti-

tutions, we used accepted operationalizations ofinstitutional variables from the political economicsand sociology literatures (e.g., Esping-Anderson,1990) and prior measurements of institutional vari-ables from business and management research (e.g.,Cullen et al., 2004; Delios & Henisz, 2000). Havingno single published source, as with the GLOBEstudy variables, we instead reviewed the literatureto identify operationalizations and then searchedsecondary data sources to develop each measure.The Appendix lists these measures and their indi-vidual items.

We derived our measure of the extent ofwelfaresocialism in a society from the extant literature(Cullen et al., 2004; Parboteeah & Cullen, 2003).Data came from the International Labour Organiza-tions 2000 World Labor Report (http://www.ilo.org) and the United Nations Development Pro-grams 2002 Human Development Report. Drawingon research on welfare socialism (i.e., Esping-Anderson, 1990), we included public social secu-rity expenditure as a percentage of gross domestic

product (GDP) and benefit levels in the form ofpensions as a percentage of GDP. As economists(e.g., Durham, 1999; Johnson et al., 2000) have rec-ommended, the measure also included total gov-ernment expenditure as a percentage of GDP. Thisindex infers institutional safeguards through wel-fare safety nets and other redistributive servicesresulting from increasing levels of government in-tervention. This three-item measure is reliable at analpha level of .78.

We employed a commonly accepted measure ofpolitical constraints, specifically, the Political Con-

straint Index developed by Henisz (2000, 2002), astructurally derived and internationally compara-ble assessment of constraints on policy formulationand adaptation in a majority of the worlds coun-tries. Because we were interested in bribery bylocal firms of their home country governments, thepolitical constraint measure was particularly rele-vant to our analysis. It focuses on critical attributesof a polity grounded in notions of checks and bal-ances for national political institutions. The indexassesses the existence and strength of veto power ina nations political system and examines the distri-

3 For the national culture variables, limited informa-tion was disclosed on the actual scale items included andthe measure validation procedures. The information wereport is that available from House et al. (2004).



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bution of office holders with various political pref-erences over and within government branches. Themeasure has been used extensively in international

business research (e.g., Delios & Henisz, 2000,2003; Goerzen & Beamish, 2003; Henisz & Delios,2001; Lu, 2002).

Firm characteristics. To test our firm-level hy-

potheses regarding the organizational conditionsthat, according to anomie theory, potentially influ-ence bribery activity, we used data from the WBESevaluating managerial perceptions of firm financialconstraints and managerial perceptions of firmcompetitive intensity. We derived the managerialassessment of financial constraints measure frommultiple items characterizing the extent to whichthe respondents believed financial issues obstructedfirm growth and development. In particular, thesefirm managers assessed the extent to which they be-lieved various financial blocks limited performance,including collateral requirements, unfavorable inter-est rates, lack of firm-retained earnings, local bankslack of resources, and access to nonbank equity in-vestors. Our seven-item measure of managers assess-ment of their firms financial constraints retained de-sirable measurement properties and was reliable at analpha level of .76.

We derived a measure designed to assess therelevant number of competitors in a firms primarystrategic group to formulate our variable manage-rial assessment of competitive intensity. The WBESinstrument asked managers to evaluate the numberof significant rivals their firms regarded as viable

competitive threats in their major product catego-ries. Because we were interested in individualfirms evaluations of the rivalry, or competitive in-tensity, they encountered, the perceived number ofsignificant competitors in a strategic group was anappropriate indicator (Barnett, 1997; McNamara etal., 2003). Indeed, some have argued that tradi-tional proxy measures and objective indicatorssuch as concentration ratios (e.g., the Herfindahlindex) are inferior to self-reports of competition inreflecting beliefs in a firm (Cool & Dierickx, 1993)and are therefore inadequate for assessing manage-

rial perceptions of firm competitive rivalry.Control variables.To isolate the supply-side in-fluences on bribery activity, we included a numberof control variables that are related at least in partto potential demand-side contaminants. At thecountry level, previous research has shown thatnational wealth is negatively related to corruption(Ades & DiTella; 1999; Nwabuzor, 2005; Wu, 2005).One explanation of this negative relationship isthat underpaid government workers may demand

bribes to supplement their poor salaries (Nwabu-zor, 2005). To segregate the effects of our indepen-

dent variables on bribery activity from potentialeffects of national wealth or affluence, we con-trolled for GDP. Following prior research (e.g., Cu-ervo-Cazurra, 2006; Wu, 2005), we obtained GDPfrom the 2002 United Nations Human DevelopmentReport and logarithmically transformed thosevalues.

