Organizational Isomorphism and Corruption in Financial Institutions: Empirical Research in Emerging Countries

The globalizations of capital markets in the last 20 years has led to a historic degree of financial integration in the world. It is clear, however, that globalization is not conducive to a complete homogeneity of financial markets and institutions. Among others, one element of diversity is the importance of the impact of corruption in emerging countries. Corruption decreases the credibility of financial institutions and markets. Scandals and unethical behavior in financial institutions erode confidence in such firms. Relying on neoinstitutional literature, this article focuses on the link between corruption and organizational isomorphism in financial institutions in emerging countries. Therefore, our aim is to examine the institutional reasons for corruption in financial institutions in emerging countries. Our structural equation model is based on empirical research in financial institutions in emerging countries. A questionnaire was administrated to 70 top executives of financial institutions in 18 different emerging countries.     

The export performance of emerging economy firms: The influence of firm capabilities and institutional environments

We advance a two-stage theoretical model which contends that the export performance of emerging economy firms (EEFs) will depend both upon their firm-specific capabilities and their home institutional environments. Specifically, we argue that EEFs will be more likely to export when facing more uncertainty at home from greater political instability, substantial informal competition, and high corruption. Furthermore, we hypothesize that firms’ export intensities will be contingent upon specialized internal capabilities such as a skilled workforce, top managerial experience, and access to external technologies. We test these hypotheses using a dataset of more than 16,000 firms from the four BRIC economies (i.e., Brazil, Russia, China and India). Our results confirm that political instability and informal competition have robust effects on the export propensity of EEFs, whilst export intensity is contingent upon the availability of skilled workers and access to external technologies via licensing.     

A causal analysis of the role of institutions and organizational proficiencies on the innovation capability of Chinese SMEs

We attempt to advance the existing narrative about the role of local institutions vis-à-vis the organizational capabilities of Chinese SMEs, and the influence of such linkages on the innovation capability of these firms. Specifically, we complement recent work by investigating the impact of macro- as well as micro-level aspects of Chinese institutions (Government support; Guanxi) on the ‘Improvisation’ and ‘Learning’ capabilities of Chinese SMEs and, ultimately, these firms’ innovation capability. Our conceptual arguments are embedded in Institutional, Organizational learning, and Resource-based theories. We isolate, unpack, and discuss several inter-related, yet distinct, causal mechanisms that ultimately influence Chinese SMEs’ innovation capability development. Based on a Partial Least Squares analysis of more than 200 firms, we find empirical support for all six hypotheses which represent the above-mentioned relationships. Our findings offer insights pertaining to: (1) the relative impact of institutional versus firm-specific factors in developing organizational proficiencies, (2) the mapping of macro- and micro-level institutional effects on organizational proficiencies, and (3) the relative effect of organizational proficiencies on innovation performance.     

Home country uncertainty and the internationalization-performance relationship: Building an uncertainty management capability

We analyze the impact of home country uncertainty on the internationalization-performance relationship of emerging market firms. Building on organizational learning theory and the institutional approach, we argue that internationalization has a positive impact on the performance of emerging market firms, and that this relationship is strengthened for firms based in emerging countries with higher corruption and political risk. The reason is that by being exposed to high levels of home country uncertainty in the form of political risk and corruption, firms develop an uncertainty management capability at home that helps them face the challenges of internationalization better. We also propose that this uncertainty management capability helps emerging market firms perform better outside of their home region. We test our arguments on a sample of 536 firms from Argentina, Brazil, Chile, and Peru.     

Organizational culture and the tolerance of corruption: the case of South Korea

ABSTRACT

There has been long term and widespread criticism of organizational corruption around the world. This also includes South Korea with many examples, both historical and current. This is underpinned by several elements but an important and high profile factor is a seeming creation and tolerance of corruption by the large, diversified, dynastic family-owned and run conglomerates – the chaebol – and their nexus with the political elite. This study examines if there is any relationship between organizational culture and the tolerance of corruption within Korean firms. For this purpose, we chose four cultural traits as independent variables: large power distance, the government–business relationship, hereditary management and naembi culture, along with the tolerance of corruption as a dependent variable. Data was collected through a questionnaire survey and we used regression analysis to test our four hypotheses. According to the results, all our hypotheses received statistical support which implies these four cultural characteristics positively affect the tolerance of corruption within firms. The theoretical and practical implications of our findings are also discussed.     

