Corruption in business: motives and influence on shadow economy
Abstract
The paper devoted to the research of the corruption offenses in the activity of business entities which are quite a common phenomenon that causes serious moral, economic and political problems, hinders development and distorts fair competition. The purpose of the study is to reveal the distinguishing peculiarities of corruption in business to business relations and special features of the behavior of the corrupt company employee in the context of corruption influence on the level of the shadow economy of Ukraine. The differences between employment in the public and private sectors are highlighted. Analyzing relevant literature, the paper offers a model of corruption-related decision-making of an enterprise employee that takes into account all the factors that may influence a choice of involvement in the corruption offenses. The main causes of corruption in business are viewed as the competitive advantages the company can gain and the level of corruption around it. The research proves that the company can start participating in corrupt practices because many representatives of the business environment are involved in it, claiming that it is the only way to survive. The paper proves the impact of corruption on the level of shadow economy on the example of Ukraine. The essence and constituent elements of the shadow economy are revealed, as well as the negative consequences of the shadow economy, the spread of which is facilitated by corruption in the authorities and government. We proved that the higher level of corruption in the public sphere will result in a higher level of corruption inside the business environment. We proved that special attention should be given to the corruption in business relations as a sub-set of a general corruption phenomenon. The suggested by authors model of corruption-related decision making in business to business relations facilitates better understanding of the true nature of the business corruption phenomenon and development of well thought anti-corruption measures both on company and government levels.
Keyword : corruption-related decision, business activity, corruption, Business-to-Business (B2B) corruption, economic freedom, shadow economy
This work is licensed under a Creative Commons Attribution 4.0 International License.
References
Acemoglu, D., & Verdier, Th. (1998). Property, corruption and the allocation of talent: A general equilibrium approach. The Economic Journal, 108(450), 1381–1403. https://doi.org/10.1111/1468-0297.00347
Acemoglu, D., & Verdier, Th. (2000). The choice between market failures and corruption. American Economic Review, 90(1), 194–211. https://doi.org/10.1257/aer.90.1.194
Ackerman, S. (1999). Corruption and government: Causes, consequences, and reform. Cambridge University Press.
Amar, A. (2012). Models of corruption [Master’s thesis, Business School]. The University of Birmingham.
Argandoña, A. (2003). Private-to-private corruption. Journal of Business Ethics, 47(3), 253–267. https://doi.org/10.1023/A:1026266219609
Aven, B. L. (2015). The paradox of corrupt networks: An analysis of organizational crime at Enron. Organization Science, 26(4), 980–996. https://doi.org/10.1287/orsc.2015.0983
Bahoo, S., Alon, I., & Floreani, J. (2021). Corruption in economics: A bibliometric analysis and research agenda. Applied Economics Letters, 28(7), 565–578. https://doi.org/10.1080/13504851.2020.1764476
Barfort, S., Harmon, N. A., Hjorth, F. G., & Olsen, A. L. (2015). A formal model of corruption, dishonesty and selection into public service. https://static-curis.ku.dk/portal/files/144009137/CorruptionDishonestyCorruption_theory.pdf
Bowen, H. (1953). Social responsibilities of the businessman. Harper and Row.
Burduja, S. I., & Zaharia, R. M. (2019). Romanian business leaders’ perceptions of business-to-business corruption: Leading more responsible businesses? Sustainability, 11(20), 5548. https://doi.org/10.3390/su11205548
Campbell, J.-L., & Göritz, A. S. (2014). Culture corrupts! A qualitative study of organizational culture in corrupt organizations. Journal of Business Ethics, 120(3), 291–311. https://doi.org/10.1007/s10551-013-1665-7
Coricelli, G., Joffily, M., Montmarquette, C., & Villeval, M. C. (2010). Cheating, emotions, and rationality: An experiment on tax evasion. Experimental Economics, 13, 226–247. https://doi.org/10.1007/s10683-010-9237-5
Coricelli, G., Rusconi, E., & Villeval, M. C. (2014). Tax evasion and emotions: An empirical test of re-integrative shaming theory. Journal of Economic Psychology, 40, 49–61. https://doi.org/10.1016/j.joep.2012.12.002
Cuervo-Cazurra, A. (2016). Corruption in international business. Journal of World Business, 51(1), 35–49. https://doi.org/10.1016/j.jwb.2015.08.015
Dejardin, M. (2011). Entrepreneurship and rent-seeking behavior. In D. Audretsch, O. Falck, S. Heblich, & A. Lederer (Eds.), Handbook of research on innovation and entrepreneurship (pp. 17–23). Edward Elgar Publishing. https://doi.org/10.4337/9781849807760.00009
Ernst & Young. (2017). Europe, Middle East, India and Africa Fraud Survey 2017 (EMEIA Fraud Survey). http://d2f5upgbvkx8pz.cloudfront.net/sites/default/files/inline-files/EMEIA%20Fraud%20Survey.pdf
Fassin, Y. (2005). The reasons behind non-ethical behaviour in business and entrepreneurship. Journal of Business Ethics, 60(3), 265–279. https://doi.org/10.1007/s10551-005-0134-3
Freedom House. (2022). Freedom in the world 2022. Ukraine. https://doi.org/10.12968/nuwa.2022.3.14
Gino, F., & Bazerman, M. (2009). When misconduct goes unnoticed: The acceptability of gradual erosion in others’ unethical behavior. Journal of Experimental Social Psychology, 45(4), 708–719. https://doi.org/10.1016/j.jesp.2009.03.013
Index of Economic Freedom. (2022). Graph the data. https://www.heritage.org/index/visualize
International Monitory Fund. (2016). Corruption: Costs and mitigating strategies. IMF. https://doi.org/10.5089/9781513594330.006
Jacoby, N. H., Nehemkis, P., & Eells, R. (1977). Bribery and extortion in world business: A study of corporate political payments abroad. MacMillan and Co.
