Bending the rules,breaking the rules: How corruption and lobbying affect the investment market selection of Swedish firms

There is stark evidence that many policies which influence firm gains from engaging in FDI (such as tax and trade policies) are targeted by lobbying groups and that corruption can be an important determinant of market attractiveness. The scarce research that exists on firm behaviour, corruption and lobbying shows that these activities can be regarded as alternative, and interdependent, influence forms. This paper provides the novel contribution of investigating how the market infiltration of corruption and lobbying affects the firm's investment decision. We identify the interdependent effects using census data for Swedish manufacturing firms that allows a complete identification of the firm's market selection. Our results reveal that these private–public sector links influence the firm's investment decision differently, as market selection is deterred by corruption and stimulated by lobbying, and that they function as substitutes. We show that the stimulating lobbying effect largely can be attributed to its interdependency with corruption, which suggests that firms are more shielded from corruption in lobbying environments. Further investigation reveals that the corruption and lobbying effects are not always representative of larger firms: The largest firms are undeterred by corruption in markets where lobbying forms an integral part of the business environment and larger firms are not stimulated by lobbying in markets largely void of corruption.     

Ethical Values as Part of the Definition of Business Enterprise and Part of the Internal Structure of the Business Oganization

The orientation of this paper is that there is no special science of "business ethics" any more than there is one of "medical ethics" or "legal ethics". While there may be issues that arise in medicine or law that require special treatment, the ways of relating to such issues are derived from a basic ethical stance. Once one has evolved such an ethical stance and thus has incorporated a fundamental mode of relating to her or his fellow human beings, the "how" to deal with various ethical "issues" will follow as a natural consequence of one's ethical stance or modality. It is not necessary, in the formation of one's fundamental ethical stance to know if one is a utilitarian or a deontologist. It is doubtful whether Buddha knew what kind of ethics he was practising. If one conceives of ethics as something extrinsic to various disciplines and attempts to first practise a discipline and then to apply ethics to modify the results of that discipline it is entirely possible that conflicts will result between what is perceived of as the proper pursuit of that discipline and the ethical considerations. The argument of this paper is that it is more efficacious (in addition to being more true) to take ethical considerations into account in the construction of the definition of the discipline. This paper is devoted to showing that business and ethics are not two different and competing fields of interest (thus requiring a discipline of business ethics to be grafted onto the study of business enterprise), but that ethical concerns are part and parcel of the very concept of a business enterprise and the internal operation of a business organization.     

Support for Investor Activism among U.K. Ethical Investors

An important goal of ethical investment is to influence companies to improve their ethical and environmental performance. The principal means that many ethical funds employ is passive market signalling, which may not, on its own, have a significant effect. A much more promising approach may be active engagement. This paper reports on a questionnaire study of a sample of 1146 ethical investors in order to assess whether U.K. ethical investors would support more activist ethical investment and whether they would be prepared to invest in companies which are failing ethically in order to do so. The results show general support for the current practice of passive signalling accompanied by "soft" engagement in the form of lobbying and the development of dialogue in order to improve corporate practice. The "harder" options of investing in companies that err in order to change them is, however, favoured by consistent minorities.     

Market Conduct and Endogenous Lobbying: Evidence from the U.S. Mobile Telecommunications Industry

This paper empirically explores the relationship between firms' market behavior and their lobbying activities in a regulated market. In particular, we investigate whether the amount of contributions offered by cellular service providers to fund the campaigns of political parties affected market conduct in the early US mobile telecommunications industry. We structurally estimate market interactions while taking the potential endogeneity of lobbying decisions into account. Our results show that competition was more intense in those states where campaign contributions by the cellular industry have been higher. Furthermore, we reject the hypothesis that lobbying activities can be regarded as exogenous in the study of market conduct.     

Lobbying and tariff formation: A deadweight loss consideration

This paper presents a model in which two organized groups spend real resources to influence a country's tariff policy. Being ‘small’ is shown to be advantageous in lobbying activities. The size of a group is measured by its share of national income. A small group bears only a small share of the deadweight loss which its lobbying and consequent deviation from free trade creates. Under plausible conditions, this advantage enables the smaller group engaged in lobbying to obtain trade restrictions which it views as beneficial.     

Using the "Ethical Environment" Paradigm to Teach Business Ethics: The Case of the Maquiladoras

The "ethical environment of business" provides a constructive frame of reference for business ethics instruction. As illustrated by a suggested role play about foreign sweatshops, it provides a realistic, problem-solving context for the study of moral and ethical ideas. Once ethical behavior is viewed through this paradigm, students can better see how business policies are shaped by ethics and prepare themselves to react to their own ethical environment.     

The Ethical Reputations of Managers in Nine EU-countries: A Cross-referential Survey

Mutual perceptions of ethical behaviour among managers in nine EU-countries were quantatively measured and related to perceptions concerning "ease of cooperation". A strong positive correlation obtains: the more ethical a country is perceived to be, the higher it is valued as an international business partner. Germany, however, is a typical exception to this rule: German managers are perceived as the most ethical, but are considered relatively difficult to cooperate with.     

