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Business and Society Review 123:2 269–301

A Non-Proxied Empirical
Investigation of Cultures
Effect on Corruption
DEKUWMINI MORNAH AND RAYMOND J. MACDERMOTT

ABSTRACT

We empirically examine the effect of two measures of cul-


ture, the World Values Survey and Hofstede’s six dimen-
sions, on three measures of corruption, Transparency
International’s CPI, the International Country Risk Guide,
and the World Bank’s Corruption Index. By adopting
three measures of corruption and using a large data set
covering many countries over many years, we offer more
robust results as to the effects of aspects of culture on
corruption. Using the World Values Survey, we find that
Trust in society, Control over one’s destiny and Respect
for others decrease corruption while Obedience increases
corruption. We find strong evidence that societies charac-
terized by high Power Distance and Masculinity are more
corrupt. Some evidence is found to indicate Long Term
Orientation, Indulgence, and Individualism have a nega-
tive effect on corruption. The effect of Uncertainty Avoid-
ance on corruption is unclear. The results have

Dekuwmini Mornah is an Assistant Professor in the Department of Economics and Business,


Virginia Military Institute, Lexington, VA. E-mail: mornahd@vmi.edu. Raymond J. Macdermott
is a Professor in the Department of Economics and Business, Virginia Military Institute, Lex-
ington, VA. E-mail: macdermottrj@vmi.edu.

C 2018 W. Michael Hoffman Center for Business Ethics at Bentley University. Published by
V
Wiley Periodicals, Inc., 350 Main Street, Malden, MA 02148, USA, and 9600 Garsington
Road, Oxford OX4 2DQ, UK. DOI: 10.1111/basr.12142
270 BUSINESS AND SOCIETY REVIEW

implications for international business leaders as well as


policy makers.

INTRODUCTION

O
n October 31, 2014, Blaise Compaore, the President of
Burkina Faso was forced to resign through violent demon-
strations after he attempted to flout the constitution and
extend his 27-year rule of the country. Corruption and manipula-
tion of the judiciary has been cited as the reason for the violent
uprising that forced him out of power. The Arab Spring which
began in 2010 ousted leaders in Tunisia, Egypt, and Yemen with
major protests and civil uprisings occurring in more than a dozen
other countries. In all these uprisings, political corruption is widely
speculated to be the main cause as demonstrated by Wikileaks dip-
lomatic cables.1 While corruption—defined as the misuse of public
office for private gain—is difficult to measure, perceptions of cor-
ruption are measurable. Perception of corruption in Burkina Faso,
Tunisia, Egypt, and Yemen as reported by Transparency Interna-
tional’s corruption index from 2005 to 2015 averaged between 7.0
and 8.2 on a scale of 0–10; where 0 is least corrupt and 10 most
corrupt.2 However, other countries in similar or worse circumstan-
ces and with high political corruption were relatively stable during
this period. What makes some countries react more strongly to
political corruption than others and why is this relevant for busi-
ness? All things being equal, the different reactionary effects from
countries of similar political corruption levels suggest differences in
cultural orientations are probable causes (Ashour 2006; Olken
2005; Seleim and Bonti, 2009).
In this article, we seek to empirically examine the question: “Can
cultural and social orientations explain differences in national cor-
ruption levels?” Which aspects of a country’s culture will grow cor-
ruption and which aspects stifle corruption? Using 3-year
averages, we construct a panel data set covering upwards of 80
countries and 15 years with three measures of corruption, mea-
sures of culture from the World Values Survey and Hofstede’s six
dimensions of culture as well as other control variables. We adopt
recent innovations in econometrics to assess the effect of cultural
MORNAH AND MACDERMOTT 271

orientations on corruption across countries. Apart from using the


most comprehensive data set to date to test the relationships
between culture and corruption, this study is novel in using the
World Values Survey to assess the effects of aspects of culture on
corruption. In addition, the study provides more robust results by
using different but highly correlated measures of corruption as well
as different estimation methods. This article will also add to the
debate of whether some religions encourage corruption by their
perceived teachings and how those teachings are predicted to influ-
ence corruption.
Why is the question of culture and corruption important for pol-
icy makers and business leaders? The negative effects of corruption
on socio-economic development (Mauro 1995; Mo 2001), institu-
tional capacity (Collier 2002), human capital (Svensson 2005), gov-
ernment stability (Kaufmann et al. 2003; Rose-Ackerman and
Palifka 2016), international trade (De Jong and Bogmans 2011;
Thede and Gustafson 2012), foreign direct investment (Cols and
Rodrıguez-Pose 2017; Mornah and Akpandjar 2015; Zhao, Kim,
and Du 2003), trust in government (Chang and Chu 2006; Shleifer
1997), and globalization (Glynn, Kobrin, and Naim 1997; Lalountas
et al. 2011; Park and Khanoi 2017) are well documented. The drive
to be competitive in global markets and to rid global business of
unethical practices has led governmental, non-governmental, and
international organizations to continuously craft policies aimed at
curbing corruption and promoting an ethical culture in interna-
tional business (Getz and Volkema 2001). Because of these efforts,
it is important for policy makers and business leaders to under-
stand the cultural antecedents of corruption as they craft policies
to curb corruption or business deals to mitigate the risks of
corruption.
The majority of the research on the causes of corruption have
focused on the socio-economic factors. For instance, more devel-
oped countries have been found to be less corrupt (Treisman
2000). Countries that practice common law legal systems or are
former British colonies are found to be less corrupt (La Porta,
Lopez-de-Silanes, Shleifer, and Vishny 1999; Treisman 2000,
2007). Openness to trade has been found to have a negative effect
on corruption (Ades and Di Tella 1999; Mornah and Akpandjar
2015; Treisman 2000, 2007) while countries with longer running
democracies are less corrupt (Treisman 2000). However, the
272 BUSINESS AND SOCIETY REVIEW

underlying socio-cultural factors that shape the worldviews of dif-


ferent societies could be even more relevant in determining degree
and tolerance of corruption in a country. For instance, socio-
economic outcomes such as openness to trade, economic develop-
ment, stability of democracy, and form of legal system are not exog-
enous. They could in fact be a function of the underlying cultural
factors.
Therefore, policy makers who are trying to curb corruption will
be better equipped if they understood the cultural antecedents of
corruption. At the same time, business leaders venturing into
international markets will find equal value in understanding the
cultural antecedents of corruption as this could guide them in
selecting target markets or cultures that complement their unique
business cultures. In addition, knowing how culture affects cor-
ruption will give an indication as to the pervasiveness or persis-
tence of the problem in a country which could guide business
leaders as to the best modes of entry that minimize the risks to
their investments in foreign countries (Davis and Ruhe 2003; Park
2003). As noted by Saleim and Bontis (2009), corruption is com-
plex in nature and could be woven into the fabric of society. There-
fore, to better appreciate the threat of corruption to a business
opportunity and or the ability of governments to fight corruption, it
is important to understand the effects of underlying socio-
economic factors such as culture on corruption.
The question of culture and corruption has been examined pre-
viously. The standard approach in previous studies was to use reli-
gion and language as proxies for culture. In most of these studies,
they find that countries dominated by hierarchical religions are
more prone to corruption because they are perceived to emphasize
things like obedience to authority, strict allegiance to the nuclear
family, and skepticism in social relations (Ko and Moon 2014).
Given this predicted causal link between corruption and religion,
La Porta, Lopez-de-Silanes and Vishny (1997) find that corruption
increases with the percentage of the population that claim to
belong to a hierarchical religion like Catholicism, Orthodox Chris-
tian, or Islam. Many other studies have confirmed this result. Usla-
ner (2004) and Sandholtz and Taagepera (2005) find that the
higher the percentage of Catholics, the lower the trust and the
higher the corruption while Treisman (2000), Paldman (2001), You
and Khagram (2005) find that corruption is lower in countries
MORNAH AND MACDERMOTT 273