Demands for bribes may vary with theindustryinwhich a firm operates. Indeed, prevailing industrycultures can set the tone for a host of firm interac-tions, including those with public officials, possi-

bly playing a role in deviant behavior (Daboub,Rasheed, Priem, & Gray, 1995). Research has alsodemonstrated that industry characteristics mayshape public officials perceptions of firms will-ingness to pay, and thus impact the demanding of

bribes (Clarke & Xu, 1999). Because industry char-acteristics more closely resemble demand-side phe-nomena, we did not develop hypotheses regardingindustry influences on bribery. We did, however,include industry as a control variable in our anal-ysis to rule out any potentially confounding effectsit might have on our dependent variable. Becausethe majority of the firms comprising our sampleoperated in manufacturing and service industries,we employed dummy variables indicating member-ship in manufacturing, service, and all otherindustries.

We included three firm-level controls represent-ing two constructs. First, the extent of a firmsgovernment ownership has been linked to briberyactivity (Clarke & Xu, 2002), traditionally having a

negative effect. The underlying logic is that if agovernment has a stake in a firm, it is less likely tosolicit bribes from that firm. We used a firms per-centage of state ownership, as measured in theWBES, as a control variable in our models.

Firm size has been linked to firm illegal behaviorand corruption occurring as a function of demand-side characteristics (e.g., Baucus & Near, 1991;Daboub et al., 1995; Kaufmann & Wei, 1999). Theo-ries of endogenous harassment (Wu, 2005), for exam-ple, connect firm size to potential vulnerability to

bribery demands. Our sample consisted primarily,

but not exclusively, of small and medium-sized firms,which typify the worlds overall population of firms.In particular, to remove the effects of firm size relat-ing to the demand side of bribery activity, we usedtwo common indicators of firm size: number of em-ployees and dollar value of sales (Kimberly, 1976), asformulated by the WBES researchers.

Analysis: Hierarchical Linear Modeling

We were interested in the variance in local firm-level bribery activity explained by a number of both



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country-level and firm-level predictors. Thus, ourquestion mandated a multilevel modeling tech-nique in which the variance could be partitioned

between the country-level and firm-level variables.To draw valid conclusions from our question, itwas essential that we evaluate the distinct countryand firm effects on bribery activity separately,

without discarding potentially critical variance(Hofmann, 1997). For these reasons, we employedhierarchical linear modeling (HLM) with restrictedmaximum-likelihood estimation (Bryk & Rauden-

bush, 1992). The HLM approach has been advo-cated for its ability to estimate within- and be-tween-group variance simultaneously and toexamine the influence of higher level units onlower level outcomes while maintaining the appro-priate level of analysis (Hofmann, 1997: 726).

Using HLM, we simultaneously estimated ourcountry- and firm-level parameters without samplesize distorting the results, as characteristically oc-curs with ordinary least squares (OLS) methods.Underlying the logic of HLM is the computation ofparameter estimates and standard errors by weight-ing group-level sample size by reliabilities at theindividual level (in this case, level 1) for the de-pendent variables within each group (level 2). Theestimates typically correspond closely to OLS esti-mates, except that the level 2 standard errors avoidthe deflation inherent in OLS. Since our hypothe-ses evaluated main and interactive effects of level 2variables on the country-mean level 1 outcome(bribery) adjusted for within-country level 1 pre-

dictors, we used random effects intercept-as-out-comes models to test our hypotheses, consistentlywith previous management research (Cullen et al.,2004; Parboteeah & Cullen, 2003). We employedproduct terms to test for interactions of the culturalvariables with welfare socialism and political con-straints, respectively.

To analyze the effects of perceived financial con-straints, perceived competitive intensity, and ourfirm-level controls, we centered the level 1 vari-ables at the group mean (i.e., country). The patternof results was the same as that for uncentered data,

but the results were stronger with centered data,suggesting better estimates for the level 1 group-centered data (Hofmann & Gavin, 1998). Since in-teraction effects using product terms were tested atlevel 2, we followed the Bryk and Raudenbush(1992) and Cohen, Cohen, West, and Aiken (2003)recommendations to center data (level 2) at thegrand mean when including interaction effects.With the exception of the change in metrics, theresults were identical to those produced with stan-dardized and unstandardized variables.