The Influence from the Past: Organizational Imprinting and Firms’ Compliance with Social Insurance Policies in China

Using a nationwide survey of randomly selected manufacturing firms in representative Chinese cities, we examine how firms’ compliance with social insurance policies is shaped by their historical imprinting, by their founding ownership structures, as well as by massive institutional changes. Our empirical results suggest that firms founded in the state socialist era and firms founded as Chinese state-owned enterprises (SOEs) were infused with socialist institutional logics of labor relations, and they tended to comply with social insurance policies even in the present market socialist era. Chinese SOEs restructured into private and joint-ventured firms attenuated the lingering effect of organizational imprinting and provide social insurances for fewer workers. This research is among the first to probe the historical influence on labor protection in contemporary society. Through studying the stability and changes of socialist institutional logic of labor relations, our research leads to a better understanding of the situation of labor relations in contemporary China.     

Do outside directors and new managers help improve firm performance? An exploratory study in Russian privatization

In the context of privatization and restructuring in Russia, we test two standard agency theory hypotheses, namely, (1) outside board members and (2) new managers are positively related to firm performance. Based on a survey of 314 privatized firms, the evidence offers little support for the hypotheses. Historically, results refuting theories have been launch pads for scientific progress. Our findings, therefore, raise interesting questions about whether the underlying theory is appropriate, whether there are methodological problems, or whether there are institutional factors in Russia’s transition economy that need to be accounted for when we test agency theory in a new setting. We address these questions and discuss their implications for corporate governance theory, practice, and public policy.     

Opportunism, corruption and the multinational firm's mode of entry

The paper develops a theoretical approach to the boundaries of the multi-national firm in the context of institutional constraints in host countries, focusing especially on corruption. The model incorporates two types of corruption: petty bureaucratic corruption and high-level political corruption. The model predicts that-in the absence of corruption-multinational firms will prefer FDI (internal expansion with strong control rights) to debt (arm's length expansion with loose control rights), the weaker the host country's ability to commit. However, both types of corruption shift the trade-off marginally toward debt. Cross-country panel empirical evidence supports these conclusions. Corruption has a second order marginal effect and matters mostly through its interaction with political risk.     

CEO gender,institutional context and firm exports

To what extent does the gender of Chief Executive Officers (CEOs) matter in the relationship between home country corruption and firm exports? Drawing on post-structural feminist and institutional theories, we employ self-reported micro-level and cross-country data from 4714 firms in 75 countries during 2008-2015 to examine how differences in institutional contexts affect firms exports in men- and women-led firms. We find that pervasive and arbitrary corruption types have different effects on firm exports, and that female CEOs mitigate the effects of corruption in two distinct ways. Our results contribute to institutional and post-structural feminist literature, and are robust when controlling for economic development and the quality of gender institutional characteristics. Our study suggests that female CEOs in developing and emerging economies will be less vulnerable to predictably-corrupt institutions than to uncertain institutions.     

Areas of Corruption in the Distribution of Foreign-Made Goods Where a Firm's Size and Origin Play a Role: The Russian Experience

Drawing on interview evidence, this article explores areas whereby business corruption in Russia affects distributors of foreign goods with both local and foreign ownership and whether its effects on distributors of small and large sizes vary. The findings reveal the areas of corruption wherein distributors of foreign goods in Russia are most likely to be affected and suggest that, though widespread in Russia, corruption may have far greater effect on smaller distributors as compared to large firms. Large distributing firms can avoid involvement in corruption in some of the areas explored. This in turn may limit small-sized foreign manufacturers' capability to compete in this market, as they are most likely to be able to contract only to small-sized distributors. The study presents findings that are based on interviews with the distributors of foreign-made goods operating in Russia. The findings of the study can help to explain activities of corruption as related to the size of business firms involved in distribution of foreign products in Russia. Hence, its value to firms contemplating export to Russia. The research can also be considered a valuable platform for further research in this field.     

Can formalization, complexity, and centralization influence knowledge performance?

Based on the theory of organizational design and on the theory of knowledge, this paper analyzes how the traditional variables which define a firm's organizational structure (formalization, complexity, and centralization) influence knowledge performance (the degree to which a firm generates knowledge internally and uses it to reach a competitive advantage). The paper tests three hypotheses using a sample of 164 large Spanish firms. The results show that organizational complexity and centralization exert a positive and a negative influence, respectively, on knowledge performance, which confirms the two hypotheses related to these variables. However, the analysis reveals no empirical evidence to confirm the hypothesis according to which formalization and knowledge performance have a positive relationship.     