dominated by Protestant religions. Yeganeh and Sauers (2013) in a


study involving over 70 countries find that communist heritage
and religiosity tend to promote corruption.
It can be controversial to theorize that hierarchical religions are
more corrupt because they preach obedience and emphasize loyal-
ties to the nuclear family. Ko and Moon (2014) examine the theo-
rized link between religion and culture using the World Values
Survey and find that there is no strong evidence to support this
theorized causal link. This means that using religion to proxy for
culture may not be accurate. Muslims in India may have a
completely different outlook than Muslims in Afghanistan. Protes-
tants in Ghana may have a different outlook than those in
England. Similarly, language may not be the best proxy for culture
because (a) colonization and remapping of countries forced coun-
tries to adopt languages that have nothing to do with their culture
and (b) because of the arbitrariness in the demarcation of coun-
tries, especially those in Sub-Saharan Africa, there are common
ethnic languages in different countries. Over time, these groups get
“culturalized” into their “new” countries. Therefore, common lan-
guage may not be a good indicator of cultural similarities especially
in the long run.
The approach of this article is simple. Instead of theorizing the
relationship between culture and religion and then religion and
corruption, we simply examine culture and corruption directly.
Our aim is to minimize the limitations of language and religion as
proxies for culture. We utilize data from the World Values Survey
(WVS) and Hofstede’s six dimensions as our measure of culture. To
the best of our knowledge, no study has looked at culture and cor-
ruption using the four cultural dimensions of the WVS that we
employed. A few studies have used Hofstede’s dimensions of cul-
ture to test the effects of culture on corruption. Husted and de
Estudios (1999) tested the effects of culture on corruption using
four out of the six Hofstede’s dimensions of culture and find that
on a sample 44 countries, masculinity, Uncertainty Avoidance and
Power Distance were positive and significant in determining cor-
ruption. Their measure of corruption was the 1996 Transparency
international corruption perception index (CPI). Halkos and Tze-
remes (2012) find results consistent with Husted and de Estudios
(1999) with a sample size of 68 observations. They found a fourth
measure, individualism, was also positive and significant. More
274 BUSINESS AND SOCIETY REVIEW

recently, McLaughlin (2013) used Power Distance and masculinity


as measures of culture in a sample of 44 countries and find results
consistent with Husted and de Estudios (1999) for those two
dimensions.
These studies are limited for several reasons. First, the sample
sizes are small with 1-year observations on corruption. This could
make the results unstable in the presence of economic and social
shocks thus limiting the robustness of the results. Second, since the
Hofstede measures of culture aim at measuring culture holistically
with all the dimensions,3 it is unclear to us why most previous stud-
ies choose only a few of these dimensions in their analysis of the
effect of culture on corruption. Leaving out some of the dimensions
may either lead to omitted variable bias or problems of endogeneity
should the omitted variables be correlated with the other dimen-
sions and the error term. It appears to us that the small sample sizes
of these studies probably explain why the number of control varia-
bles in these studies is limited as the authors try to save on degrees
of freedom. We simultaneously include all the six dimensions of cul-
ture as measured by Hofstede in our study.
To minimize the limitation of small sample size, we construct a
panel data set that covers more years (upward of 15 years) and
more countries (upward of 80). We also use three different mea-
sures of corruption that are highly correlated and employ different
estimation methods. By constructing and using a large panel data
set, different measures of corruption and culture, and different
estimation methods, we present results that are likely more robust
to small sample data problems, measurement errors, and estima-
tion methods.
The rest of the article is organized as follows: Section 2 presents
the dimensions of culture we use and analyzes/theorizes how each
dimension is likely to affect corruption. In Section 3, we present
the data used in our analysis and the empirical model we employ.
Results and analysis are presented in Section 4 with conclusion in
Section 5.

CULTURE AND CORRUPTION

Shleifer and Vishny (1993) defines corruption as “the sale by gov-


ernment officials of government property for personal gain.” They
MORNAH AND MACDERMOTT 275

analyze two cases of corruption: corruption without theft and cor-


ruption with theft. In the case of corruption without theft, the gov-
ernment official charges more than the official price of the good
and then remits the official price to the government while keeping
the difference. The difference between the official price and the
actual price charged is the amount of bribe. This type of corruption
is easier to control because it pitches the buyer against the official
thus a higher probability of it being reported. In the case of corrup-
tion with theft, the official charges a price and does not remit any-
thing to the government. They can charge a price below the official
price or above the official price and keep all of it. It is obvious that
corruption with theft will be more difficult to catch when the official
charges below official price because the official and buyer collude
against government.
Klitgaard (1998) conceptualizes corruption as an increasing
function of both Monopoly Economic Rents and Discretionary
Power, and a decreasing function of Accountability. Klitgaard’s
conceptualization allows us to predict the impact of different varia-
bles on corruption through their effect/impact on these three con-
ceptualizing variables. Using this conceptualization, we examine
the effects of different cultural variables on corruption. Culture can
affect corruption depending on the degree of tolerance for corrup-
tion or the general outlook toward the practice. A few studies
attempt to measure culture or some aspects of culture across
countries. For the purposes of this study, we will use the WVS and
Hofstede’s measures of culture.