It is of theoretical relevance to note that we ana-

lyzed the effects of firm-level variables separatelywithin each country using the HLM procedure withrandom effects. This means that the hypothesizedpredictors of bribery activity at the firm level (level1) were based on deviation from local norms. Inaddition, centering our firm-level variables fromcountry-level means produced within-country

slopes that were based on deviations from localnorms. The level 2 hypotheses tested with randomeffects intercepts-as-outcomes models, in turn, pre-dicted differences in the country means of firm-level bribery, adjusting for within-country firm-level effects and controls.

RESULTS

Table 1 shows the correlation matrix and de-scriptive statistics for the variables in the study at

both level 1 (firm) and level 2 (country). As noted,we weighted the correlations by sample size to giveequal and proportionate weighting to the variousnations. We attached country-level indicators toindividual firms to calculate correlation coeffi-cients both within and across levels of analysis.Because of the counterweighting, the correlationsamong level 2 variables are the same as those forthe 38 countries if estimated separately.

Table 2 presents the results for the three modelsspecified above. Model 1 shows the results of test-ing our main effects hypotheses at the country leveland at the firm level. Models 2 and 3 show theresults of testing the moderation hypotheses. Sep-

arate models were necessary because the parameterestimates for the main effects variables were notinterpretable independent of their product terms.Indeed, once product terms are entered into anequation, the interaction consists of both the mainand product terms (Cohen et al., 2003).

We computed the variance explained by the totalmodel as well as at the various levels of analysisusing techniques recommended by Bryk and Rau-denbush (1992: 19). The country-level variables ex-plained 36 percent of the between-country variancefor model 1, 32 percent for model 2, and 35 percent

for model 3. Following multilevel theoretical pre-scriptions (e.g., Bryk & Raudenbush, 1992), we alsoestimated the total model-explained variance per-centages, which were 54 percent for model 1, 55percent for model 2, and 54 percent for model 3.

Country-level results, adjusted for individualfirm-level differences, showed the presence or ab-sence of support for our hypotheses regarding cul-tural and social predictors of local bribery activity.Hypothesis 1, involving the cultural value of anachievement orientation, was not supported, as acountrys level of achievement orientation did not



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have a significant main effect on bribery activity,although the relationship was positive, as pre-

dicted. For Hypothesis 2, we posited that lowerlevels of in-group collectivism increase the preva-lence of bribery activity. With a statistically signif-icant estimate of 9.26 for in-group collectivism(

02j,p .001), we found support for this hypothe-

sis, confirming that more individualistic societiesare likely to have more local bribery activity. Asstated in Hypothesis 3, we expected that a lowemphasis on the cultural value of a humane orien-tation results in more bribery activity. Althoughthis relationship was negative as predicted, the pa-rameter estimate was not statistically significant.

Our hypotheses dealing with social institutionsfocused on two political elements, the extent ofstate welfare socialism and the extent of politicalconstraints on government. With regard to Hypoth-esis 4, we found support for the premise that thegreater the extent of welfare socialism in an econ-omy, the less prevalent local bribery is (04j 1.92, p .05). Hypothesis 5, regarding the effectsof political constraints, was also supported, dem-onstrating that stronger political constraints in asociety reduce local bribery (05j 5.13, p .10).More subtle interpretations of anomie theory sug-

gest that the effects of cultural values on bribery arenot necessarily universal but are likely moderated

by a countrys institutional context. We examinedthese relationships by testing the interaction effects

between the cultural values and bribery, as moder-ated by the institutions of welfare socialism andpolitical constraints. These interactions producedstrong and significant results and perhaps the mostinteresting findings for this multilevel study of

bribery. Figures 1, 2, and 3 show plots of the inter-action effects posited in the moderation hypothe-ses. We plotted interactions using standardizedscores for bribery activity and the independentvariables. Thus, all variables could be plotted on

the same scale rather than individually on uniquemetrics. Plots show the effects of the culture vari-ables at illustrative high ( 1 s.d.) and low ( 1 s.d.)levels of the institutional moderators.