Organizational culture,innovation, and performance: A test of Schein's model

Innovation is the key to organizational survival and therefore the study of processes that support innovation should be of interest to researchers and practitioners alike. Schein's multi-layered model of organizational culture offers a useful framework for thinking about processes that foster innovation. A defining characteristic of the model is the subtle but important distinctions between the varied “layers” of organizational culture (i.e., values and norms, artifacts and behaviors). The basic assumption of this study is that Schein's model offers a tractable explanation of cultural processes that support organizational innovation, especially in service firms. Despite the intuitive appeal and practical value of Schein's conceptual framework, empirical research in relation to the model is limited. This paper develops a rationale for an empirical model based on Schein's conceptual model; the study reports a test of an empirical model. Data collected from approximately 100 principals of law firms provides a suitable empirical context for a test of the model. The findings generally support the hypothesized relationships. A key result is how layers of organizational culture, particularly norms, artifacts, and innovative behaviors, partially mediate the effects of values that support innovation on measures of firm performance. The findings have implications for theory and practice, especially in relation to building an organizational culture within professional service firms that fosters innovative behavior.     

The Impact of Corruption on Firm Tax Compliance in Transition Economies: Whom Do You Trust?

Tax compliance is an important issue for governments and the public alike. To meet public needs and fund public mandates, firms around the world are expected to comply with tax laws. Factors that are related to organizational (firm) tax compliance have not been sufficiently examined in the literature. Owing to the increasing global influence of transition economies, factors associated with firm tax compliance in transition economies are particularly of interest. Based on a sample of over 5,000 firms from 22 former Soviet Bloc transition economies, we find that higher levels of corruption and higher levels of particularized trust (reliance on friends and family) are associated with lower levels of tax compliance. Interestingly, we also find that the negative relationship between corruption and tax compliance is weakened in situations of higher generalized trust (trust in strangers). Overall, our study’s results suggest that institutional factors play an important role and are related to firm tax compliance behavior in transition economies.     

Institutional drivers of conformity – Evidence for management accounting from Brazil and Germany

This paper contributes to the discussion of international convergence in management accounting, which has included only limited empirical data. Building on institutional theory, we have analysed cross-sectional field study data from a unique set of manufacturing companies in Brazil and Germany. Our data suggest that management accounting structures and practices in both countries are converging towards international standards under the pressure of coercive, mimetic and normative isomorphism. Although firms generally tend to adopt Anglo-American practices, we also find that German management accounting concepts have a strong influence in Brazil. In addition to elaborating on the imitation of international best practices and standardised information systems, we show the pressures created by the adoption of the International Financial Reporting Standards and the pursuit of legitimacy via adherence to social expectations.     

Facing global economic crisis: Foreign sales,ownership groups,and corporate value

This study extends the research on internationalization to a new organizational context – emerging market firms (EMF), and a new time context – global economic crisis. We propose a U-shaped relationship between foreign sales intensity and firm value for EMFs during global economic crisis. Further, we distinguish between EMFs’ relational owners (i.e., business groups) and transactional owners (i.e., institutional investors) to investigate their different moderating effects. We find empirical support for our hypotheses using a sample of Chinese firms during the global economic crisis in 2008. Moreover, we provide research and practice implications.     

Age,order of entry,strategic orientation,and organizational performance

This paper proposes an empirical test of several hypotheses linking age, order of entry, and strategic orientations to a firm's performance. Three strategies are defined: cost-leadership strategy, innovative differentiation, and marketing differentiation. The aim is to show that the impact on performance of both age and each of the three strategic orientations may differ according to a firm's order of entry into an industry.Following Lieberman and Montgomery's (1998) evaluation of their major contribution on first mover advantage, we emphasize three points. First, we develop and test hypotheses related to early and late followers' strategic orientations, broadening the scope of traditional studies on pioneers. Second, the model combines the dimensions of a firm's age, order of entry, and strategic orientations, as well as industry conditions (stage of the industry, environmental unpredictability, and technology diffusion), to establish a contingent model of performance analysis. Finally, the empirical study deals chiefly with organizational performance and not market share, which is considered a typical advantage accruing to pioneers.In addition, the scope of the study (582 French manufacturing firms) provides the means to fill a void in empirical studies because it is a broad cross-sectional test on non-U.S. data. The firms are mainly private, small to medium-sized, and single or dominant business firms. Therefore, our assumptions must be understood as particularly applicable to this type of firm.The results reveal important lessons for practitioners. First, we did not find a first-mover advantage in terms of organizational performance. In addition, pioneers' organizational performance is enhanced by the cost leader strategy—contrary to our assumption emphasizing innovative differentiation for these firms. Second, early followers' performance benefits from innovative differentiation and marketing differentiation. Finally, late entrants developing a cost leader strategy have a significantly higher performance. All groups considered, late followers are the firms most sensitive to environmental uncertainty and age effects.Our study clarifies the impact of a firm's age and strategic orientations on its performance depending on the firm's order of entry. The implications of these results are particularly relevant for practitioners and entrepreneurs. First, a cost leadership strategy seems to be a guarantee for a pioneer to increase its organizational performance. New ventures should therefore take into consideration the fact that newness and innovative differentiation might not be the best strategic orientations for high performance in the long run. Second, as a second mover, however, developing a superior product and being able to market it efficiently appear to be the enhancing factors of firm performance. Third, for both pioneers and early followers, age does not significantly reduce their performance. However, the longer a firm waits before entering, the greater is the negative effect of age on its performance. This is due to the difficulty of resisting competitive erosion, because pioneers and early followers drive the changes in the industry. The identification of these effects should help managers and stakeholders to make more effective entry decisions to sustain a firm's advantage, leading to better performance and higher probability of survival.     