World Values Survey and Corruption

The WVS began in 1981 as the European Values Survey. This first
wave, as they are called, included just 20 countries.4 Since then,
there have been four additional waves of surveys.5 Over the years,
these five waves of surveys have covered 99 countries.6
The WVS questions cover ecology, economy, education, emo-
tions, family, gender and sexuality, government and politics,
health, happiness, leisure and friends, morality, religion, society
and nation, and work.7 To measure culture, many studies have
selected four questions to give guidance on Trust, Obedience,
Respect, and Control.8
276 BUSINESS AND SOCIETY REVIEW

Trust is the percentage of surveyed individuals who responded


“Most people can be trusted” when asked “Generally speaking,
would you say that most people can be trusted or that you need to
be very careful in dealing with people?” Trust in this sense does not
mean that people can keep a secret, which, if it were the case,
could promote “corruption with theft” as buyer and seller collude
against government. Rather, Trust here means people can be
expected to do the right thing. By Klitgaard’s conceptualization, it
is plausible to assume that Accountability and Trust should be
positively correlated and thus Trust should have a decreasing effect
on the level of corruption in a country. While there may be concern
that in a more trusting society, individuals are likely to be more
easily cheated, we would expect less corruption in more trusting
cultures. This metric is a self-assessment of their society and likely
the strongest indicator of corruption. If corruption were an issue,
the respondents would likely indicate a lack of trust.
Obedience and Respect are two parts of the same question. Par-
ticipants are asked to select up to five qualities from a list of 10
that children should be encouraged to learn at home. Two of those
on the list are obedience, and tolerance and respect for other peo-
ple.9 The metric used here is simply the percentage of respondents
who included each of these among their five. In more obedient soci-
eties, individuals are more likely to submit to another’s authority
which would encourage corruption. Obedience and Respect in this
sense imply deference to authority in social relations and business
decisions. By Klitgaard’s conceptualization, an unchallenged
authority will have less accountability and more discretionary
power. Therefore, Obedience in this sense will increase discretion-
ary power, decrease accountability and thus increase corruption.
However, a subtle difference between Obedience and Respect may
see the two having different effects on corruption. If Respect is
interpreted in a society to mean being fair and not trying to take
advantage of others, then Respect could lead to lower corruption.
The effect of Respect on corruption will be determined in our
empirical analysis.
Finally, Control is the average score of respondents who rate, on
a scale of 1–10 where 1 indicates none at all and 10 a great deal,
how much freedom of choice and control they feel they have over
the way their life turns out.10 Societies in which people have less
control are likely to be those in which power is concentrated in the
MORNAH AND MACDERMOTT 277

hands of a few people. With concentrated power, economic rents


are likely to be high and by Klitgaard’s conceptualization, corrup-
tion will be high as well. Therefore, in societies where people feel
they have little control, we would expect more corruption as these
individuals would likely feel powerless in the face of authority. The
authority figure can demand bribes with ease and the powerless
individual will be willing to succumb to the corrupt authority’s
demands without resistance.

Hofstede and Corruption

Hofstede (2001), whose work as a management trainer at IBM


offered him the opportunity to study different cultures, surveyed
and analyzed over 116,000 questionnaires from 72 countries.
Though constantly evolving, at this point Hofstede has identified
six cultural dimensions: Power Distance, Uncertainty Avoidance,
Individualism-Collectivism, Masculinity-Femininity, Long-term ver-
sus Short-term Orientation, and Indulgence versus Restraint.
Power Distance is a measure of interpersonal power or influence
as perceived by the less powerful of the two. In High-Power Dis-
tance countries, one expects a tall organizational pyramid and a
centralized decision structure. With power and decision making
concentrated in High-Power Distance countries, we would expect
greater corruption. In countries with a Low-Power Distance,
authority is less concentrated and corruption more difficult and
less likely. Power Distance maps perfectly to Klitgaard’s conceptu-
alization of corruption. In High-Power Distance countries with con-
centrated power, there will be higher economic rents, higher
discretionary power and lower accountability, and thus higher cor-
ruption. The reverse is true for Low-Power Distance countries. We
are ruling out the case of Low-Power Distance due to a dysfunc-
tional society where there is no law and order.
Masculine–Feminine is meant to capture those characteristics
most commonly attributed to men (assertiveness, competitiveness,
ambition), and women (nurturance, relationships). We would
expect countries that are more masculine, those with higher scores
in this dimension, to see more corruption. That is, in these coun-
tries, assertive and aggressive behavior is the norm. “Taking that
which is mine” can easily morph into “taking that which is not
278 BUSINESS AND SOCIETY REVIEW

mine.” Working this into Klitgaard’s conceptualization of corrup-


tion, assertiveness, and competition for dominance will lead to
more rent creating and rent seeking activities in this society. By
Shleifer and Vishny (1993) classification, we are likely to see less
corruption without theft (as assertive individuals are more likely to
contest higher than normal prices) and more corruption with theft
where the price charged is lower than the official price (as asser-
tive/competitive individuals seek competitive edge by getting the
public good at lower than normal price).
Uncertainty Avoidance captures the various methods and insti-
tutions developed by a culture to cope with uncertainty such as
technology, religion, and the law. In countries with High-
Uncertainty Avoidance, we would likely see institutions and pro-
cesses in place to minimize the unknown. By Klitgaard’s conceptu-
alization, countries that have High-Uncertainty Avoidance are
likely to have more Accountability and less Discretionary Power.
This would create an environment where corruption is less likely to
thrive. Therefore, we would expect this to be negatively related to
corruption.
The Individualism–Collectivism dimension scores a culture on a
spectrum, with low scores indicating a Collectivist society while
high scores an Individualist society. The effect of this dimension on
corruption is ambiguous. On one hand, we can expect corruption
to be greater in Individualist societies, where citizens look out for
themselves as opposed to Collectivist societies where corruption is
expected to be low because the needs of the group take precedence.
We can invoke Klitgaard’s conceptualization to say that in Collec-
tivist societies, individuals have less discretionary power as the
group has to be consulted in most decisions. This also lends itself
to the hierarchical religion and corruption theorization that claims
that emphasis on the nuclear (smaller family) rather than the
larger society explains corruption. If this strand of the argument
holds, then corruption is expected to be higher in Individualistic
(small family oriented groups) than in Collectivist countries
(extended family oriented societies). On the other hand, if collectiv-
ism is seen on ethnic lines, where the group of interest is the ethnic
group, then collectivism based on group polarization can actually
lead to more corruption. For instance, Dincer (2008) find that eth-
nic polarization in U.S. increases corruption. Given the ambiguity,
we will let the data speak to the effect of collectivism on corruption.
MORNAH AND MACDERMOTT 279

Long-term versus short-term orientation tries to tease out whether


people focus their efforts on the present (a low score), or the future
(high score). In countries with a short-term orientation, more atten-
tion is given to more immediate results while long-term oriented soci-
eties focus on relationships and market position. Corruption is a
short-term play and less likely to be found in societies with a long-
term orientation. So, for this variable, we will expect a negative rela-
tionship between it and corruption, all things being equal.
Finally, Indulgence stands for a society that allows relatively free
gratification of basic and natural human drives related to enjoying
life and having fun while Restraint stands for a society that sup-
presses gratification of needs and regulates it by means of strict
social norms. One-way rents are created is through rules and regu-
lation. In lower-scoring, less Indulgent societies, there are more
rules which will create rents and corruption. In more Indulgent
societies, there will be more competition among individuals which
will drive out corruption rents thus reduce corruption in addition
to the reduction of corruption rents due to rules regulations.
Another view states that, rather than create corruption, more rules
and regulations in restrained societies would expose it. Either way,
we will expect to see less corruption in more indulgent societies.

