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A friend has been trying to start an artisanal liquor business in a small Latin American country. He learned how to ferment fruit, designed a logo, scavenged and sanitized hundreds of glass bottles, registered his company with all appropriate agencies, and paid his initial taxes. He decided it was time to expand after producing his first batch and selling it to a few small shops. Unfortunately, he ran into a major stumbling block when negotiating sales to larger restaurants and grocery stores: liquor taxes. His business model was completely unprofitable due to the high level of liquor taxation. He explored that one liquor manufacturer and importer dominated the market and didn’t pay any taxes while attempting to understand how other liquor businesses stayed afloat. How? Corruption. My friend had two options for staying in business: (A) stay small, stay under the radar, and avoid paying taxes, or (B) navigate the risky and uncertain process of bribing his way out of paying taxes. He ultimately chose the third option: he closed his shop and returned to his regular job.

In the end, the fate of one small liquor store is unimportant. But my friend’s experience exemplifies a much broader phenomenon, one that will be familiar to readers who have lived in countries where corruption is widespread: corruption protects incumbent firms, undermines entrepreneurship, and limits growth and job creation—particularly by SMEs, which are often the primary drivers of economic growth, employment, and innovation. Corruption can be a major roadblock for entrepreneurs and small business owners who can’t bribe their way out of regulation. Pervasive corruption can dramatically alter the shape of an economy by shifting business incentives. Researchers have documented the numerous ways inconsistent enforcement of government rules, and regulations (linked to widespread corruption) prevent entrepreneurs from expanding and formalizing their businesses, beginning with Hernando DeSoto’s seminal work on informal economies in the other path: The economic response to terrorism (2007). Due to size, larger businesses can more easily absorb the costs of payments to rent-seeking regulators or bribe-happy tax collectors. Another has to do with the political advantages of incumbency: researchers have discovered that corruption stifles the growth of smaller, more profitable private-sector businesses far more than larger, state-owned businesses. Corruption has a greater impact on smaller businesses, but smaller businesses also frequently resort to bribery.

On the other hand, larger, more established businesses can lobby for favorable regulatory changes. Corruption can also make it difficult to access finance in places where capital markets are concentrated, and limited access is particularly prevalent in developing countries. The prospects for emerging businesses are further hampered as a result of this.

Despite all the evidence, the anti-corruption community has not paid enough attention to SMEs’ unique disadvantages. Furthermore, the severe corruption burden of SMEs trying to grow in a complex regulatory environment provides a strong incentive for them to mobilize in support of anti-corruption reforms. This increased incentive, combined with the wide range of people who benefit from SMEs and their strong economic potential, makes them a formidable ally in the fight against corruption. Even in authoritarian countries, there is evidence that SMEs can be strong and effective advocates for anti-corruption policies. Although the OECD’s recent Global Anti-Corruption and Integrity Forum featured a panel on the subject, the anti-corruption community has yet to devise a strategy for mobilizing and encouraging this latent constituency for reform. Assume that the anti-corruption community pays any attention at all to SMEs. In that case, it’s to encourage them (and other businesses) to commit to more stringent compliance: a subcomponent of the UN Global Compact’s 10th Principle encouraging businesses to fight corruption, and “Collective Action” efforts have sought to include Small and medium-sized enterprises, but primarily to increase their compliance with anti-corruption norms, rather than leveraging their unique systemic disadvantages. For example, in Egypt, a business-led Integrity Network “specifically engaged” SMEs by asking them to sign an integrity pledge and encouraging MNEs to offer tangible business incentives to SMEs who follow through on their pledge.

Rather than solely focusing on improving SMEs’ anti-bribery compliance programs, anti-corruption advocates should take advantage of SMEs’ unique position and self-interest to mobilize them to demand credible anti-corruption policy reforms. Simply recognizing SMEs as distinct from MNEs when developing programs that partner with “Business” to fight corruption (like “Collective Action” efforts) would help to consolidate SMEs’ interests and lead to more effective interventions. Providing technical assistance and a forum for local networks of entrepreneurs, small businesses, and informal market participants can help foster the growth of a strong interest group with a broad base and the international and institutional support needed to alleviate fears of retaliation. Another way to empower Small and medium-sized enterprises in a corrupt system is to focus on specific areas of reform that may have a disparate impact on SMEs. Enacting whistle-blower protection laws for businesses that report corruption, for example, would almost certainly be used and benefit SMEs disproportionately. International organisations and civil society groups could help fight corruption while also empowering the critical drivers of economic growth and development by leveraging the untapped power of SMEs.