Supporting Hypothesis 6a, the level of welfaresocialism significantly impacts the relationship be-tween national achievement orientation and brib-ery activity (07j 3.60, p .01). This significantinteraction effect shows that under conditions oflower welfare socialism, the cultural value of anachievement orientation becomes a strong predic-tor of bribery activity (see Figure 1). Conversely,

TABLE 1Descriptive 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 levelLevel 22. Achievement orientation 6.03 0.31 .13 (.72)

3. In-group collectivism 5.78 0.32 .24 .54 (.77)4. Humane orientation 5.44 0.22 .10 .16 .25 (.88)5. Welfare socialism 0.00 0.86 .27 .01 .15 .20 (.78)6. Political constraints 0.62 0.23 .24 .29 .09 .01 .36

Firm levelLevel 17. Financial constraints 9.90 7.33 .14 .17 .09 .05 .10 .07 (.76)8. Competitive intensity 2.33 0.67 .34 .26 .21 .15 .07 .25 .03

Control9. GDPc 11.00 0.88 .22 .13 .22 .23 .31 .36 .05 .13

10. Manufacturing 0.29 0.46 .05 .02 .01 .11 .04 .07 .07 .03 .0111. Services 0.44 0.50 .10 .01 .05 .07 .16 .04 .09 .04 .08 .5812. State ownership 6.96 23.52 .03 .10 .08 .05 .07 .04 .04 .06 .11 .03 .0113. Number of employees 1.78 0.71 .05 .09 .02 .04 .10 .03 .04 .12 .08 .15 .14 .20

14. Sales revenues 3.02 2.66 .15 .14 .04 .05 .18 .27 .06 .13 .11 .05 .01 .06 .27

a n 3,769, level 1;n 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 .05. Correlations greater than .05 are significant at p .01.c Mean and standard deviation are in billions of dollars.



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when a countrys polity has higher levels of welfaresocialism, an achievement-oriented culture re-duces bribery activity.

The relationships of bribery activity with the cul-tural values of in-group collectivism (08j 2.25,p .05) and a humane orientation (09j 2.19,

TABLE 2Results for HLM Analysis of Firm-Level Bribery Activitya

VariablesHypothesized

Sign

Parameter Estimates

Model 1 Model 2 Model 3

b s.e. b s.e. b s.e.

Country-level hypothesesLevel 2

National cultureAchievement orientation (01j) 3.06 2.76 1.80 2.88 3.95

2.73In-group collectivism (02j) 9.26*** 2.59 9.65*** 2.57 9.90*** 2.53Humane orientation (03j) 2.74 3.28 10.83* 4.61 5.43

3.66Social institutions

Welfare socialism (04j) 1.92* 0.95 1.76* 0.90 1.58* 0.93Political constraints (05j) 5.13

3.68 6.16* 3.43 7.79* 4.11Interaction effectsAchievement orientation welfare socialism (07j) 3.60** 1.39

In-group collectivism welfare socialism (08j) 2.25* 0.94Humane orientation welfare socialism (09j) 2.19

1.38Achievement orientation political constraints (10j) 1.64* 0.89

In-group collectivism political constraints (11j) 2.28* 1.04Humane orientation political constraints (12j) 0.87 0.84

Firm-level hypothesesLevel 1Financial constraints (1j) 0.11*** 0 .02 0.12*** 0.02 0.12*** 0 .02Competitive intensity (2j) 0.39* 0.18 0.39* 0.18 0.39* 0.18

Control

GDP (06j) 1.72* 0.92 0.72 0.96 0.85 1.00Manufacturing (3j) 0.07 0.39 0.12 0.39 0.14 0.39Services (4j) 0.14 0.31 0.05 0.31 0.06 0.31State ownership (5j) 0.02*** 0.01 0.02*** 0.01 0.02*** 0.01Number of employees (6j) 0.56** 0.21 0.57** 0.21 0.57** 0.21Sales revenues (7j) 0.11* 0.06 0.12

0.39 0.11 0.06

a

Level 1 n

3,769; level 2 n

38. GDP was log-transformed prior to analysis. p .10*p .05

**p .01***p .001

FIGURE 1Achievement Orientation at Selected Levels of Welfare Socialism and Political Constraintsa

a Values for bribery and achievement orientation are standardized.



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p .10) had significant interactions with the extentof welfare socialism. Contrary to Hypothesis 6b, the

negative effects of in-group collectivism on briberywere muted as the degree of welfare socialism in-creased (see Figure 2). Perhaps we see here anoffsetting of loyalty, with loyalty to proximalgroups being stronger than that to society as awhole. However, supporting Hypothesis 6c, the

bribery-activity-reducing effects of a humane orien-tation were enhanced at higher levels of welfaresocialism. The steeper slope for high welfare social-ism in Figure 3 depicts this relationship.

