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Running Head: Corruption behaviors and Multinational Organization

Corruption behaviors and Multinational Organization

[Name of Writer]

[Name of Institute]
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Corruption behaviors and Multinational Organization

Introduction

The aim of this essay is to discuss whether or not global organizations align themselves

with practices of corruption found in a local environment in which they are operating to be

locally competitive. Corruption has developed to be the forefront issues of the managerial level

at the international and national levels. Corruption practices in global business are growing and

widespread. Economists refer towards few indicators which can be affected by the corruption

level, including GDP per capita, expenditure by government, and aid from foreign (Xezonakis et

al. 2016). Though, corruption has several consequences, like the economic development delay,

international investment, and trade that negatively influence growth in the economy. Empirical

research depicts that the high corruption presence significantly hinders a foreign direct

investment (FDI) inflow towards host nations, negatively influences success in economy,

decreases the human capital level, and destroys confidence in all private and public institutions.

Furthermore, globalization has raised the managers to need for predicting a potential for nation

corruption. Nevertheless, fighting with corruption is extremely tough due to it is the multifaceted

social phenomenon which penetrates vertically and horizontally in several societies aspects

(Meyer‐Sahling, and Mikkelsen, 2016).

There are wide efforts within non-governmental, governmental, and global firms for

fighting corruption and for establishing particular guidelines for preventing bribery and immoral

practices in global firms. Moreover, corruption dealing has developed to be a significant problem

in building the institutional capacity of the state (Banerjee, 2016).

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Discussion

Multinational enterprises (MNEs) often face public administration of corruption in the

host country; through laws, regulations, and organizations, the government is influencing and

sometimes administering transactions. The government develops "game rules" in large part to

form a basic economic system that defines the nature of the business. However, government

rules and systems are rarely in public interest and never work. Instead, the government aims for

legitimate goals, because corruption exists (Van Vu et al. 2018). Corruption - the public power

abuse for private advantages—warps the game rules. Frequent corruption punishes powerful and

innovative companions by means of references to contracts and non-contractual rights for

companies against bribes that compensate unlikely behavior. Corruption is as a minimum

detrimental to economic development and business growth, such as bad financial policies or

financial insolvency. However, dealing with corruption is domestic activity in an global trade,

which sometimes brings important benefits to individual companies (Goel et al. 2016).

Corruption is all over the place, for being sure, but it is not all over the same. In fact, the

amount of corruption in countries is different from labor costs or from corporate taxes. The

challenges faced by overseas companies largely reflect their efforts to understand and adapt to

local corruption. However, the rating of corruption caused by levels alone is insufficient and the

use of the company is limited. According to a recent study, the main features of the experience of

the contaminated environment are not just the corruption amount but also an uncertainty

surrounding transactions of corruption (Aladwani, 2016).

Companies must understand the basic features of corruption so that they can adapt and

function effectively in a new environment. Especially for global organizations, understanding the

nature of a corruption country and distinguishing it from other countries is the key to
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determining access and expansion. In addition, apart from the organization itself, can

significantly expand the understanding of how the government differs and how it influences the

decisive processes of the euro. International commercial literature believes that government and

its representatives maximize public interest and therefore do not consider the impact of

corruption on the company (Xezonakis et al. 2016). Others believe that corruption is an

opportunity for the political behavior of international companies. Although it is possible to reveal

the challenges and possibilities of corruption, there is still a need for administrative literature to

create a meaningful framework to describe the nature of corruption. Other disciplines began to

contribute to this work, but no research gave a model (Meyer‐Sahling, and Mikkelsen, 2016).

Entry strategy is the key factor in global expansion. The entry mode considerably defines

the resource commitment of the organization, risk of investment, control degree, and profits

share by global operations. The institutional theory does not discuss the impact of corruption in

the government's legitimacy of international companies (Goel et al. 2016), with more and more

studies shows that corruption has significantly reduced the ratio of direct investment economy. In

addition, the corruption associated with economic growth and the opening of international trade

(Van Vu et al. 2018). In summary, these effects suggest that corruption also prevents access

through exports, although research has not been done to study the effects of corruption fair

business strategies. Evidently, corruption decreases aggregate entry, but several organizations

select to enter the locale in spite of the challenges which are presented by corruption. Although

the company and the investments on characteristics are important when deciding whether to

obtain a favorable land for any model, we are concerned with contamination of the marginal

impact of decision making (Banerjee, 2016).

