Prof’s Studies of Corruption in Asia are in Demand Worldwide

A UT Dallas management professor’s findings on corruption in Asia are in demand by business universities around the world.

Dr. Seung-Hyun Lee

Dr. Seung-Hyun Lee

Two articles by Dr. Seung-Hyun Lee, an associate professor in the Naveen Jindal School of Management, examine how bribery and other types of corruption influence business and profits in Asian countries. Lee, of the school’s Organizations, Strategy and International Management area, also analyzes how U.S. firms fare when competing in such environments.

“Bribery is a reality of doing business in most Asian countries,” Lee said. “Bribery is almost like paying a tax in many countries.”

Since the papers appeared in the Asia Pacific Journal of Management in 2007 and 2010, Lee has frequently received requests to use them from various universities, including the Singapore campus of INSEAD, one of the world’s foremost graduate business universities.

Lee’s 2007 paper, “Corruption in Asia: Pervasiveness and Arbitrariness” uses two distinct factors to study bribery:

  • Pervasiveness, or how rampant bribery is, and how easy it is to tell whether bribery is acceptable.
  • Arbitrariness, or the likelihood of whether the bribe will result in the requested service.

The two factors play different roles.

“High arbitrariness,” as a review in The Economist explained, “discourages foreign investment in a way that high pervasiveness does not, since firms cannot well afford to be unsure whom to bribe and whether the bribe will work.”

Lee uses practices in Indonesia and India to illustrate.

“Indonesia is a very corrupt country, but, at the same time, if you bribe you get preferential treatment as promised at the time of bribery” he said. “So bribery is very prevalent in Indonesia. If you don’t pay the bribe, you aren’t going to get the deal. If you do, however, then you will surely get the benefit.”

Sungjin J. Hong

Sungjin J. Hong

“In countries like India, on the other hand, bribery is very prevalent, but uncertainty associated with bribery is very high,” Lee said. “If uncertainty is high, you may not know who to bribe, how much to bribe, and whether or not you will get the benefits that you are told you will get. If that is the case, it’s very risky to bribe, as well as can be very costly.”

The paper was co-authored by Dr. Kyeungrae (Kenny) Oh, a Jindal School doctoral alumnus now at the University of Missouri – St. Louis,

Lee’s second paper, co-authored by JSOM faculty member Sungjin J. Hong, used data provided by the U.S. Bureau of Economic Analysis and the World Bank to look at how corruption impacts profitability.

That study, “Corruption and Subsidiary Profitability: US MNC Subsidiaries in the Asia Pacific Region,” concluded that subsidiaries of multinational corporations (MNCs) operating in the Asian region enjoy higher profitability in countries with lower levels of corruption.

“Our research showed that the more corrupt a country is, the more likely their own domestic companies will seek opportunities outside their own domestic business environment,” Lee said.

“Our research showed that the more corrupt a country is, the more likely their own domestic companies will seek opportunities outside their own domestic business environment.”

Dr. Seung-Hyun Lee,
associate professor, Naveen Jindal School of Management

Though the Foreign Corrupt Practices Act of 1977 made it illegal for U.S. firms to engage in bribery, the issue has not gone away. Questions regarding the law and subsequent enforcement continue to make headlines — such as in recent New York Times stories alleging that Wal-Mart made illicit payments in Mexico to secure permits and favored treatment.

U.S. firms may have a disadvantage when going into many Asian countries where bribery is rampant, “because they cannot bribe,” Lee said. “However, U.S. firms are more competitive and so, even with the constraints, get the business because they have more to offer overall.”

One way to avoid the bribery issue is to be socially responsible in those countries, Lee said. “Directly bribing government officials may benefit greedy government officials,” he said, but engaging in such locally beneficial behaviors as building schools, providing educational opportunities and investing in the social infrastructure, “will bring benefits to the society and to those who are unprivileged. Since those benefited by the good neighbors from abroad would seek stability, incumbent local government officials get support from the rank and file.”

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