DATA AND EMPIRICAL ANALYSIS

Data

Data for our analysis were collated from a wide range of sources. A
detailed description of the variables employed and their sources
are provided in the Appendix.
Corruption (Corrupt): The principal measure of corruption used
is that of Transparency International CPI. This index reflects the
level of perceived corruption in a country. This measure is most
commonly used in empirical work largely because it combines
many different sources of data used in other measures of corrup-
tion. Other measures of corruption across countries considered in
this study include the international country risk guide (ICRG) cor-
ruption index by the PRS group, and Control of Corruption Index
(WB Corrupt) by the World Bank. The ICRG corruption index as
defined by the PRS group is a “measure of political corruption
280 BUSINESS AND SOCIETY REVIEW

within the political system that is a threat to foreign investment by


distorting the economic and financial environment, reducing the
efficiency of government and business by enabling people to
assume positions of power through patronage rather than ability,
and introducing inherent instability into the political process.”
Essentially, this measures the effects of political corruption on for-
eign business prospects in the local economy. Control of Corrup-
tion on the other hand as defined by the world bank “captures
perceptions of the extent to which public power is exercised for pri-
vate gain, including both petty and grand forms of corruption, as
well as ‘capture’ of the state by elites and private interests.”
All three corruption indices are scored such that the higher the
index, the lower the level of corruption. The CPI and the World Bank
indices range from 0 to 10 while the ICRG index ranges from 0 to 6.
To make for ease of interpretation, we rescale the corruption mea-
sures such that higher scores have higher levels of corruption and
vice versa. We do this by subtracting each corruption index score
from its upper band. That is to say, for the CPI and the World Bank
Indices, we subtract a country’s score from 10 while for the ICRG,
we subtract the country’s score from 6. These measures in our data
set are highly correlated with correlations ranging between 0.68 and
0.91, as seen in Table 2. The average CPI is 4.2 while those of the
World Bank Control of Corruption Index and the ICRG are 4.9 and
3.0, respectively. Some of the countries that consistently rank among
the most corrupt countries for all three measures in the data set are
Bangladesh, Afghanistan, Somalia. Similarly, some of the consis-
tently least corrupt countries across all three measures in the data
set are Finland, Iceland, and Denmark.
Culture Dimensions: The two measures of culture are the four
dimensions of the World Value Survey (Trust, Obedience, Respect, and
Control) and the six dimensions of Hofstede (Power Distance, Uncer-
tainty Avoidance, Individualism-Collectivism, Masculinity-Femininity,
Long-term vs. Short-term Orientation, and Indulgence vs. Restraint).

Other Variables

Some variables have widely been found to affect corruption and we


considered some of them in our analysis. Education (tertiary), eco-
nomic development (measured by GDP per capita), natural
MORNAH AND MACDERMOTT 281

resource endowment (measured by resource rents), ethnic diver-


sity, and trade openness are some of the common variables. But as
explained below, our preferred model used the lags of corruption
instead given the fact that we cannot possibly control for all
determinants.

Baseline Model

As indicated above, other variables have been found to influence


corruption. If these variables are correlated with our measures of
culture and corruption, then we will face problems of endogeneity
and omitted variable bias. One approach to deal with this is to con-
trol for all these variables in our model but to do so would signifi-
cantly reduce the degrees of freedom. This probably explains why
previous studies did not control for these other variables. In addi-
tion, it is difficult to control for all the variables that affect corrup-
tion. To address these issues, we adopt a second approach in
which we estimate a dynamic model. A dynamic model will be
appropriate if we can argue that time dependent variables affect
corruption through their lags. We argue that corruption is an expe-
rience good that depends on occurrences in the past. It is highly
plausible that corruption today is dependent on past levels of edu-
cation, GDP per capita, natural resources, trade openness, and
others. As a result, controlling for the lag of corruption in a model
will take care of these other variables—our preferred model.
Our baseline model is specified complete with all the control var-
iables and their theoretically justified functional forms. We also
include a one period lag of corruption since it is plausible that cor-
ruption today may depend on corruption yesterday.

Corruptionit 5b0 1 b1 Corruptioni;t21


X
k
1bk Culture Dimensionsk
1
X
N X
T
1bN Country FEi 1bT Time FEt 1Ei;t :
1 1

Corruptionit and Corruptioni,t 2 1 measure corruption for country i


at time t or t 2 1 (which is the lag of corruption). Our main model
282 BUSINESS AND SOCIETY REVIEW

uses the perception of corruption index (CPI). Other measures of


corruption adopted to check robustness are the World Bank Con-
trol of Corruption Index and the ICRG. Culture Dimensions repre-
sent the dimensions of culture from either the six Hofstede
dimensions (simultaneously included in the regression analysis) or
the four WVS dimensions (also simultaneously included in the
regression analysis). Country FE is country fixed effects that control
for country heterogeneity as well as other uncontrolled country
time invariant variables that have been found to affect corruption
such as legal system, colonial ties, and Protestant share of the pop-
ulation. Time FE represent time fixed effects to control for shocks
that may have affected perceptions of corruption for the year.
These shocks include the discovery of a big corruption scandal.

Estimation

We use two estimation techniques. Our benchmark models are run


using OLS with robust standard errors. As a check on the robust-
ness of our results and to check for possible estimation errors, we
also run models using the generalized methods of moments (GMM)
estimator. The GMM estimator that uses an instrument set has been
found to be more efficient in the presence of endogenous variables.
In our baseline model, the lag of corruption may give rise to autocor-
relation and possible endogeneity. Similarly, some of our culture
dimensions may be endogenous. For instance, trust in the WVS may
affect corruption just as corruption may affect trust. We, therefore,
estimate our models using the Arrellano and Bond System GMM
estimator with our instruments as genetic distance and the lags of
government, GDP per capita, property rights, and education. The
system GMM is appropriate in this case because our main variables
of interest (culture variables) are time invariant and our data set
(after 3-year averages) has a short time span (max 11-time periods
based on 3-year averages) and a large number of countries.
We estimate our model with the lag of corruption included as a
control variable. We did not include other control variables apart
from our measures of corruption because the lag of corruption sub-
sumes the effects of most other variables that presumably affect cor-
ruption. Corruption and its lags are very highly correlated. Even the
fifth lag is highly correlated with current corruption (0.933 for the
MORNAH AND MACDERMOTT 283

Corruption Perception Index. 0.935 for the World Bank Control of


Corruption Index and 0.88 for the ICRG). All our time data are 3-
year averages. We employed 3-year averages because there is little
variation in our annual corruption data as explained.

RESULTS AND ANALYSIS

Descriptive statistics and the correlation matrix are provided in


Tables 1 and 2, respectively while Tables 3 and 4 list the countries
included in the World Values Survey and Hofstede.