Which institutions encourage entrepreneurial growth aspirations?

We develop entrepreneurship and institutional theory to explain entrepreneurial growth aspirations across individuals and institutional contexts. Our framework generates hypotheses at the national level about the negative impact of higher levels of corruption, weaker property rights and greater government activity on entrepreneurs' aspirations to increase employment. We further explore whether individual's social networks compensate for weaknesses in national institutions. We use the Global Entrepreneurship Monitor surveys in 42 countries for 2001–2006, applying a multilevel estimation framework to test our ideas. We find that the relationship between growth aspiring entrepreneurs and institutions is complex; they benefit simultaneously from strong government (in the sense of property rights enforcement), and smaller government, but are constrained by corruption. Social networks mediate some but not all institutional deficiencies.     

知识密集型服务业集群内企业间知识转移影响因素——环同济建筑设计产业带的实证研究

在回顾国内外相关研究的基础上,构建知识转移的影响因素模型。然后,基于知识密集型的环同济设计产业集群的调研数据对上述理论模型进行实证研究。研究结果显示:企业间亲密的关系和企业浓厚的学习文化对知识密集型服务业企业之间的知识转移有重要的促进作用;企业较强的吸收能力、企业间较近的组织距离对产业集群内知识密集型服务业企业之间的知识转移有较大促进作用;知识的模糊性对知识密集型服务业集群内企业之间的知识转移有阻碍作用;中等的知识距离比较远的知识距离更有利于产业集群内知识密集型服务业企业之间的知识转移。     

Does corruption boost or harm firms’ performance in developing and emerging economies? A firm-level study

In the last decade, a growing number of studies have addressed the ongoing debate about whether corruption “sands” or “greases” the wheels of business at the firm level. This study revisits this debate and proposes a comprehensive theoretical framework to test whether corruption harms or boosts firm performance, as well as the extent to which this relationship is mediated by the countries’ institutional settings, the size and strategic behaviour of the firms, and market competition. Based on a sample of 21,250 firms located in 117 emerging and developing countries, and resorting to instrumental variable (IV) estimations, three main results were found: (a) regardless of the proxy used for corruption and firm performance, the former clearly harms the latter; (b) corruption “greases the wheels” of business for African firms but it “sands the wheels” for firms in Latin America, the Caribbean, Eastern Europe, Central Asia, and Southern Asia; and (c) the negative impact of corruption on performance is mitigated for larger and exporting firms.     

Dual liability and the moderating effect of corporate social responsibility–Evidence from Belt&Road investment of Chinese firms

Our examination of 796 Chinese firms that invested in the Belt&Road (B&R) region from 2008 to 2015 shows that Chinese firms often encounter liability of foreignness (LOF) and liability of origin (LOR). Our empirical results reveal that larger institutional distance is related to significant performance decrease, which evidences liability of foreignness for Chinese multinationals. Moreover, Chinese firms with concentrated ownership see their financial performance adversely affected after the B&R initiative, which further validates the argument for liability of origin. We found that firms' Corporate Social Responsibility performance (CSR) has a significant, positive “institutional moderating” effect, that is buffering conflicts between Chinese firms and local stakeholders, and projecting a favorable institutional image to mitigate Chinese multinationals' dual liabilities in the B&R region. Firms with better Corporate Social Responsibility (CSR) performance are more likely to avoid political risk. CSR has been a buffering and bridge mechanism in government inefficiency, lower regulatory quality, lower rule of law and less control of corruption and reducing rent seeking behavior.Therefore, investment in CSR and more inclusive ownership schemes may assist Chinese firms' long survival across the B&R region.