The Price of International Business Morality: Twenty Years Under The Foreign Corrupt Practices Act

Last year marked the 20th anniversary of the Foreign Corrupt Practices Act (FCPA) of 1977. The FCPA is the first and only statute prohibiting bribery and other corrupt business practices by U.S. citizens and companies conducting business overseas. This paper provides an overview of the FCPA during the two decades of its existence. More specifically, the objectives of this paper are four-fold. First, the paper provides background information about the FCPA of 1977 and subsequent amendments in 1988. Second, the paper discusses the enforcement of the FCPA since its passage by examining the number of cases prosecuted under the FCPA and the respective penalties imposed. Third, the paper discusses the economic impact of the FCPA by addressing whether the FCPA places U.S. firms at a competitive disadvantage. Fourth, the paper provides public policy recommendations to expand the reach and scope of the FCPA. It covers efforts to criminalize bribery through multilateral organizations, such as the Organization for Economic Cooperation and Development (OECD), the World Trade Organization (WTO), and the Organization of American States (OAS). It also covers bilateral arrangements and efforts by non-governmental organizations such as Transparency International.     

The ethical issue of international bribery: A study of attitudes among U.S. business professionals

Restrictions upon international bribery by U.S. business firms, as incorporated in the Foreign Corrupt Practices Act, have been controversial since this legislation was passed in 1977. Despite many attempts to repeal or change the law, it remains as originally enacted.This article reports on a survey of U.S. business professionals concerning international bribery. Response to our survey reveals a divided business community in terms of their opinions on the ethics of international payments prohibited by the present law.In addition to a lack of consensus about the morality of payments, the survey also reveals a diversity in the viewpoints of respondents. Moralism, pragmatism, cultural relativism, and legalism are four distinct underlying assumptions apparent in the attitudes of U.S. business professionals on the issue of questionable international payments. Justin G. Longenecker is an Emeritus Chavanne Professor of Christian Ethics in Business at Baylor University. He has written several articles and he is the co-author of two books: Small Business Management (1987) and Management (1984). Joseph A. McKinney is Professor of Economics and Co-Director of Master of International Management Program at Baylor University. His articles have been published in journals such as Atlantic Economic Journal and Columbia Journal of World Business. Carlos W. Moore is an Edwin W. Streetman Professor of Marketing at Baylor University. He is the co-author of Small Business Management (Cincinnati, South-Western Publishing Company, 1987).     

The Foreign Corrupt Practices Act: The Failure of the Self-Regulatory Model of Corporate Governance in the Global Business Environment

The American regulatory model of corporate governance rests on the theory of self-regulation as␣the most effective and efficient means to achieve corporate self-restraint in the marketplace. However, that model fails to achieve regular compliance with baseline ethical and legal behaviors as evidenced by a century of repeated corporate debacles, the most recent being Enron, WorldCom, and Refco. Seemingly impervious to its domestic failure, Congress imprinted the same self-regulation paradigm on legislation restraining global business behavior, the Foreign Corrupt Practices Act. This anti-bribery initiative prohibits unethical and illegal payments made to foreign public officials in an effort to eradicate bribery as a rational-choice global market entry strategy. However, this paper illustrates, using newly complied statistics from 1977 to 2008, that the FCPA has not had a dramatic impact on U.S. global corporate behavior despite its recent high profile coverage and the tough regulatory rhetoric about corporate compliance. The paper also extends the prior Cragg and Woof FCPA efficiency study and provides current empirical evidence to resolve several unanswered questions raised by that earlier study.     

Outward Foreign Direct Investment,Interindustry Networks,and U.S. Trade Politics

This article investigates how outward foreign direct investment by U.S. multinational corporations influences industry lobbying for trade protection in the United States, focusing on interindustry structure of goods sales networks between upstream and downstream sectors and also on the multinationals’ input procurement patterns. If foreign affiliates of U.S. multinationals switch input sources from U.S. to host-country suppliers, U.S. suppliers should receive a negative demand shock, ceteris paribus. An empirical test finds that those U.S. upstream sectors that are highly dependent upon U.S. multinationals for goods sales tend to lobby more as the multinationals’ overseas production and sales increase.     

