Corruption, the digital sectors, and the profitability of foreign subsidiaries in emerging markets

Yan Wu; Yang Yang; Tomasz Mickiewicz

doi:10.1016/j.jbusres.2023.113848

Corruption, the digital sectors, and the profitability of foreign subsidiaries in emerging markets

Yan Wu
, Yang Yang^*
, Tomasz Mickiewicz

^*Corresponding author for this work

Shanghai Lixin University of Accounting and Finance
Shanghai Polytechnic University

Research output: Contribution to journal › Article › peer-review

32 Citations (Scopus)

48 Downloads (Pure)

Abstract

Utilising institutional theory, we reconsider the relationship between foreign subsidiary profitability and host country corruption, and offer two key insights. First, when corruption is at a medium level, the profitability of foreign subsidiaries is strongly negatively affected, consistent with prospect theory. However, when corruption is widespread and becomes an uncertainty-reducing norm, subsidiary
profitability becomes relatively stronger, albeit remaining at a lower level than in a corruption-free environment. Second, extensive business restrictions weaken the relationship between corruption and foreign subsidiary profitability. Furthermore, foreign companies operating in digital sectors are less affected both by host country corruption and by business restrictions. In addition, we consider lobbying
to be an alternative non-market strategy to bribery, which can reduce the negative impact of business restrictions for companies in digital sectors. Our hypotheses have been supported by estimations drawing on over 18,000 foreign subsidiaries in emerging markets.

Original language	English
Article number	113848
Number of pages	17
Journal	Journal of Business Research
Volume	161
Early online date	20 Mar 2023
DOIs	https://doi.org/10.1016/j.jbusres.2023.113848
Publication status	Published - 1 Jun 2023

Bibliographical note

Copyright © 2023 Elsevier Inc. This author's accepted manuscript version is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International https://creativecommons.org/licenses/by-nc-nd/4.0/

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

SDG 16 Peace, Justice and Strong Institutions

Keywords

institutions
corruption
digital economy
emerging markets
foreign subsidiaries
prospect theory

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10.1016/j.jbusres.2023.113848

Corruption_and_digital_economy
Copyright © 2023 Elsevier Inc. This author's accepted manuscript version is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International https://creativecommons.org/licenses/by-nc-nd/4.0/
Accepted author manuscript, 656 KBLicence: CC BY-NC-ND 4.0

Cite this

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title = "Corruption, the digital sectors, and the profitability of foreign subsidiaries in emerging markets",

abstract = "Utilising institutional theory, we reconsider the relationship between foreign subsidiary profitability and host country corruption, and offer two key insights. First, when corruption is at a medium level, the profitability of foreign subsidiaries is strongly negatively affected, consistent with prospect theory. However, when corruption is widespread and becomes an uncertainty-reducing norm, subsidiary profitability becomes relatively stronger, albeit remaining at a lower level than in a corruption-free environment. Second, extensive business restrictions weaken the relationship between corruption and foreign subsidiary profitability. Furthermore, foreign companies operating in digital sectors are less affected both by host country corruption and by business restrictions. In addition, we consider lobbying to be an alternative non-market strategy to bribery, which can reduce the negative impact of business restrictions for companies in digital sectors. Our hypotheses have been supported by estimations drawing on over 18,000 foreign subsidiaries in emerging markets.",

keywords = "institutions, corruption, digital economy, emerging markets, foreign subsidiaries, prospect theory",

author = "Yan Wu and Yang Yang and Tomasz Mickiewicz",

note = "Copyright {\textcopyright} 2023 Elsevier Inc. This author's accepted manuscript version is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International https://creativecommons.org/licenses/by-nc-nd/4.0/",

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AU - Wu, Yan

AU - Yang, Yang

AU - Mickiewicz, Tomasz

N1 - Copyright © 2023 Elsevier Inc. This author's accepted manuscript version is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International https://creativecommons.org/licenses/by-nc-nd/4.0/

PY - 2023/6/1

Y1 - 2023/6/1

N2 - Utilising institutional theory, we reconsider the relationship between foreign subsidiary profitability and host country corruption, and offer two key insights. First, when corruption is at a medium level, the profitability of foreign subsidiaries is strongly negatively affected, consistent with prospect theory. However, when corruption is widespread and becomes an uncertainty-reducing norm, subsidiary profitability becomes relatively stronger, albeit remaining at a lower level than in a corruption-free environment. Second, extensive business restrictions weaken the relationship between corruption and foreign subsidiary profitability. Furthermore, foreign companies operating in digital sectors are less affected both by host country corruption and by business restrictions. In addition, we consider lobbying to be an alternative non-market strategy to bribery, which can reduce the negative impact of business restrictions for companies in digital sectors. Our hypotheses have been supported by estimations drawing on over 18,000 foreign subsidiaries in emerging markets.

AB - Utilising institutional theory, we reconsider the relationship between foreign subsidiary profitability and host country corruption, and offer two key insights. First, when corruption is at a medium level, the profitability of foreign subsidiaries is strongly negatively affected, consistent with prospect theory. However, when corruption is widespread and becomes an uncertainty-reducing norm, subsidiary profitability becomes relatively stronger, albeit remaining at a lower level than in a corruption-free environment. Second, extensive business restrictions weaken the relationship between corruption and foreign subsidiary profitability. Furthermore, foreign companies operating in digital sectors are less affected both by host country corruption and by business restrictions. In addition, we consider lobbying to be an alternative non-market strategy to bribery, which can reduce the negative impact of business restrictions for companies in digital sectors. Our hypotheses have been supported by estimations drawing on over 18,000 foreign subsidiaries in emerging markets.

KW - institutions

KW - corruption

KW - digital economy

KW - emerging markets

KW - foreign subsidiaries

KW - prospect theory

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UR - https://www.scopus.com/pages/publications/85150434524

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DO - 10.1016/j.jbusres.2023.113848

M3 - Article

SN - 0148-2963

VL - 161

JO - Journal of Business Research

JF - Journal of Business Research

M1 - 113848

ER -

Corruption, the digital sectors, and the profitability of foreign subsidiaries in emerging markets

Abstract

Bibliographical note

UN SDGs

Keywords

Access to Document

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