Combatting Corruption Through Collective Action

Authors: 
Andrea Røyrøy Beinset & Andreas Fogth Berger
Publication year: 
2017
Publisher: 
NORWEGIAN SCHOOL OF ECONOMICS
Abstract: 

Many international firms and local companies are operating in markets that are exposed to corruption. Corruption increases the cost of doing business and has harmful consequences on the society. Multinational corporations publish compliance and anti-corruption declaration on their home pages, where they claim they resist demands for bribes. Firms can go beyond legal compliance and corporations can take a more active role in the prevention of corruption. This thesis studies collective action as an anti-corruption tool and identifies circumstances where it is more likely that a company will be part of collective action agreements.

We find that a deterioration in the business environment works as a trigger for companies to join collective action. Further, we find that a facilitator has a positive influence and that multinational enterprises are more active in initiating collective actions than smaller companies. To find these circumstances, we use literature on collective action, theories and research on cartels and Hirschman’s exit, voice and loyalty framework to develop hypotheses. We then compare these hypotheses to cases where collective action is used to fight corruption.

Our findings highlight that companies need a long-term perspective, not just in words and good intentions but in evaluations that lead to bonus payments. A further implication of our study is that the companies’ moral responsibility exceeds the legal responsibility. It is important that MNEs are made aware of collective action as a tool that can be used against corruption. Our findings indicate that facilitators can have an important role in initiating collective action in industries with small companies.