Results: World Values Survey

In Table 5, we present results of the model in which the only con-


trol variables are the dimensions of culture for the WVS. Obedience
is positive and significant in all estimations and across all three
measures of corruption (Table 5). In more obedient societies,
authority figures are more likely to take advantage of their fellow
citizens leading to more corruption. This subscribes to the hierar-
chical culture-induced corruption. When we include the lag of cor-
ruption as in Table 6, Obedience maintains its positive significance
in four of the six regressions.
Trust is negative in all regressions and significant in all but one.
As indicated above, this metric is likely the strongest indicator of cor-
ruption. More trusting societies are less corrupt. This result lends
support to the finding that more hierarchical societies are more cor-
rupt. Uslaner (2004) find that the higher the percentage of Catholics
(a hierarchical religion), the less trust there is and the less trust, the
more corruption. When we include the lag of corruption variables
(Table 6), we see that Trust is now statistically insignificant in the CPI
and WB measures of corruption, thus reducing its robustness.
Control is found to be negative and significant in every regres-
sion (Table 5) as predicted. Thus, in societies where individuals feel
they have little control over the outcome of their lives, we find
greater levels of corruption. Adding lag of corruption (Table 6),
again we see the robustness diminish to just the ICRG models.
Finally, Respect is negative and significant in all six regressions
(Table 5); consistent with a priori expectations. However, when we
284 BUSINESS AND SOCIETY REVIEW

TABLE 1 Summary Statistics


Variable Obs Mean Std. dev. Min Max

Corruption
Corruption Perception 898 4.221529 2.140524 0.8 9.93
Index (CPI)
Corruption By ICRG 1,172 3.040908 1.363201 0 6
Corruption By 1,158 4.943226 2.897635 0 10
World Bank
Culture: WVS
Respect 176 66.77841 14.41039 14.4 93.6
Obedience 176 35.99574 16.91025 2.3 81.7
Trust 176 30.79545 15.81485 2.8 74.2
Control 170 68.15294 7.274834 44 84
Culture Hofstede
Power Distance 804 58.65672 21.73671 11 104
Individualism 804 44.32836 23.91541 6 91
Masculinity 804 48.8806 19.97173 5 110
Uncertainty Avoidance 804 67.43284 23.74222 8 112
Long Term Orientation 1,080 45.326 23.68049 0 100
Indulgence 1,080 45.6128 22.41679 0 100
Other Control Variables
Government 1,338 2147.103 3341.689 8 233,95
Expenditure
Per Capita
Government Size 1,357 0.1666093 0.090335 0 1
Gdp Per Capita 1,975 10021.64 16485.51 68 152,972
Natural Resource 2,027 8.338962 14.91753 0 179
Rent (Total)
Secondary School 1,691 66.50911 32.77056 3 157
Enrollment
Tertiary Enrollment 1,551 22.9121 21.68757 0 113
Ethnic Diversity 2,196 0.4385361 0.2583657 0 0.93
Property Rights 2,112 43.46591 23.77486 5 95

control for the lag of corruption (Table 6), Respect loses significance
in three of the six regressions.

Hofstede Results

Tables 7 and 8 present the results for the Hofstede measures of


culture. Table 7 has only the six of Hofstede’s dimensions of cul-
ture as explanatory variables. Table 8 adds a lag of corruption to
TABLE 2 Correlation Matrix
Power Uncert. Long-
CPI ICRG WB Respect Obed. Trust Control distance Individ. Masc. avoid term Indulg.

CPI 1
ICRG 0.7611 1
WB 0.9122 0.6773 1
MORNAH AND MACDERMOTT

Respect 20.6024 20.3978 20.5351 1


Obedience 0.3078 0.2366 0.3702 0.0687 1
Trust 20.56 20.3595 20.4547 0.368 20.339 1
Control 20.3691 20.2381 20.2751 0.2462 0.09 0.2063 1
Power 0.8114 0.6288 0.7413 20.5471 0.3463 20.4429 20.3583 1
Distance
Individualism 20.709 20.6035 20.7306 0.5204 20.2872 0.3937 0.0721 20.6682 1
Masculinity 0.307 0.3375 0.1565 20.2024 20.0329 20.2249 20.0266 0.2181 0.0492 1
Uncertainty 0.3236 0.1562 0.2116 20.2049 0.0211 20.6505 20.262 0.2249 20.3066 0.0482 1
Avoidance
Long-Term 0.0976 0.1228 20.0109 20.1279 20.4555 0.2443 20.5253 0.1754 0.0805 0.2166 20.0543 1
Orientation
Indulgence 20.3436 20.1955 20.1763 0.3449 0.2768 20.0076 0.6965 20.3271 0.0425 20.1013 0.0236 20.7271 1
285
286 BUSINESS AND SOCIETY REVIEW

TABLE 3 WVS: List of Countries


Albania (3,4) Ghana (5) Peru (3,4,5)
Algeria (4) Great Britain (1,2,3,4) Philippines (3,4)
Andorra (5) Greece (4) Poland (2,3,4,5)
Argentina (2,3,4,5) Hong Kong (5) Portugal (2,4)
Armenia (3) Hungary (2,3,4) Puerto Rico (3,4)
Australia (2,3) Iceland (1,2,4) Romania (2,3,4,5)
Australia (4,5) India (2,3,4,5) Russian Federation (3,4,5)
Azerbaijan (3) Indonesia (4,5) Rwanda (5)
Bangladesh (3,4) Iran (4,5) Saudi Arabia (4)
Belarus (3,4) Iraq (5) Serbia (3,4,5)
Belgium (1,2,4) Ireland (1,2,4) Singapore (4)
Bosnia & Herzegovina (3,4) Israel (4) Slovakia (2,3,4)
Brazil (2,3,5) Italy (1,2,4,5) Slovenia (2,3,4,5)
Bulgaria (2,3,4,5) Japan (2,3,4,5) South Africa (2,3,4,5)
Burkina Faso (5) Jordan (4,5) South Korea (1,2,3,4,5)
Canada (1,2,4,5) Kyrgyzstan (4) Spain (1,2,3,4,5)
Chile (2,3,4,5) Latvia (2,3,4) Sweden (2,3,4,5)
China (2,3,4,5) Lithuania (2,3,4) Switzerland (2,3,5)
Colombia (3,5) Luxembourg (4) Taiwan (3,5)
Croatia (3,4) Macedonia (3,4) Tanzania (4)
Cyprus (5) Malaysia (5) Thailand (5)
Czech Republic (2,3,4) Mali (1,2,5) Trinidad and Tobago (5)
Denmark (1,2,4) Malta (4) Turkey (2,3,4,5)
Dominican Republic (3) Mexico (3,4,5) Ukraine (5)
Egypt (4,5) Moldova (3,5) Uganda (4)
El Salvador (3) Montenegro (3,4) Ukraine (3,4)
Estonia (2,3,4) Morocco (4,5) United Kingdom (5)
Ethiopia (5) Netherlands (1,2,4,5) United States (1,2,3,4,5)
Finland (2,3,4,5) New Zealand (3,5) Uruguay (3,5)
France (1,2,4,5) Nigeria (2,3,4) Venezuela (3,4)
Georgia (3,5) Northern Ireland (1,4) Vietnam (4,5)
Germany (2,3,5) Norway (2,3,5) Zambia (5)
Germany West (1,2,3) Pakistan (3,4) Zimbabwe (4)

Note: The number(s) in parenthesis indicate the waves. For instance, Zimbabwe
took part only in Wave 4 while the South Korea has been in all five waves.