Trade Policy and Global Corporate Strategy

This article is an investigation of the linkages between the international trade and investment strategies of firms faced with global competition and the structure of protectionism. The first section briefly reviews the problems faced by businesses competing in a global environment characterized by triad power. It also provides a new framework which describes the various strategic alternatives available to firms when dealing with government trade policy. In the second and third sections, this theoretical framework is applied to explain a new global trading phenomenon: the recent escalation os U.S. "administered" protection. It is demonstrated how such protection can severely affect the environment for corporations when used as a strategic weapon by U.S. firms against foreign rivals. The fourth section assesses the response of Canadian firms faced with the issue of U.S. administered protection. It demonstrates how they have been able to influence government policy in order to diminish the impact of U.S. protectionism. This section also addresses the question of why certain Canadian firms oppose trade liberalization between the United States and Canada, in spite of administered protection, and how they have been able to influence the Canadian government in order to maintain "artificial" competitive advantages.     

Bribery and Corruption: the OECD Convention on Combating the Bribery of Foreign Public Officials in International Business Transactions

This article discusses the effects of the OECD Convention on Combating the Bribery of Foreign Public Officials, which was signed in 1997 and is due to be implemented by the signatory nation-states this year. The Convention represents the expansion of legal measures to combat the bribery of foreign public officials by individuals or corporations, and it has been accompanied by the Organisation of American States' Convention Against Corruption. Previously the Foreign Corrupt Practices Act (FCPA), which applied only to United States individuals or corporations, 'stood alone in the world as a legal barrier to transnational bribery' (Low, Bjorklund and Atkinson 1998:245). This article proceeds in stages to evaluate implications of the Convention. Firstly the Convention is placed in the context of the increased focus on transnational business bribery in recent years. Second, the main points of the Convention are outlined. Third, the issues and problems posed by the Convention for business are discussed. Finally some themes regarding enforcement by the relevant authorities are outlined.     

Foreign market entry mode of service firms: The case of U.S. MBA programs

While international expansion has become an important strategic imperative on the part of knowledge intensive service firms such as U.S. business schools, little empirical support is available on how these business schools enter foreign markets. If U.S. based business education programs are expected to prosper in light of the potential onslaught of international competition, expansion to overseas markets will be one of the most sought after options available. A poor choice in market entry strategy, or the lack of international market entry, can result in a negative impact on the educational institution. This research focuses on developing, measuring, and empirically testing a framework of key factors influencing international market entry mode choice of U.S. business schools by using primary data from faculty and administrators of U.S. Master of Business Administration (MBA) schools.     

The Foreign Corrupt Practices Act: Why It Fails to Deter Bribery as a Global Market Entry Strategy

Recent studies (Cragg and Woof, Bus Soc Rev 107(1):98–144, 2002; Weismann, J Bus Ethics 88:615–66, 2009) revealed that in the first 28 years of its existence, the Foreign Corrupt Practices Act was not enforced by the federal government. The Weismann study further concluded that the FCPA, designed by Congress as a self-regulatory model of corporate governance, failed to achieve the regulatory goal of deterring global bribery by U.S. companies. The current article addresses the reasons that the FCPA remains an ineffective measure to control bribery as a global market entry strategy despite the highly publicized 2006 Department of Justice initiative to increase prosecutions and tighten enforcement efforts. The failure arises out of both the increased use of informal dispositions of case prosecutions, (including non-prosecution and deferred prosecution agreements), which has made “getting caught” merely an increased “cost of doing business” and the failure to close the regulatory gaps in the statute that permit violators to slip through the enforcement net. The article updates and compiles the case prosecution data for every reported case prosecuted between 1977 and 2011. That data are then compared to the results of a 2010 integrity risk survey performed by Deloitte Financial Advisory Services and Forbes which reveal a widely held global business perception that compliance and integrity risks appear to be rising sharply and that the FCPA is ineffective in deterring bribery and corruption in foreign markets. The article aims to serve as a predictive tool for policy makers and business professionals in assessing risk in the global markets, particularly as commerce intensifies in the BRIC countries, notable for bribery and corruption.     

Quality improvement programs: Tools for international competitive advantage

There is growing concern about the long-run success of U.S. industries in the face of increasing foreign competition. Product quality is a strategic business issue. In an effort to gain competitive advantage, some firms are implementing organization-wide quality training programs. Many firms have still to recognize the benefits of a quality orientation, however. This article examines how quality programs are implemented in organizations. It considers factors leading to success in developing a quality orientation and compares the Japanese and American approaches. © 1992 John Wiley & Sons, Inc.     

Integrating Foreign Languages and Cultures into U.S. International Business Programs: Best Practices and Future Considerations

This paper describes the importance of foreign languages and cultures and their integration into U.S. international business programs. The author juxtaposes globalization strategies of European and American business schools and highlights pre-university foreign language study in Europe and the U.S. The paper goes on to describe model U.S. undergraduate and graduate international business programs and their use of strategies that lead to professional proficiency. The author concludes with a discussion of strategies to be considered by U.S. business schools.     