Lobbying and the responsible firm: Agenda‐setting for a freshly conceptualized field

“Responsible lobbying” is an increasingly salient topic within business and management. We make a contribution to the literature on “responsible lobbying” in three ways. First, we provide novel definitions and, thereby, make a clear distinction between lobbying and corporate political activity. We then define responsible lobbying with respect to its content, process, organization, and environment, resulting in a typology of responsible lobbying, a conceptual model that informs the rest of the paper. Second, the paper provides a thematic overview of the current literature underpinning lobbying and the responsible firm, and the underlying paradigms informing this literature. Third, the paper makes specific suggestions for a future research agenda, ending with a consideration of methodological implications of such research.     

Machiavellian marketing: The development of corporate lobbying in the UK

Political lobbying by business has grown considerably in recent years. This paper considers its relationship with marketing communication and marketing. Niccolo Machiavelli, in “The Prince”, gives a practical treatise on how to use power and the influences upon the ruler. It is argued that the role of the political lobbyist and corporate campaigner is a modem reflection of Machiavelli's ideas. The literature on lobbying and corporate campaigning in the UK is reviewed and there is an assessment of the insights which marketing can bring to this growing area. The paper presents a working definition of corporate lobbying and campaigning, and an indication of the scale of activity in the UK. A practical research programme for marketing researchers in this significant area is outlined. Some recent cases from current research are given with an outline of some of the core reasons for the growth of “Machiavellian Marketing”.     

The Maturing of Socially Responsible Investment: A Review of the Developing Link with Corporate Social Responsibility

This paper reviews the development of socially responsible investment (SRI) over recent years and highlights the prospects for an increasingly strong connection with the practice of corporate social responsibility. The paper argues that not only has SRI grown significantly, it has also matured. In particular, it has become an investment philosophy adopted by a growing proportion of large investment institutions. This shift in SRI from margin to mainstream and the position in which institutional investors find themselves is leading to a new form of SRI shareholder pressure. Although this bears some resemblance to lobbying campaigns which might take advantage of shareholder rights, we seek to distinguish it as an important phenomenon in its own right — one to which corporate executives are likely to be paying increasing attention in the years to come. We further argue that this approach potentially meets some of the earlier ethical criticisms of certain forms of SRI but, ironically, probably owes its existence to those pioneering approaches. We conclude with some suggestions for further research to inform discussion of the issues highlighted in the paper.     

Caveat Emptor: Ethical Chauvinism in the Global Economy

The tendency of American business schools to teach a "universal" set of ethical standards and managerial perspectives can have a serious impact on the business practices of new graduates as well as on the success of companies desiring to do business globally. We need to become more sensitive to other cultural/ethical approaches and to sensitize our business students to them early in their academic process in order to encourage the use of common-norming to attain mutual economic benefit. We can understand this process through the application of anthropological principles to ethical constructs.     

Trade policy of a free trade agreement in the presence of foreign lobbying

This paper studies the effect of foreign lobbies on trade policy of a country which is a member of a Free Trade Agreement (FTA). It uses a monopolistically competitive political economy model in which the government determines external tariffs endogenously. The effect of foreign lobbying under the FTA is examined empirically using Canadian industry-level trade data that allow differentiating of lobby groups by the country of origin. The analysis suggests that the presence of foreign lobbying has a significant effect on the domestic trade policy. The heterogeneity of foreign lobbies is also important: the presence of an organized lobbying group in an FTA partner country tends to raise trade barriers while an organized lobbying group of exporters from outside of the FTA is associated with less protection.     

Organizing Ethics: A Stakeholder Debate

This article summarizes the development of the stakeholder concept in the last decade. The academic debate has been dominated over the last ten years by the managerial version of the stakeholder concept. The case of Shell in Ogoniland is elaborated to demonstrate that the managerial version does not pay sufficient respect to other interpretations of the concept. The article criticizes this dominant interpretation and argues for the need of an ongoing — academic and practical — debate on organizing and ethics. An ongoing "organizational stakeholder debate" is required. Social and ethical accounting, auditing, and reporting can be seen as one way to operationalize this notion of the "organizational debate", if it addresses the creation and diversity of moral meaning in the context of organizations.     

An analysis of stability of the north–south growth model of trade: Saddle-path stability of the generalized grossman–helpman model with skilled and unskilled labours

Abstract

Following the Common Agency approach to political equilibrium, we examine how domestic interest groups can influence national policies toward FDI and how the choice of instrument by the government can affect lobbying activities. Domestic firms lobby for lower subsidies when a discriminatory subsidy on FDI is applied. However, when a subsidy is applied uniformly to both groups, they may lobby for higher subsidies. The nature of lobbying is also different for proportional and lump-sum profit subsidies when uniformly applied. The qualitative effect of the number of domestic firms or the degree of corruption on the equilibrium depends on the choice of instruments. Finally, with the help of numerical simulation, we examine whether there is any potential conflict between the government and the lobby groups on the choice of the instrument.     