The results for Hypotheses 7a and 7b, regardingthe moderating effects of political constraints, fol-

lowed a pattern similar to those of welfare social-ism. Consistently with Hypothesis 7a, the negativeinteraction between an achievement orientationand political constraints (10j 1.64, p .05)showed that bribery activity was negatively relatedto an achievement orientation under conditions ofhigher political constraints and positively relatedunder lower political constraints (see Figure 1).Contrary to Hypothesis 7b, the significant interac-tion of in-group collectivism with political con-straints (11j 2.28, p .05) showed that greaterpolitical constraints reduced the generally negative

(i.e., bribery-inhibiting) effects of in-group collec-tivism (see Figure 2). Finally, the prediction that

political stability moderates the relationship be-tween the cultural value of a humane orientationand bribery was not supported.

In contrast to main effects, the interaction effectselaborated the conditions under which the culturalvariables behaved as anticipated in anomie theory.In keeping with a more complex interactive view ofanomie theory, as welfare socialism and the stabil-ity gained through political constraints increase,the bribery-predicting effects of these cultural vari-ables were inflated or depleted.

The results shown in Table 2 indicate support for

our firm-level hypotheses. Hypothesis 8 predictsthat perceived financial constraints on a firm havea significant effect on the likelihood of the firmsengaging in bribery activity. The data supportedthis argument, with firm financial constraints hav-ing a positive, significant effect on bribery activity(1j 0.11,p .001). Hypothesis 9 was supported,demonstrating that the competitive intensity per-ceived by firms managers is likely to increase brib-ery activity (2j 0.39, p .05). The data suggestthat more perceived strategic group rivalry and,ultimately, the extent to which firms decision

FIGURE 2In-Group Collectivism at Selected Levels of Welfare Socialism and Political Constraintsa

a Values for bribery and in-group collectivism are standardized.

FIGURE 3Humane Orientation at Selected Levels of Welfare Socialisma

a Values for bribery and humane orientation are standardized.



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makers believe that they must compete for re-sources, likely increase bribery. In sum, the resultsprovide preliminary evidence for the powerful ef-fects of anomie generated at the firm level as well asat the country level.

With regard to our control variables, GDP was astatistically significant (06j 1.72, p .05) pre-

dictor of bribery activity in model 1. This effect,however, diminished in the more complex models.These results suggest that although more affluentcountries have less bribery, various combinationsof cultural values and institutional context mightoffset this effect. Industry was not a significantdeterminant of bribery. Although we presented noformal hypotheses considering the effect of a firmsindustry on bribery activity, we suspected the in-fluence of the country-level variables would over-whelm any lower-level industry effects. The per-centage of state or government ownership of a firmwas significantly, inversely related to bribery activ-ity, as we suspected it would be, and in keepingwith past research (5j 0.02,p .001). Firm sizemeasured as number of employees was signifi-cantly and negatively related to bribery (6j 0.56, p .01). Size indicated by sales revenues,however, was a positive predictor (7j 0.11,p .05).

DISCUSSION AND IMPLICATIONS

The advantages of multilevel theory and methodsallowed our study to span a variety of national

contexts and nearly 4,000 firms from 38 countries.In the spirit of enhancing multilevel theory andresearch, we drew from classic sociological theoryand extended it to a multilevel framework testinghypotheses relating broad country- and firm-levelvariables to managerial reports of firm bribery. Weadvance anomie theory, furthermore, by applyingits central premises to firm-level phenomena inaddition to cultural and societal factors. Our mul-tilevel framework lends theoretical support andprovides empirical evidence for anomic conditionsperpetuated at both the societal and the firm levels.

To our knowledge, our theoretical extension of an-omie to the firm level is a novel contribution, ad-vancing the anomie theoretical framework beyondthe more traditionally studied societal conditions.In addition, our results provide support for theinfluence on bribery activity of cultural values, in-cluding an achievement orientation, collectivism,and a humane orientation, and the complexities oftheir interactions with polities.

Specifically, both the extent of welfare socialismand the degree of political constraints present in asociety have important moderating effects on the

impact of culture on bribery. These moderating re-lationships refine and advance the theoretical as-sertions of anomie theory. In particular, our resultsspecify instances in which national cultural effectson bribery activity may be either muted or en-hanced by the extent to which two mechanisms,welfare socialism and political constraints, are

present in a society. We believe that our findings,grounded in the larger framework of anomie theory,represent significant extensions of the theoreticaldomain.