International Bribery: Does a Written Code of Ethics Make a Difference in Perceptions of Business Professionals

This article analyzes the attitudes of United States business professionals toward the issue of international bribery, and in particular, whether or not having a written code of ethics has an effect on these attitudes. A vignette relating to international bribery from a widely used survey instrument was employed in a nationwide survey of business professionals to gather information on ethical attitudes of respondents. Data were also collected on gender of respondents, whether or not respondents were self-employed, whether or not the respondents’ firms had a written code of ethics, and to what extent the respondents’ firms generated revenues from international operations. Attitudes concerning whether or not international bribery is ever acceptable exhibited wide dispersion. Respondents from firms that have a written code of ethics were significantly less likely to find international bribery acceptable. Firms that generate revenues from international operations were significantly more likely to have a written code of ethics than were firms which did not generate revenues from international operations. Implications of the findings for business policy are discussed. Joseph A. McKinney is Ben H. Williams Professor of International Economics at Baylor University. He was previously on the faculty of the University of Virginia, and has served as visiting professor to universities in Japan, France, the United Kingdom and Canada. His research interests include business ethics, international trade policy, and regional economic integration. Carlos W. Moore is the Edwin W. Streetman Professor of Marketing at Baylor University, where he has been on the faculty for more than 30 years. His research interests include business ethics, marketing and advertising evaluation, and small business strategies. He has done consulting on bank marketing and new product development.     

The changing role of U.S.-based MNCs: A financial perspective

An increasing number of US.-based multinational companies have adopted a strategy of “inward-oriented” diversification in the 1980s. This article focuses on the ensuing financial performance of these firms, especially as compared to that of a group of U.S.-based domestic corporations. Specifically, well-known performance and risk measures are applied to a sample of multinational and domestic firms based in the U.S. The data are analyzed over three five-year periods (1979-1983, 1980-1984, and 1981-1985). The overall results, while providing total support for a few of the major issues and lending partial support to the others, seem to indicate that U.S. multinationals may have adopted a successful strategy in response to a changing global economic environment.     

Why franchise companies expand overseas

Business format franchising is becoming an increasingly international activity. From 1971 to 1985, U.S. franchisors added foreign outlets at a rate of 17% per year, almost twice as fast as they added domestic outlets (Aydin and Kacker 1990). As a result, by 1990 more than 350 U.S. companies had more than 32,000 franchised outlets overseas. By 2000, 60% of all franchisors in the United States are expected to have outlets overseas (Hoffman and Preble 1993).This study examines the 815 largest U.S. franchisors to understand what capabilities encourage them to expand overseas. It finds that the key capability that predicts the intent to expand overseas is superior capability to reduce franchisee opportunism. Franchisors who seek foreign franchisees have developed a greater capability to bond against and monitor potential franchisee opportunism. The data show that these differences are consistent across all industries in which franchising takes place.The results of this study indicate that foreign entrepreneurs can identify the American franchisors most likely to expand overseas by looking at their pricing structure and their monitoring capabilities. The easy identification of characteristics from which to find American franchisors will help to reduce the search costs of potential foreign franchisees. This reduction in search costs will make the establishment of international franchise relationships less expensive.This study also provides guidance to franchisors interested in expanding overseas. The results show how franchisors can structure their franchise relationships to reduce potential franchisee opportunism. This ability to reduce franchisee opportunism will make it easier for franchisors to enter high-growth foreign markets using the franchising business mode.This study also has implications for researchers. It suggests that international business research examine further the mechanisms by which firms make contractual modes of international business work. Whereas many firms may internalize international market transactions under conditions likely to lead to market failure, the large number of franchisors who use franchising as an international expansion mode despite conditions of market failure suggests that more attention be paid to mechanisms that companies can use to reduce the probability of failure of international contractual transactions. By helping to explain how franchisors monitor foreign franchisees or bond them against opportunistic behavior, this study suggests that the international business literature develop a more complex understanding of the workings of international business transactions than the simple choice of internalization or contractual entry modes.     

中国内外贸一体化的实践、目标与政策建议(上)--对流通组织形式的考察

本文从流通组织形式的视角研究了中国内外贸一体化问题.文章首先总结了中国一批优势的生产企业、外贸企业和商业企业近年来在内外贸结合和国内外市场一体化经营方面的有益探索和实践,然后提出了流通组织的发展目标.为了推动内外贸一体化的发展和深化,作者还分别针对综合商社的发展、工业型跨国公司和零售企业的国际化经营提出了政策建议.     