Model 1. Again, our regression analysis provides clear guidance for


the dimensions of culture in Model 1. From Table 7, Power Dis-
tance is positive and significant in all regressions. Thus, as Power
Distance rises, as the organizational pyramid grows steeper and
decisions become more centralized, corruption grows. This result is
consistent with those of McLaughlin (2013) and Husted and de
MORNAH AND MACDERMOTT 287

TABLE 4 Hofstede Countries


Argentina Hong Kong Philippines
Australia Hungary Poland
Austria India Portugal
Bangladesh Indonesia Romania
Belgium Iran Russia
Brazil Ireland Serbia
Bulgaria Italy Singapore
Canada Japan Slovak Rep
Chile Korea South Slovenia
China Latvia Spain
Colombia Lithuania Sweden
Croatia Luxembourg Switzerland
Czech Rep Malaysia Taiwan
Denmark Malta Thailand
El Salvador Mexico Trinidad and Tobago
Estonia Morocco Turkey
Finland Netherlands U.S.A.
France New Zealand Uruguay
Germany Norway Venezuela
Great Britain Pakistan Vietnam
Greece Peru

Estudios (1999). After including lag of corruption (Table 8), Power


Distance maintains its significance in all but one regression. This
suggests some degree of robustness of Power Distance on
corruption.
Individualism–Collectivism is negative and significant in 10 of
the 12 regressions (Tables 7 and 8). Corruption is greater in more
collectivist societies and less in individualistic societies. Perhaps,
rather than individualist societies looking out for themselves and
Collectivist societies caring for each other, collectivist societies are
ripe for corruption because of less competition (more monopolistic
opportunities). In collectivist societies, the interdependence of its
citizens provides opportunities for, free-ridership, rent-seeking,
and corruption that do not exist in more Individualist societies that
could be said to be more competitive thus driving out opportunities
for rent-seeking as in the case of monopoly.
Masculine–Feminine is positive and significant in all 12 regres-
sions (Tables 7 and 8). This would suggest greater levels of corrup-
tion in more masculine countries. This matches with our a priori
288

TABLE 5 Model 1: WVS Culture and Corruption OLS and GMM


CPI ICRG WB

OLS GMM OLS GMM OLS GMM

Obedience 0.0532*** 0.0519*** 0.0303*** 0.0293*** 0.0582*** 0.0628***


20.0055 20.0018 20.003 20.0013 20.0073 20.0022
Trust 20.0340*** 20.0337*** 20.0214*** 20.0232*** 20.0137 20.0099***
20.0086 20.0021 20.0035 20.0014 20.0084 20.0025
Control 20.0815*** 20.0838*** 20.0303*** 20.0263*** 20.1171*** 20.1201***
20.0115 20.0036 20.0054 20.0025 20.0152 20.0045
Respect 20.0703*** 20.0756*** 20.0261*** 20.0278*** 20.0747*** 20.0795***
20.0107 20.002 20.0033 20.0015 20.0115 20.0026
Constant 14.0991*** 14.6505*** 5.7076*** 5.6183*** 15.0779*** 15.1760***
20.9287 20.2511 20.3878 20.1793 21.0952 20.3153
N 297 265 637 544 410 348
Countries 77 75 80
Instruments 12 22 14
Sargent Test 0 0 0
AR Test 0.48 0.25 0.44
Adj. R Square 0.5741 0.3661 0.3803
F 138.2656 1201.4547 120.9218 527.7932 94.0942 782.6996

Robust Standard errors in parentheses *P < 0.10. **P < 0.05. ***P < 0.01.
BUSINESS AND SOCIETY REVIEW
TABLE 6 Model 2: WVS Culture and Corruption OLS and GMM with Lagged Dependent Variable
CPI ICRG WB

OLS GMM OLS GMM OLS GMM

Obedience 0.0130*** 0.0110*** 0.0039 0.0083*** 0.0061 0.0074**


20.0037 20.0039 20.0028 20.0021 20.0038 20.003
Trust 0.0001 0.004 20.0078*** 20.0101*** 20.0017 20.0022
20.0041 20.0043 20.0029 20.002 20.0043 20.003
Control 20.0057 20.0118 20.0199*** 20.0203*** 20.0086 20.0045
MORNAH AND MACDERMOTT

20.0087 20.0078 20.0053 20.0037 20.0085 20.0062


Respect 20.0083* 20.007 20.0075** 20.0138*** 0.0021 0.0016
20.0042 20.0045 20.0031 20.0026 20.005 20.0034
Corruptiont21 0.8943*** 0.9174*** 0.6788*** 0.5434*** 0.8843*** 0.8907***
20.0286 20.0398 20.0374 20.0371 20.0255 20.0237
Constant 0.8598 0.987 2.9298*** 3.5404*** 0.6526 0.3644
20.661 20.7392 20.4318 20.3346 20.6556 20.5227
N 138 122 482 415 246 211
Countries 65 75 75
Instruments 11 21 13
Sargent Test 0 0 0
AR Test 0.17 0.11 0.07
Adj. R Square 0.9348 0.6571 0.9064
F 811.6608 377.7808 260.3501 265.1378 566.1725 690.1958

Robust Standard errors in parentheses *P < 0.10. **P < 0.05. ***P < 0.01.
289
TABLE 7 Model 1: Hofstede Culture and Corruption OLS and GMM: No Other Control Variables
290

Included
CPI ICRG WB

OLS GMM OLS GMM OLS GMM

Power Distance 0.0386*** 0.0421*** 0.0184*** 0.0185*** 0.0379*** 0.0365***


20.0037 20.0013 20.0028 20.0014 20.0059 20.0014
Individualism 20.0292*** 20.0329*** 20.0218*** 20.0239*** 20.0414*** 20.0478***
20.0041 20.0011 20.0023 20.0011 20.0051 20.0012
Masculinity 0.0137*** 0.0125*** 0.0075*** 0.0080*** 0.0088** 0.0088***
20.0035 20.0009 20.0022 20.001 20.0043 20.001
Uncertainty Avoidance 0.0169*** 0.0062*** 0.0051** 0.0008 0.0045 20.0107***
20.0046 20.0008 20.0022 20.0009 20.0055 20.001
Long-Term Orientation 20.0282*** 20.0204*** 20.0131*** 20.0108*** 20.0284*** 20.0191***
20.0037 20.001 20.0022 20.0011 20.0046 20.0011
Indulgence 20.0356*** 20.0357*** 20.0162*** 20.0162*** 20.0342*** 20.0313***
20.0043 20.001 20.0023 20.0011 20.0061 20.0012
Constant 4.8804*** 5.3015*** 2.9653*** 3.2565*** 5.3204*** 6.1276***
20.6141 20.15 20.3411 20.1638 20.8261 20.169
N 352 261 504 442 360 318
Countries 58 58 59
Instruments 16 24 18
Sargent Test 0 0 0.336
AR Test 0.065 0.23 0.399
Adj. R Square 0.6315 0.5349 0.5467
F 195.0449 1811.1915 127.2318 459.419 104.3655 1510.3215
BUSINESS AND SOCIETY REVIEW