Our findings emphasize that higher levels of wel-fare socialism and political constraints offset thepower of those cultural values hypothesized byanomie theory to make goal achievement more im-portant than the legitimacy of the means used toachieve the goals. These findings are independentof national wealth, which has often been assumedto be the major driver of bribery. Without an insti-tutional framework that mutes the effects of ano-mie-driving cultural values, our findings suggest,firms likely engage in more bribery to achieve theirgoals.

Our firm-level sample consisted largely of smallto medium-sized firms, as one would expect, giventhat most firms in the world are small to medium-sized. However, as we noted above, managers inlarger firms may be less dependent on the supportsprovided by welfare socialism, a condition thatwould reduce its ability to limit bribery. Althoughwe did not formally hypothesize such a reduction,we conducted an ex post facto analysis of this pos-

sibility by dividing the sample into small and largefirms and then examining the effects of welfaresocialism on bribery for these subgroups. Not sur-prisingly, welfare socialism had a significantlymore pronounced effect in reducing bribery forsmaller firms, although the direction of the effectremained negative for both groups. These resultssupport the liability of size argument that small andmedium-sized firms are more vulnerable to com-petitive forces and perhaps face more pressure todeviate when their polity fails to provide adequatesecurity nets. This conclusion may suggest future

research opportunities, given that the majority ofthe worlds firms are small to medium-sized andthat these firms are instrumental in their nationsGDPs and economic growth (Beck, Demirguc-Kunt,& Levine, 2003).

According to anomie theory, more individualis-tic countries instill stronger drives for success atthe expense of the collective and therefore havemore societal actors that choose deviance or illegit-imate routes to success. Supporting this position,we found that collectivism reduced bribery. How-ever, one paradoxical finding was that the institu-



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tional mechanisms designed to make competitionmore equitable and predictable (political con-straints) and failure less catastrophic (welfare so-cialism) muted the generally deviance-reducing ef-fects of collectivism. One possible explanation isthat the society-wide benefits that accrue from na-tional political systems may counter loyalties to

more proximal groups in collectivist cultures.In our extension of anomie theory to the firmlevel, findings suggest that perceived pressures in alocal environment produce anomic strain and in-crease bribery activity. Specifically, the data sup-ported our notion that managerial perceptions offinancial constraints increase the supplying of

bribes to public officials who might help getthings done. Also as hypothesized, perceivedcompetitive intensity significantly and positivelyimpacted the likelihood of a firms engaging in

bribery. In the logic of anomie theory, the greaterthe perceived competitive intensity, conceptual-ized in terms of the important strategic groups rel-evant to a firm, the greater the likelihood of thefirms resorting to deviant means to compete.

These two effects substantiate our assertions thatfirms likely supply bribes as a strategic response tolocal competitive and constraining conditions.Specifically, to achieve competitive advantage inanomic situations, firms managers are more likelyto choose deviant means (i.e., bribery) to createopportunities and remove barriers to their success.Importantly, our methodology allows us to observethese firm-level effects within countries, evidenc-

ing that the positive effects of competition and fi-nancial constraints on bribery occur relative to lo-cal norms. That is, regardless of the degree to which

bribery is a common practice in a country, in keep-ing with anomie theory, the unique pressures firmsface increase their propensity to bribe.

Managerial Implications

The findings of our analyses inform firms andtheir decision makers on many fronts. The country-

level conditions found to be significant drivers ofbribery are characteristic of achievement-oriented,individualistic (as opposed to collectivist) societieswith a low emphasis on humane values. Our resultsmay inform company boards of directors about thepotential for bribery activity by their firms, helpingfacilitate company-wide compliance with regard to

bribery behaviors. By understanding local culturalconditions and institutional forces, firms may diag-nose a priori the potential pressure to bribe they arelikely to face in their home countries. What is more,firms might better anticipate such behavior on the

part of their local competitors, who may also usebribery to gain strategic advantages.

Our results provide a clearer picture of briberyevolving from the supply side, which may benefitlocal strategic decision making. When grapplingwith daily operations, for example, firms might

better evaluate their domestic markets in view of

cultural and institutional forces that may impedeefforts to conduct business ethically. Top-levelfirm decision makers are also better prepared tomitigate employees offering or supplying bribeswhen the decision makers are aware of contextualcombinations that promote such behavior. Contri-

butions of knowledge in this domain allow localdecision makers acting on behalf of resource-constrained firms to make insightful strategic deci-sions based on informed and validated criteria toachieve optimal outcomes, even in highly compet-itive environments.