Köbis, N. C., Prooijen, J. W., Righetti, F., & Van Lange, P. A. M. (2017). The road to bribery and corruption: Slippery slope or steep cliff? Psychological Science, 28(3), 297–306. https://doi.org/10.1177/0956797616682026
McLean, B., & Elkind, P. (2003). The smartest guys in the room: The amazing rise and scandalous fall of Enron. Portfolio Trade.
Momot, T. V., Mizik, I. I., & Polituchyi, S. Y. (2016). Anti-corruption compliance in strategic monitoring of personnel security at an enterprise. Actual Problems of Economics, 6(180), 167–175.
Ogrean, C. (2007). From business corruption to business ethics – new challenges for the competitive strategy of the firm. Studies in Business and Economics, 2(2), 49–64. http://eccsf.ulbsibiu.ro/RePEc/blg/journl/227ogrean.pdf
Orlovskyi, R., Shapoval, R., & Demenko, O. (2018). Possibilities of adapting the typologies of the international standards for establishing criminal liability for corruption-related crimes in Ukraine. Journal of Eastern European and Central Asian Research (JEECAR), 5(2), 12. https://doi.org/10.15549/jeecar.v5i2.230
Rendtorff, J. (2010). The concept of corruption: Moral and political perspectives. Organization and Management, 139(1), 125–133. https://doi.org/10.2478/v10166-010-0009-4
Roy, A. (2007). Corruption in business: Management theory and practice. International Journal of Business and Globalisation, 1(3), 311–327. https://doi.org/10.1504/IJBG.2007.015051
The Global Anticorruption Blog. (2014). The source of the $1 trillion in annual bribes figure. GAB. https://globalanticorruptionblog.com/2014/04/24/the-source-of-the-1-trillion-in-annual-bribes-figure/
The Ministry of Economic Development and Trade of Ukraine. (2021). General tendencies of the shadow economy in Ukraine. Report. https://minfin.com.ua/ua/2021/06/29/67115422
The World Bank. (2019). Enterprise surveys. http://www.enterprisesurveys.org/data/exploretopics/corruption#--13
The World Bank. (2020). Anticorruption fact sheet. https://www.worldbank.org/en/news/factsheet/2020/02/19/anticorruption-fact-sheet
Torsello, D. (2018). Organizational culture and corruption. In D. Poff & A. Michalos (Eds.), Encyclopedia of business and professional ethics (pp. 1–5). Springer. https://doi.org/10.1007/978-3-319-23514-1_136-1
Transparency International Ukraine. (2021). Corruption Perceptions Index-2021. Report. https://ti-ukraine.org/en/research/corruption-perceptions-index-2021/
Uribe-Toril, J., Ruiz-Real, J. L., Ceresia, F., & Valenciano, J. (2019). Corruption and entrepreneurship: A bibliometric analysis. Journal of Legal, Ethical and Regulatory Issues, 22(4), 1–11. https://www.abacademies.org/articles/corruption-and-entrepreneurship-a-bibliometric-analysis-8512.html
Voliotis, S. (2017). Establishing the normative standards that determine deviance in organizational corruption: Is corruption within organizations antisocial or unethical? Journal of Business Ethics, 140(1), 147–160. https://doi.org/10.1007/s10551-015-2652-y