Do better managers bribe less? Cross-national and experimental evidence

Abstract

<jats:title>Abstract</jats:title> <jats:p>Work on the relationship between regulation and bribery suggests that bribes are a joint function of the demands of bureaucrats and the supply of business managers willing to pay them. However, due to biases in measurement, empirical work has concentrated on country-level, demand-side drivers, while research on factors that lead businesses to bribe remains theoretically rich but empirically underdeveloped. We contribute to the burgeoning work on the supply of bribery with a formal model that predicts poorly managed firms may strategically initiate bribes because resource constraints and/or poor service quality necessitate shortcuts in regulatory compliance. To test these theories, we present two connected studies. The first demonstrates that the predictions are consistent with cross-national business survey data. The second, a field experiment, randomly assigned firms to management training courses in Vietnam. Using detailed accounting books, we find that firms in the management course paid monthly bribes less than one-fifth the size ($227 less) of the placebo group, and, consistent with our predictions, had higher levels of regulatory compliance.</jats:p>