Conclusions and Future Research

Our research objective was to cross levels of anal-ysis to juxtapose the underlying tenets of anomietheory with reports from individual firms regardingtheir experience with bribery. The broader im-plications of our multilevel analysis advance andrefine the foundational premises of anomie theoryarticulated by Durkheim (1897/1966) and laterMerton (1968) and Messner and Rosenfeld (2001),illustrating the cultural, institutional, and organi-zational drivers that set the stage for firm-level de-

viance. Ultimately, societal pressures are so greatthat they propagate behaviors defying hypernorms,some of civilizations most deeply held beliefs. An-omie provides a theoretical explanation for why a

behavior like bribery, which has been universallydenounced as wrong, continues to thrive in firmsworldwide. This theoretical framework allowed usto understand why behaviors such as bribery differ

by country. Finally, anomie theory has proven in-sightful with regard to firm-level phenomena aswell. Our extended analyses of firm financial con-straints and competitive intensity allowed us to

broaden the tenets of anomie theory to the organi-zation level, ultimately advancing theory. The re-sults signify the potential value of applying our

broadly based framework as a cross-level explana-tory backdrop in global managerial research.

Our analysis was limited by the sample size of 38countries, which restricted the number of level 2variables we could include as controls owing torelatively low statistical power and the risk of type2 error. Beyond the theoretically compelling andunique combination of variables included in ouranalysis, a number of nation-level controls could



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have been included. For example, in consideringinstitutions related to polities, the extent of the ruleof law and the degree of economic freedom presentin a country have been examined as nation-levelfactors involved in corruption (Nwabuzor, 2005).Although these variables have conceptual (favor-able institutional conditions for business) and em-

pirical (correlations greater than .5) overlap withthe Henisz measure of political constraints, we didexamine their effects in exploratory analyses. En-suring confidence in the strength of our models, thepresence of these added controls had minimal ef-fects on our results, reducing the significance levelof one interaction to slightly above .1 because of thedecrease in statistical power. Consistently withprevious findings, both had negative relationshipswith bribery activity. Additional social institutionscould have been examined as well. Specifically,nonstate welfare nets such as family or religionmay moderate the effects of national culture on

bribery in a manner similar to the effects of welfaresocialism.

Future researchers using a cross-level lens mightapply anomie theory to other areas of corporatewrongdoing, such as tax evasion or false reportingof accounting data. Different or additional cultural,institutional, and organizational factors might berequired for such studies. Further, the strength andcertainty of legal sanctions and other punishmentsfor bribery could prove an important area for futureresearch. The interface between religion and politymight explain why some acts such as bribery are

tolerated while other acts deemed deviant are pun-ished severely. Also of interest might be multilevelstudies that examine as dependent variables therelationships between firm-level demand-side fac-tors, such as firm size, and bribery. Further, a find-ing of our study, the contrasting effects of firm sizeas measured by number of employees (negativelyrelated to bribery) and size measured as sales rev-enues (positively related to bribery), warrants fur-ther investigation.

More sophisticated treatments of culture alsosuggest future research directions. One fascinating

area of exploration would be juxtaposition of thepredominant facets of a national culture with anations predominant business culture. Althoughnational cultural variables interacted with socialinstitutions to have powerful effects on bribery inour study, the possible combinative effects with

business culture also merit investigation. Finally, acomplete study of bribery from the perspective ofanomie theory would require examination of the

behaviors of both suppliers and demanders. Al-though this study focuses on the supply-side char-acteristics of bribery, attempting to balance econo-

mists tendency to only look at the demand side, itis unlikely that deviance occurs only on one side.Certainly, both firms and government officials canuse bribery to serve their self-interested ends, war-ranting balanced examination.

Our analysis provides insight into the organiza-tional, cultural, and institutional drivers of bribery

activity among local firms in their home countries.Accordingly, we are better equipped to understandhow bribery can occur under certain combinationsof local conditions. In light of the conclusions de-rived from our cross-level investigation, we hopethat broad-based anomie theoretical perspectiveswill continue to explain elusive and troublesomephenomena impacting firms, their stakeholders,and society in general.

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Cross.level.analaysis.of.Bribery.activities AMJ.2007