Introduction
The prevalence of corruption is a potential host country is one of the important concerns in the firms investigation procedure, since the high prevalence of corruption leads to not only unfair business competition environment but also society’s instability. Corruption is an element of the norms and rules of states and, thus, affects both the external and internal legitimacy of MNE subsidiaries (Rodriguez, Uhlenbruck & et cal, 2005). Many world organizations such as World Bank survey the corruption prevalence indicator which is known as CPI for every country annually. A couple of research studies also have done many findings concerning on the prevalence of corruption upon the firms’ international expansion. However, most literature has quantified the impact of corruption in host country on foreign direct investment, which seldom gives a general view on the impact of the prevalence of corruption on the firm’s decision.
This essay begins with an overview of the impact of the prevalence of corruption in a potential host country upon a firm’s decision from three aspects, the negative and positive attractiveness and entry market, and also did a balanced evaluation of the corruption charges against GlaxoSmithKline in China. As a result, the impact of the case might has on the decision of other potential firms to Chinese market has been easily summarized.
The impact of the prevalence of corruption upon a firm’s international expansion decision
Impact on the market attractiveness
The corruption is one of the serious barriers to the fair business competition environment, which deters many firms’ decision to international expansion to some pervasive corruption markets. However in the initial of decision making step, the corr...
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...enefit, competitive advantages and efficient organization because the image of its brand is long term based. Individual corporate behavior or joint activities by groups of corporations are important elements in firms' response to corruption. Ultimately, much of the burden is on governments to restrain corrupt tendencies. Firms are expected to support these efforts (Doh, Rodriguez & et cal, 2003). There are many international organizations for helping to regulate the corporation’s activities, such as Transparency International and The International Chamber of Commerce.
Conclusion
To sum up, as the discussion about the impact of the prevalence of corruption in a potential host country, analysis of GlaxoSmithKline case and the impact on other potential firms, the potential firms should organize their business carefully in coping with the corruption in foreign markets.
When operating in a different country/culture businesses should refrain from making any definite assumptions or judgements. The issue is that is it easy to make assumptions/judgements about countries whose livelihoods that business is not even familiar with. Then when the business actually gets to that country, they will find that their assumptions/judgements fail to live up to the complexity of that country/culture. For example, in the case of bribery that occurs in certain countries, a company may mistakenly assume that because officials partake in this act that this act is thereby morally permissible. If anything that is far from the truth. Historically, bribery has often been considered wrong in many countries worldwide. When that company
Even though monopolies are illegal, public corruption allows companies to form and continues to be a problem today. In an article published by the Los Angeles, Anh Do
Chetwynd, Eric, Frances Chetwynd, and Bertram Spector. "Corruption and Poverty: A Review of Recent Literature." Management Systems International (2003): n. pag. Print.
First, paying bribes and siphoning off millions of dollars from the corporation would eventually lead to the company losing money because building mega projects in politically unstable countries would prove problematic. A sudden regime change would render the contracts useless, as
Often times, Americans do not realize the corruption that surrounds them in their nation. Capitalism is an economic and political system in which the country’s trade and industry is controlled by private owners for profit, rather than by the state. Business owners, CEO’s, corporations, and large businesses have the propensity of taking extreme advantage of the power capitalism brings. For decades companies and corporations have been taking unexplainable benefit of the power they have. Capitalism in the Unites States leads to corruption.
The cons to the argument for saying the Foreign Corrupt Practices Act is obsolete is discussed in the article With Wal-Mart Claims, Greater Attention on a Law by Charlie Savage. In this article Charlie Savage argues that the FCPA has always been a useful tool in stopping corruption but in recent years with companies becoming more globalized other countries gradually adopted similar laws, the United States has started to enforce it more strictly. The dollar amount of fines imposed by the Justice Department and the Securities and Exchange Commission has increased even more, including a record-setting $800 million paid by Siemens in 2008. Enforcement under the act has soared, from just two enforcement actions in 2004 to 48 in 2010. There are currently at least 100 open investigations, specialists estimate.