Robust Standard errors in parentheses *P < 0.10. **P < 0.05. ***P < 0.01.
TABLE 8 MODEL 2: Hofstede Culture and Corruption OLS and GMM with Lag Dependent Variable
CPI ICRG WB

OLS GMM OLS GMM OLS GMM

Power Distance 0.0002 0.0065** 0.0115*** 0.0217*** 0.0050* 0.0115***


20.0026 20.0028 20.0026 20.0018 20.0028 20.0022
Individualism 20.0032 20.0044* 20.0058** 20.0225*** 20.0045 20.0122***
20.0023 20.0023 20.0024 20.0019 20.0029 20.0021
Masculinity 0.0030* 0.0029* 0.0046** 0.0099*** 0.0074*** 0.0076***
20.0017 20.0017 20.0021 20.0013 20.0019 20.0015
Uncertainty Avoidance 20.0013 20.0019 0.0021 0.0002 20.0038* 20.0067***
MORNAH AND MACDERMOTT

20.0016 20.0016 20.0018 20.0011 20.002 20.0014


Long-Term Orientation 20.0058*** 20.0090*** 20.0026 20.0090*** 20.0106*** 20.0116***
20.002 20.002 20.0026 20.0014 20.0027 20.0017
Indulgence 0.001 20.0041* 20.0050** 20.0141*** 20.0076** 20.0119***
20.002 20.0023 20.0022 20.0015 20.003 20.0018
Corruptiont 2 1 0.8924*** 0.8066*** 0.5591*** 20.0435 0.8693*** 0.7184***
20.0198 20.0364 20.0494 20.0482 20.0338 20.0261
Constant 0.7034** 1.1822*** 0.7755** 2.8924*** 1.1433*** 2.0524***
20.2936 20.3239 20.3154 20.2514 20.4395 20.2785
N 232 151 383 341 240 213
Countries 55 58 57
Instruments 15 23 17
Sargent Test 0.024 0 0
AR 0.542 0.498 0.007
Adj. R Square 0.9478 0.6844 0.9172
F 1034.8685 501.9854 174.5021 256.3737 270.6495 759.4605
291

Robust Standard errors in parentheses *P < 0.10. **P < 0.05. ***P < 0.01.
292 BUSINESS AND SOCIETY REVIEW

expectations that corruption would be more common in more


aggressive, assertive countries, and consistent with prior results of
McLaughlin (2013) and Husted and de Estudios (1999).
The results for Uncertainty Avoidance are a bit muddled. In Table
7, it is positive and significant in three regressions, insignificant in
two and negative and significant in one (World Bank Corrupt for the
GMM estimator). The results did not improve in Table 8 with four of
the six regressions being insignificant and the last two significant but
negative. Certainly, these results do not give a clear guidance.
Long-term orientation has the expected sign across models and
estimation methods. It is negative and significant in 11 of the 12
regressions (Tables 7 and 8). This strong result indicates greater
corruption in countries with short-term orientation. This makes
sense because, as we posited earlier, corruption appears to be a
short-term strategy and is less likely to be found in societies with a
Long-term orientation.
The final dimension, Indulgence versus Restraint is negative and
significant in 11 of the 12 regressions. This strong result would
indicate greater corruption in restrained societies. Thus, in more
restrained societies, one would find more rules and regulations
and, in turn, greater opportunity for rents and corruption. Indul-
gence, on the other hand, is similar in some respects to individual-
ism because it allows the individual to look out for themselves.
This promotes competition and drives out corruption rents.

POLICY IMPLICATIONS AND CONCLUSION

We set out to find out whether culture has any effect on corruption
across countries using the WVS and Hofstede’s dimensions of cul-
ture and what the implications could be for business and policy.
We find that indeed, some aspects of culture have significant and
robust effects on corruption. With the WVS, by and large, Trust in
society, Control over one’s destiny and Respect for others decrease
corruption while Obedience increases corruption. Under the Hof-
stede dimensions, in most cases, societies characterized by high
Power Distance and Masculinity are more corrupt. Individualism,
Long Term Orientation, and Indulgence, in most cases, have a neg-
ative effect on corruption. The effect of Uncertainty Avoidance is
unclear.
MORNAH AND MACDERMOTT 293

The religion and corruption literature have predicted that coun-


tries dominated by religions that are more hierarchical are prone to
corruption. Hierarchical religions are perceived to emphasize Obe-
dience, Control, and are less trusting of others. Assuming this the-
orizing is correct, then our results in most cases partially confirm
(Obedience, Trust) and partially disputes (Respect and Control)
this theorization of religion, culture, and corruption.
What are the implications of these results for international busi-
ness and policy makers? International business requires managers
to evaluate the attractiveness and market potential of a country fol-
lowed by the determination of the type and mode of entry (Mac-
Dermott and Mornah 2015). Some aspects of culture may be favor-
able to certain types of businesses. In an analysis of which aspects
of culture is conducive for what mode of entry using the GLOBE
dimensions, Mac-Dermott and Mornah (2015) find that each
dimension has different effects on the viability of various modes of
entry. For instance, they argue that for a business coming from a
High-Power Distance country, they will be better served investing
in countries also characterized by high Power Distance than inves-
ting in countries that have low Power Distance. Similarly, busi-
nesses originating from countries with low Power Distance should
look to invest in countries with similar low Power Distance and
trading with those that have high Power Distance. Their analyses
focus on culture as the deciding factor for mode of entry. But other
factors like corruption are also important. Knowing that countries
with high Power Distance are likely to be more corrupt, interna-
tional businesses will be more careful in choosing between inves-
ting and trading depending on which one carries the least risk.
Seleim and Bontis (2009), suggest that understanding the cultural
influences on corruption could be relevant for international busi-
ness in the sense that it guides international companies with
regards to their human resource strategies such as recruiting,
compensation, training, and development.
This study also has important implications for government pol-
icy. Corruption has been found to have negative effects on foreign
direct investment and trade. In an internationally competitive mar-
ket for foreign direct investment and trade opportunities, countries
can increase their competitiveness by decreasing corruption. The
drive to be competitive in global markets and to rid global business
of unethical practices has led governments, non-governmental,
294 BUSINESS AND SOCIETY REVIEW

and international organizations to continuously craft policies


aimed at curbing corruption and promoting an ethical culture in
international business (Getz and Volkema 2001). Because of these
efforts, it is important for policy makers and business leaders to
understand the cultural antecedents of corruption as they craft
policies to curb corruption or business deals to mitigate the risks
of corruption. The problem with most of these international policies
is that they are designed without regards to the culture. Different
countries will respond differently to policy prescriptions given dif-
ferences in culture. Therefore, knowing your cultural orientations
and how that affects corruption could inform the design of more
efficient policy prescriptions given that changing culture is more
difficult. For instance, in terms of the Hofstede’s dimensions, we
find that mostly, countries with low Power Distance and Masculin-
ity scores as well as high Individualism and Long-Term Orientation
scores have lower corruption. A solution to curb corruption in a
country should therefore take into account the country’s cultural
scores on these dimensions.