The internationalization of Nigerian firms: Motivations and location patterns

Despite the increased number of studies of the internationalization of emerging‐market multinationals (EMNCs), Latin American and Asian firms have dominated the focus of such studies, while the study of the internationalization process of sub‐Saharan African firms in the international business literature is quite limited. Therefore, this article examines the motivations and location patterns of the internationalization process of four Nigerian firms through a multiple case study approach. The findings show that the internationalization of the Nigerian firms is a recent phenomenon, but the foreign investment pattern reflects a pan‐African investment strategy. However, the findings also reveal that the firm‐specific advantages that had been accumulated in the domestic market, coupled with home‐country factors and regional‐/host‐market factors, were key determinants of the motivations and location patterns in the internationalization process of Nigerian firms.     

Evans,W. A. Advertising Today and Tomorrow. Great Britain: George Allen and Unwin, 1974

Abstract

This study reports on developments in the international advertising agency business during the 1970s. Findings suggest that U.S. agencies remain the dominant force in international advertising in contrast to the declining performance of U.S. industry in other sectors. Specifically, American agencies have found faster growth in their overseas markets leading to continually larger shares of their total billings; there has been a growing concentration in the international business of U.S. agencies and in the industry internationally; and, the international experience of U.S. agencies has led to a growing penetration of foreign markets, to growth in productivity, and to increasing domestic market power. Results of the study indicate however, that U.S. agencies may be facing increasing challenges from non-U.S. agencies in the future; notably from the West European, Japanese, and some developing countries.     

从历史视角看美国贸易政策的本质

美国的贸易政策是指能直接影响美国进出口地理方向和进出口商品结构、跨国投资的政府措施。必须从经济和政治结合的角度去理解美国的贸易政策,美国贸易政策的本质是实现美国国内外经济利益和政治利益的工具或手段。贸易保护主义和贸易自由化都是美国利益的实现方式。认识美国贸易政策的本质为认识中美贸易方面存在的问题提供一种思路。     

Expatriate management: Comparison of MNCs across four parent countries

This article reports the results of a study of expatriate management and headquarters‐subsidiary relations in 29 American, British, German, and Japanese multinationals and a sample of 46 of their foreign subsidiaries based on face‐to‐face and telephone interviews with key international HR, subsidiary HR, and subsidiary managing directors. We found that earlier studies, heavily weighted with U.S. multinationals, cannot necessarily be applied to expatriate management experiences of other national industrial countries. Also, expatriate management is more similar for American and British MNCs, while both German and Japanese multinationals in our sample had fairly distinct systems of using expatriates in their foreign subsidiaries. Thus, we can discuss at least three fairly distinct models of expatriate management and corporate‐foreign‐subsidiary control. © 2000 John Wiley & Sons, Inc.     

A Cross Cultural Analysis of the Geographical Knowledge of U.S., Irish,Israeli, Mexican,and South Korean Business School Students

ABSTRACT

Geographical knowledge about foreign countries is considered to be a significant factor related to the successful marketing of goods and services in international markets-a not insignificant conclusion by experts given the sizable trade deficits run up by the United States in 2000 ($365 billion), 2001 ($346 billion), and 2002 ($435 billion).

Unfortunately, previous research has concluded that U.S. business school students-tomorrow's executives who will make decisions that will impact their firms' international operations-have inadequate levels of international geographical knowledge.

This article compares the geographical knowledge of U.S. business school students to that of business school students in four countries: Ireland, Israel, Mexico, and South Korea. The sub-par performance exhibited by the U.S. students and the impact of six independent variables on global geographical knowledge are used to develop a number of pedagogical conclusions designed to enhance the international geographical knowledge of U.S. business school students and students in foreign business schools and overcome the antipathy toward this subject matter that apparently exists within business schools and their various external constituencies.     

A new look at ethics in international business

In many countries there are stated rules that gift-giving and solicitation in business practice are unethical and prohibited. However, except for the American FCPA, all the rules and guidelines seem to govern only domestic business practices and there are no clear-cut rules for international business practices in this respect. This study investigates gift-giving and solicitation in international business practice, using the data collected from 111 New Zealand international business firms. The research findings show variable conduct and contradictory attitudes. These findings suggest that, with the variety of ethical standards and levels of morality which exist in different cultures, neither Deontology nor Utilitarianism could be the answer to the dilemma of ethics and pragmatism that faces today's international business managers. Instead, “Culturalism,” as developed in this study, should be the guiding principle to international business ethics.