Corruption risk - the effect on international competitiveness : a study of Norwegian multinational companies

Abstract

Corruption is a debated topic among actors in the international business environment, particularly as stringent anti-corruption legislations pose restrictions on how companies can legally operate. Corruption is by many leading economists regarded as a worldwide challenge and an impediment to economic growth and development. Norway has taken an active role in the international fight against corruption, and this thesis asks whether this could affect Norwegian multinational companies’ (MNCs) competitiveness. This thesis examines how the risk of corruption affects Norwegian multinational companies’ international competitiveness. To limit the scope, the thesis asks the following sub-questions: (1) how is the inherent risk of corruption considered? (2) How is the inherent risk of corruption managed? A qualitative study has been conducted on five Norwegian multinational companies, operating in the BRIC countries (Brazil, Russia, India, China). The MNCs operate in different industries and represent a combination of private/public and privately owned companies. The research found that the MNCs consider the inherent risk of corruption to be high. The MNCs respond to the identified risk by implementing strict internal procedures for corruption risk management. However, despite these procedures, certain MNCs recognize that they are unable to reduce the risk to an acceptable level, leading to risk aversion. The implementation of anti-corruption procedures, as a result of identified risk, is found to affect the MNCs’ international competitiveness negatively in two ways. On one hand, it requires a considerable amount of resources that might affect the companies’ profitability. On the other hand, risk aversion may force the MNCs to exclude certain markets due to the identified corruption risk. These consequences are, however, argued to be short term. On a long-term basis, the anti-corruption procedures are assumed to contribute to international competitiveness. If anti-corruption laws continue to proceed towards a global standard, it is argued to cause equal competitive conditions for all multinational actors.