NOTES

1. The Wikileaks Diplomatic cables also known as Cablegate was a United


States Diplomatic Cables leak of classified cable messages sent to the U.S.
State Department by some 274 U.S. foreign and diplomatic missions around
the world. The cables were mostly diplomatic assessment of world leaders,
host countries, and their officials. They contained information on acts of cor-
ruption or abuse of office that agencies could capture.
2. Note that we recalibrate the CPI such that higher numbers imply higher
corruption.
3. The Hofstede study started with an initial four dimensions and these
were later expanded to five and six.
4. All but three of the 20 countries were European: Canada, South Korea,
and the United States.
5. Waves 2 through 5 included 40, 56, 68, and 56 countries, respectively.
In addition, the number of questions varied over the years.
6. See Appendix.
MORNAH AND MACDERMOTT 295

7. Waves 1 through 5 had 381, 744, 236, 245, and 259 questions, respec-
tively. The four key questions utilized in the current study were included in all
five waves.
8. For each metric, a higher score is interpreted as a greater indication of
that quality for the culture. For instance, a country that scores high on the Tol-
erance metric is believed to be more tolerant (of both the people and their ideas)
than others.
9. The other qualities were independence, hard work, feeling of responsi-
bility, imagination, thrift/saving money determination/perseverance, reli-
gious faith, and unselfishness.
10. We multiply the score by 10 to make it comparable to the other three
culture measures.

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298 BUSINESS AND SOCIETY REVIEW

APPENDIX

TABLE A1 WVS: Dimensions and A Priori Expectations


Dimension Definition A priori expectation

Trust [2] Percentage of people who While there may be concern that
responded “Most people can in a more trusting society,
be trusted” when asked individuals are likely to be
“Generally speaking, would more easily cheated, we would
you say that most people can expect less corruption in more
be trusted or that you need trusting cultures. This metric
to be very careful in dealing is a self-assessment of their
with people?” society and likely the strongest
indicator of corruption. If cor-
ruption were an issue, the
respondents would likely indi-
cate a lack of trust.
Obedience [1] Percentage of people who In more obedient societies, indi-
included obedience as an viduals are more likely to sub-
especially important quality mit to another’s authority
that children can be encour- which would encourage
aged to learn at home. corruption.
Respect [2] Percentage of people who We would expect that in societies
included tolerance and where respect for others is a
respect for other people as priority, corruption would be
an especially important qual- less common. Here, the ratio-
ity that children can be nale comes from the authority
encouraged to learn at home. figure who would be less likely
to take advantage of his/her
fellow citizens given the respect
s/he has for them.
Control [2] Average score of respondents to In societies where people feel
the question “Some people they have little control, we
feel they have completely free would expect more corruption
choice and control over their as these individuals would
lives, while other people feel likely feel powerless in the face
that what they do have no of authority. Thus, with more
real effect on what happens to control we would expect less
them where 1 means ‘none at corruption.
all’ and 10 means ‘a great
deal’ to indicate how much
freedom of choice and control
you feel you have over the
way your life turns out.” This
has been re-scaled to an
index of 0–100.
MORNAH AND MACDERMOTT 299

TABLE A2 Hofstede Dimensions and A Priori Expectations


Dimension Definition A priori expectation

Power Distance The measure of interper- With power and decision


[1] sonal power or influ- making concentrated in
ence as perceived by high-Power Distance
the less powerful of the countries, we would
two. In high-Power Dis- expect greater corrup-
tance countries, one tion. In low-Power Dis-
expects a tall organiza- tance countries,
tional pyramid and a authority is less con-
centralized decision centrated and corrup-
structure. tion more difficult and
less likely.
Individualism– The Individualism–Collec- Unable to tell for sure
Collectivism tivism dimension scores which is more likely.
[??] a culture on a spectrum
with low scores indicat-
ing a collectivist society
while high scores an
individualist society.
Masculine–Feminine More masculine countries In more masculine coun-
[1] tend to be assertive- tries, assertive, aggres-
ness, while more femi- sive behavior is the
nine countries tend to norm. Taking that
be more nurturing. which is mine can eas-
ily morph into corrup-
tion; taking that which
is not mine.
Uncertainty This dimension captures We would expect this to
avoidance the various methods be negatively related to
[2] and institutions devel- corruption. In countries
oped to cope with with high Uncertainty
uncertainty such as Avoidance, we would
religion and the law. likely see institutions
and processes in place
to minimize the
unknown. This would
create an environment
where corruption is
more difficult and less
likely.
300 BUSINESS AND SOCIETY REVIEW

TABLE A2 (continued)

Dimension Definition A priori expectation

Long-Term This dimension tries to Corruption is a short-


Orientation tease out whether peo- term play and less
[2] ple focus their efforts likely to be found in
on the present, a low societies with a long-
score, or the future. term orientation.
Indulgence versus This dimension distin- We could expect more
Restraint guishes societies that corruption in Indulgent
[?] allow relatively free societies; those who are
gratification of human free to satisfy their
needs from those who wants and needs
use social norms to because they compete.
suppress the gratifica- However, competition
tion of these needs. drives down monopoly
power thus could
reduce rents and
corruption.
TABLE A3 List of Variables, Definitions, and Sources
Dimension Definition Source

Corruption
Corruption Perception Index (CPI) The Corruption Perception Index Transparency International
(CPI) index by Transparency Inter- Corruption perception indi-
national measures the level of ces (various years)
perceived corruption in a country.
International Country Risk Guide (ICRG) Measures perception of corruption The PRS Group
World Bank Control of Corruption (WB) This is an index indicating the World Bank Database (World
degree to which countries are Development Indicators)
MORNAH AND MACDERMOTT

fighting corruption.
Culture measures
WVS (Trust, Obedience, Respect, Control) As defined in Appendix Table A1 World Values Survey (Inglehart
Hofstede (All six dimensions) As defined in Appendix Table A2 et al. 2014)
Hofstede (2001)
Other variables
GDP Per Capita
Education (Tertiary) WDI
Ethnic Diversity WDI
Genetic Distance Alesina
Natural Resource Endowment WDI
Property Rights The PRS Group
Trade Openness WDI
301