Business Cases and Corporate Engagement with Sustainability: Differentiating Ethical Motivations

This paper explores links between different ethical motivations and kinds of corporate social responsibility (CSR) activities to distinguish between different types of business cases with regard to sustainability. The design of CSR and corporate sustainability can be based on different ethical foundations and motivations. This paper draws on the framework of Roberts (Organization 10:249–265, 2003) which distinguishes four different ethical management versions of CSR. The first two ethical motivations are driven either by a reactionary concern for the short-term financial interests of the business, or reputational, driven by a narcissistic concern to protect the firm’s image. The third responsible motivation works from the inside-out and seeks to embed social and environmental concerns within the firm’s performance management systems, and the fourth, a collaborative motivation, works to bring the outside in and seeks to go beyond the boundaries of the firm to create a dialogue with those who are vulnerable to the unintended consequences of corporate conduct. Management activities based on these different ethical motivations to CSR and sustainability result in different operational activities for corporations working towards sustainability and thus have very different effects on how the company’s economic performance is influenced. Assuming that corporate managers are concerned about creating business cases for their companies to survive and prosper in the long term, this paper raises the question of how different ethical motivations for designing CSR and corporate sustainability relate to the creation of different business cases. The paper concludes by distinguishing four different kinds of business cases with regard to sustainability: reactionary and reputational business cases of sustainability, and responsible and collaborative business cases for sustainability.     

The Stakeholder Theory and the Common Good

The theory of the social responsibility of the firm oscillates between two extremes: one that reduces the firm's responsibility to the obtainment of (the greatest possible) profit for its shareholders, and another that extends the firm's responsibility to include a wide range of actors with an interest or "stake" in the firm. The stakeholder theory of the social responsibility of business is more appealing from an ethical point of view, and yet it lacks a solid foundation that would be acceptable to a variety of schools of thought. In this paper I argue that the stakeholder theory could be founded on the concept of the common good. First, I explain the foundations of the theory of the common good, the concept itself, how it relates to the individual good, and its role in the firm. Following that, I explain how the theory of the common good could be applied to the stakeholder theory. Finally, I draw some conclusions.     

Lobbying costs and trade policy

We study how endogenous lobbying costs influence trade policies. Although in practice lobbying expenditures far exceed campaign contributions, the literature on the political economy of trade policy has focused on the latter. In this paper we develop a model in which informational lobbying costs play a role in determining the structure of protection. In the model, special interest groups can choose to send a signal to the policymaker regarding some information they possess, and the policymaker observes the signal before setting the trade policies. We find that lobbying expenditures directly affect the equilibrium policies. In order to test the predictions of the model we collected data on lobbying expenditures from the Center for Responsible Politics as well as data on trade and industry characteristic variables for the United States from other sources. We perform a structural estimation of the equilibrium trade policies and find support for our model. The empirical evidence indicates that lobbying expenditures play an important role in explaining the variation of protection across sectors. Moreover, the model leads to considerably lower and more reasonable estimates of the weight that the government places on social welfare relative to political contributions.     

Consumer Insurance Fraud/Abuse as Co-creation and Co-responsibility: A New Paradigm

B2B online reverse auctions technology (ORAs) emerged as a popular tool for large buying firms in the late 1990s. However, its growing use has been accompanied by a corresponding increase in unethical behaviors to a point that it has been described as the technology that has triggered more ethical concerns in the e-commerce arena than in any other segment of activity. Our findings first indicate that the establishment of formal ethical criteria based on the restrictive interpretation of ethics as honesty is not enough to resolve the ethical issues that surround the introduction of a technology because it ignores the ethical values shared by most actors in the sector in terms of fairness. We show the extent to which lobbying, rumor, technical problems, and public discourse can impact on the interpretations of the technology regarding ethics. Highlighting the importance of incorporating ORAs into the broader context of relationship management that integrates ethics as fairness and not only ethics as honesty serves to illustrate why the future of ORAs might not be as bright as predicted by a theoretical interpretation of the technology that is sometimes disconnected from the realities of the field.     

Product Market Competition and Lobbying Coordination in the U.S. Mobile Telecommunications Industry

This paper empirically investigates market behavior and firms?? lobbying in a unified structural setup. In a sequential game, where firms lobby for regulation before they compete in the product market, we derive a testable measure of lobbying coordination. Applying the setting to the early U.S. cellular services industry, we find that lobbying expenditures, as measured by campaign contributions, and market conduct were consistent with a one-shot Nash equilibrium and that price caps were binding on average. Furthermore, campaign contributions from cellular firms effectively lowered the burden of the price caps and reduced production costs.     

Do interest groups affect US immigration policy?

While anecdotal evidence suggests that interest groups play a key role in shaping immigration policy, there is no systematic empirical analysis of this issue. In this paper, we construct an industry-level dataset for the United States, by combining information on the number of temporary work visas with data on lobbying activity associated with immigration. We find robust evidence that both pro- and anti-immigration interest groups play a statistically significant and economically relevant role in shaping migration policy across sectors. Barriers to migration are lower in sectors in which business interest groups incur larger lobbying expenditures and higher in sectors where labor unions are more important.