Avoid, acquiesce … or engage? New insights from sub‐Saharan Africa on MNE strategies for managing corruption

• Author: Aloysius Newenham‐Kahindi,Charles E. Stevens
• Published date: 01 February 2021
• Date: 01 February 2021
• DOI: http://doi.org/10.1002/smj.3228

RESEARCH ARTICLE

Avoid, acquiesce …or engage? New insights

from sub-Saharan Africa on MNE strategies for

managing corruption

Charles E. Stevens

1

| Aloysius Newenham-Kahindi

2

1

Department of Management, Lehigh University, Bethlehem, Pennsylvania

2

Peter B. Gustavson School of Business, University of Victoria, Victoria, British Columbia, Canada

Correspondence

Charles E. Stevens, Department of

Management, Lehigh University,

621 Taylor Street, Bethlehem, PA 18015.

Email: ces213@lehigh.edu

Funding information

Social Sciences and Humanities Research

Council of Canada, Grant/Award

Number: 430-2016-00007

Abstract

Research summary: Many questions remain about

how MNEs manage corruption. Moreover, what is

known derives largely from the perspective and experi-

ences of developed country MNEs. To address this limi-

tation, we compare developed country and developing

country MNEs' approaches for managing corruption in

sub-Saharan Africa. Through an inductive, qualitative

research design, we discover how and why firms engage

in “avoidance”and “acquiescence”strategies. We also

uncover a novel “engagement”strategy pioneered by

developing country firms that involves such tactics as

finding innovative substitutes for corrupt activities,

leveraging partnerships with governments and other

firms, and forming deeper, long-term relationships in

the host country. These findings suggest that MNEs

have more room for active agency and more proactive

strategies for managing corruption than has typically

been assumed in the literature.

Managerial summary: Multinational firms face chal-

lenges in host countries where corruption is common,

due to concerns that they will need to engage in corrupt

acts in order to survive. Some respond by simply not

operating in these countries, while others fall into the

trap of engaging in illicit activities. We consider an

Received: 26 April 2019 Revised: 31 July 2020 Accepted: 3 August 2020 Published on: 13 September 2020

DOI: 10.1002/smj.3228

Strat Mgmt J. 2021;42:273–301. wileyonlinelibrary.com/journal/smj © 2020 Strategic Management Society 273

alternative perspective: that firms may use deeper posi-

tive engagement with the host country to reduce pres-

sures to engage in corruption, by building their popular

acceptance and strengthening their bargaining power.

Although we find that this “engagement”approach was

first used by developing country firms, developed coun-

try firms have also begun using this strategy. The logic

underlying this approach can help managers succeed

abroad while reducing the need to get their hands dirty

in the process.

KEYWORDS

corruption, engagement, institutions, legitimacy, qualitative

1|INTRODUCTION

Corruption—the abuse of entrusted power for private gain—is one of the most important phe-

nomena that a multinational enterprise (MNE) must account for when venturing abroad

(Cuervo-Cazurra, 2016; Doh, Rodriguez, Uhlenbruck, Collins, & Eden, 2003; Spencer &

Gomez, 2011). For MNEs, higher levels of host country corruption are generally associated with

lower levels of foreign direct investment (FDI) (Brouthers, Gao, & McNicol, 2008; Voyer &

Beamish, 2004; Wei, 2000), an increased preference for nonequity and low-equity entry modes

(Doh et al., 2003; Mudambi, Navarra, & Delios, 2013; Sartor & Beamish, 2018; Uhlenbruck,

Rodriguez, Doh, & Eden, 2006), a greater likelihood of participating in corrupt activities (Luo,

Zhang, & Bu, 2019), and a higher likelihood of exiting the country (Sartor & Beamish, 2020;

Svensson, 2005). Higher levels of host country corruption are also associated with worse firm

performance (Gaviria, 2002; O'Toole & Tarp, 2014; Seker & Yang, 2012).

Despite this large and growing body of research that has identified important consequences

of corruption for MNEs' strategy and performance, researchers' understanding of MNEs' strate-

gies for managing corruption itself remains limited (Cuervo-Cazurra, 2016; Doh et al., 2003;

Jeong & Weiner, 2012). Indeed, the literature suggests that if engaging in corruption is an insti-

tutionalized and taken-for-granted practice in the host country (Castro, Phillips, &

Ansari, 2020; Rodriguez, Uhlenbruck, & Eden, 2005; Uhlenbruck et al., 2006), MNEs' strategic

options may be largely limited to either paying bribes or implementing controls designed to

avoid involvement in corrupt activities (Collins, Uhlenbruck, & Rodriguez, 2009; Jeong &

Weiner, 2012; Mudambi et al., 2013). However, noting that much of what is known about man-

aging corruption has been based on the experiences and perspective of developed country MNEs

(Luo et al., 2019), researchers have posited that greater familiarity with the phenomenon at

home may enable developing country MNEs to develop heretofore unknown approaches for

navigating corrupt host countries (Kolstad & Wiig, 2012; Morck, Yeung, & Zhao, 2008). Yet,

little is known about what such approaches may entail, or how they would address the institu-

tional pressures and power imbalances that enable corruption in the first place (Cuervo-

Cazurra, 2016).

274 STEVENS AND NEWENHAM-KAHINDI