How does home country bribery affect firms’ foreign market focus?

Abstract

Purpose Drawing on the bribery literature, this paper aims to examine the effect of bribes paid in the home country on firms’ decision to internationalize through exports from transition economies. It also investigates whether the effect of home country bribery may vary from new ventures to established firms, and from those firms that operate in an environment with high to low informal competition. Design/methodology/approach This paper tests several hypotheses using a panel data with fixed effects based on a sample of firms in transition economies from the Business Environment and Enterprise Performance Survey. Findings First, home country bribery in transition economies can make domestic markets more lenient and dampen firms’ motivation to seek opportunities abroad. Second, new ventures have a higher motivation to focus on their domestic markets after paying bribes. Finally, despite the benefits accrued in the home country through bribery, firms that face a higher level of informal competition in the home country are more likely to seek opportunities abroad. Practical implications Managers in transition economies should consider their home country bribery activities in their evaluation of foreign market opportunities. Firms that use money to influence home country government officials, especially new ventures, are advised to have a more holistic view in evaluating foreign market opportunities so they will not miss out on new opportunities. Originality/value This paper advances literature on home country institutions and the research on firm global strategies. Moreover, it also highlights several contingencies that shape the effect of home country bribery on firms’ foreign market focus.