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Costs of Corruption

Corruption might be considered as a tax, which raises costs and changes the risk of some

stakeholders to others. Identifying their indirect and direct costs helps isolation as corruption

influence business decisions. It is probable that a bribe of cost, compensation, fatigue and faster

money are the most effective forms of corruption (Xezonakis et al. 2016. pp.160). The direct cost

of contamination is the cost of direct interaction within a company and a government (signified

by the employees or decision makers). Therefore, bribery, bureaucracy and various transactional

charges are direct charges because they can be identified by direct interactions or actions

between certain companies and corrupt officials. Also, the direct costs are also the means used to

avoid the blackmail of corrupt officials in a specific company (Meyer‐Sahling, and Mikkelsen,

2016. pp.1105).

Bribes

Bribery is paid to companies and other stakeholders through the provision of financial

and non-financing payments to public states. There are many instances of bribery. Though, only

the small part of the donations was opened, suggesting that bribes were more frequent than

stated. Bribery is a major form of corruption that is faced by the multinational organization, and

those organizations have to deal with the bribery issues for maintaining competency in the local

nation (Van Vu et al. 2018. pp.847).

“Red Tape and Bureaucratic Delay”

“Red tape and bureaucratic delay” are instances of unofficial costs involved in the

treatment of corrupt officials or compatible with corrupt system requirements. In order to avoid
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“red tape and delays” in approving projects, companies often incorporates bribes for “grease the

skids" (Xezonakis et al. 2016. pp.160).

Avoidance

Companies may have expensive efforts to avoid and limit the risk of extortion of corrupt

officials, including hiding production and eliminating the official economy. Avoiding corruption

can be expensive (Meyer‐Sahling, and Mikkelsen, 2016. pp.1105).

Directly Unproductive Behavior

Corruption can force companies to participate in expensive and incompetent phases. This

can include investments in channels that affect the distribution of economic activity through

lobbying, direct voting, and sales effects. In many countries, officials of the Hanaan municipality

have been notified of various compulsory "profitable distributions". Relations, gifts and other

'benefits' are clearly the expected costs of the business of the region (Van Vu et al. 2018.

pp.847). A Hainan Private Company has announced a formal system of distribution of profits

with municipal officials. The company is about recruiting essential employees or their relatives

as a means of developing a political or social impact. It is known that Wenzhou, East China,

local private companies possessing high-level exchanges in the company's shares against

protection against state intervention (Xezonakis et al. 2016. pp.160).

Conclusion

The essay has discussed whether or not global organizations align themselves with

practices of corruption found in a local environment in which they are operating to be locally

competitive. The assignment has concluded that the multinational companies should not align

themselves as per the national corruption practices, because it can create an effect on firms’
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worldwide image. Corruption has developed to be the forefront issues of the managerial level at

the international and national levels. Corruption practices in global business are growing and

widespread. Economists refer towards few indicators which can be affected by the corruption

level, including GDP per capita, expenditure by government, and aid from foreign. Though,

corruption has several consequences, like the economic development delay, international

investment, and trade that negatively influence growth in the economy.

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References

Aladwani, A.M., 2016. Corruption as a source of e-Government projects failure in developing

countries: A theoretical exposition. International Journal of Information Management,

36(1), pp.105-112.

Banerjee, R., 2016. On the interpretation of bribery in a laboratory corruption game: moral

frames and social norms. Experimental Economics, 19(1), pp.240-267.

Goel, R.K., Mazhar, U. and Nelson, M.A., 2016. Corruption Across Government Occupations:

Cross‐National Survey Evidence. Journal of International Development, 28(8), pp.1220-

1234.

Meyer‐Sahling, J.H. and Mikkelsen, K.S., 2016. Civil service laws, merit, politicization, and

corruption: The perspective of public officials from five East European countries. Public

administration, 94(4), pp.1105-1123.

Van Vu, H., Tran, T.Q., Van Nguyen, T. and Lim, S., 2018. Corruption, types of corruption and

firm financial performance: New evidence from a transitional economy. Journal of

Business Ethics, 148(4), pp.847-858.

Xezonakis, G., Kosmidis, S. and Dahlberg, S., 2016. Can electors combat corruption?

Institutional arrangements and citizen behaviour. European Journal of Political Research,

55(1), pp.160-176.