Political and legal considerations were given first priority in this analysis with primary emphasis given to whether a country's legal or political system prohibits or impedes foreign investment. If a country's political or legal system discouraged or prevented foreign investment, that country was disqualified from further consideration. Factors considered when assessing the political and legal environment:
The rule of law is vital for supporting a democratic society. Citizens rely on the government to protect its people through laws and good governance. However, corruption undermines government’s abilities to be accountable for the good of its people. Corruption as defined by Transparency International is “the abuse of entrusted power for private gains”. When governments are corrupt, they defer the rule of law and create greater inequalities. Organized crimes, such as human trafficking, contribute to corruption by undermining law enforcement efforts, slowing economic growth, and raising the costs of regional trade (Dixon 98). These negative impacts effect the peoples trust in the government.
When we look at the laws that have been broken by so many of the top named corporations, I see why they continue to operate in the capacity that they do. When you take in to account the amount of money taken in for overall profits each year versus the fines levied “if” they are caught breaking the law I can see why they take their chances at being caught or not. Although the fines given are typically large amounts, they really are a mere slap on the wrist when compared to the money earned each
Bribery is wrong, and it would be almost instinctive to point at the benefits of impartially functioning public servants and incorrupt corporations to our democratic society as justification. However, in this imperfect world where bribery is rife in varying degrees, is it possible to express this notion convincingly? Certainly 'because the UK Bribery Act says so' is far less persuasive to a council planning office in Shanghai than in London, and indeed in compliance with section 7 of the Bribery Act 2010 which relates to commercial offences, it is essential that this question is engaged with on a corporate scale and without assertion through dogma. Accordingly, this essay will argue that elements wrong with bribery are inclusive of both moral and economic considerations. Moreover, in conjunction with international mandates, advent of aggressive legislation such as that of the UK Bribery Act 2010 is representative of global efforts to eliminate bribery. Hence, it follows that bribery can never be considered a normal part of business because it is economically unsustainable in the long term.
The UN Convention against Corruption (UNCAC) (UN General Assembly 2003) is the first international attempt to establish a standard of anti-corruption policy in order to reduce problems related to corruption (Hechler et al. 2011) like an adverse impact on economic growth (Mauro 2004). In spite the fact that the approach of UNCAC is based on large empirical evidence about the causes of corruption (Judge, McNatt, and Xu 2011) corruption remains in some countries a persistent problem (Hechler et al. 2011). A ex ante analysis by Hechler et al. (2011) identified the lack implementation as one of the major pitfalls of the UNCAC and this essay seeks to find a theoretical explanation by drawing on the literature of policy diffusion, which applies for UNCAC as the policy choices of signing countries affect the policy choices of other countries (Meseguer 2006). This constitutes an interesting case for testing the assumptions of the two main mechanism identified by Gilardi (2003), who distinguishes between mechanisms of diffusion focused on rational problem-solving or symbolic purposes (Meseguer 2006). However, this essay narrows the field of possible answers by arguing that the concept of rational learning (Meseguer 2006) does not apply and therefore advocates a critical assessment of the underlying premise of mimetic isomorphism that countries imitate each other but are more concerned about legitimacy rather than functional efficiency (Hall and Taylor 1996). Testing mimetic isomorphism against the implementation process of UNCAC will highlight under which conditions the theoretical framework is more likely to explain the outcome of anti-corruption policy. This may yield key insights on the antecedents of failure in decreasing...
Global Challenge: Building the New Worldwide Enterprise. McGRAW-HILL Book Company Europe. NEELANKAVIL, James P. (2003). International Business Corruption: A Framework of Causes, Effects, and Prescriptions. Hofstra University Press.
The existence of bribery and unethical behavior is rampant in the world market and may not change overnight. The question of bribery has been distilled in business literature as a question of ethics. In this situation at the airport with the customs officer, it is important to distinguish between business ethics and personal ethics. In a business ethics situation, the Foreign Corruption Practices Act would prohibit offering any bribe to the custom office – for example to free a shipment of goods that was lost in red tape (Pitman & Sanford, 2006). Most companies also have policies against bribery as well. In this situation, however the main issue at hand is that of personal ethics. When in a situation where your company is unknown and there is no business being conducted, normal business ethics and laws (including FCPA) do not apply only personal ethical standards.
Montesh, M. (n.d.). Conceptualizing Corruption: Forms, Causes, Types and Consequences. Retrieved May 4, 2014, from
Corruption is one of the major issues nowadays and is a clear example and consequence of the actual society and culture. A manifestation of this global phenomenon is the construction industry where corruption is really widespread and interconnected with other industries.