Corruption is a product of an individual, institutional, and societal factors. Thus, any attempt to reduce corruption would be futile without a multilevel perspective. I demonstrate how corruption can be reduced by altering individual attitudes, subjective norms (SN), and contextual features of institutions, based on the insights gained from applying the theory of planned behavior (TPB) [1] to the study of corruption.

Figure 1. Theory of Planned Behaviour (TPB) Source: Ajzen, I. (1985)

Figure 1. Theory of Planned Behaviour (TPB) Source: Ajzen, I. (1985)

Modifying Attitudes

Individuals tend to develop positive attitudes toward corrupt behaviours when the perceived benefits of engaging in corruption outweigh the costs. Therefore, a logical way to change individuals’ attitudes toward unethical behaviour is to change the perceived utility of engaging in the action. This can be accomplished by lowering the benefits of corrupt behavior, increasing the costs of corrupt behavior, or both. Organisational studies offer that institutional reward systems can directly influence unethical behaviour. For instance, rewarding individuals for ethical deeds have been connected via enhanced levels of ethical behaviour.

Conversely, the threat of dismissal and direct punishments for ethical transgressions have been associated with unethical behaviour reductions. Additionally to formal punishments, it has been demonstrated that the threat of informal punishments such as social exclusion and loss of social status motivates individuals to act more prosocially. However, because informal punishments are associated with SN violations, a system must first have SN that promotes prosocial behavior for this type of behavioral regulation to occur.

According to social learning theory, seeing another person’s behavior reinforced (positively or negatively) leads observers to expect their behaviors to be reinforced similarly. Thus, penalties can play a critical deterrent role. On the other hand, penalties will have little effect if corrupt behaviors are difficult to detect. As such, the effectiveness of penalties is highly dependent on the monitoring systems in place. Moreover, penalties for corrupt behaviours should be severe enough to outweigh an individual’s potential benefits from engaging in corruption. Ball, Trevino, and Sims (1994) demonstrated that only significantly harsh punishments affected observers’ outcome expectancies (i.e., observers’ beliefs about how they would be treated if they engaged in similar behavior in the future). As previously stated, ethical fading is another reason individuals view corrupt behavior positively. Because moral fading results from largely subconscious psychological processes, detecting and managing it can be challenging. However, as Messick and Bazerman (2001) point out, recognizing its enablers is the first step toward reducing ethical fading. This entails recognizing that the labels we assign to corrupt behaviors and the decision frames we use to evaluate ethical choices have an effect on our moral awareness, that we can gradually become more unethical as a result of psychological numbing and routinization, and that we have a tendency to misconstrue moral responsibility.

Recognizing how ethical fading occurs, individuals can take proactive steps to increase their’ and others’ moral awareness in situations. For instance, in a series of laboratory and field experiments, Shu et al. (2012) found that signing at the beginning rather than after a self-report (that provided an opportunity to cheat) increased people’s levels of honesty because of increased ethical saliency. In a series of studies based on negotiations, Ganegoda, Latham, and Folger (2011) found that the egocentric biases of individuals could be reduced by making justice a goal. Overall, these and other studies suggest that individuals adjust slightly to their contexts, processes, and behaviours to counteract ethical fading.

elephant-in-the-room 2000

Modifying and Generating Norms

It is hard to expect lasting changes in individuals’ levels of corruption without changing norms relating to corrupt behaviours and possibly creating new norms supporting honest interactions. It is crucial to ensure a shared reason for the change to modify norms. Corruption is primarily a descriptive norm, i.e., people have empirical expectations about corrupt behaviour, a positive attitude toward it, and a preference for behaving corruptly based on such expectations. It is rarely an SN because normative expectations may be absent or even contradictory to empirical ones, as is the case when widespread corruption exists. Nonetheless, there is a widespread perception that this is a bad practice. However, when corruption is systemic, individuals may feel pressured to engage in corrupt behavior, which may be sanctioned. Both cases require the presence of reasons for change, followed by changes in social expectations.

To have an enduring effect, rationale changes should be associated with the emergence of new factual information undermining the efficacy of a prevalent behavior, accompanied by changes in individuals’ normative beliefs. These shared motivations for eradicating corruption can be fostered by educating individuals about how their criminal activities can result in negative externalities that eventually affect them. By highlighting the costs of corruption, a shared understanding can be made regarding the necessity to refrain from it. The literature demonstrates the efficacy of educational initiatives in modifying collaborative practices. For example, Gillespie and Melching (2010) describe how educating people about democracy and human rights resulted in a participant-led social movement in Senegal to end female genital cutting and child marriage. Their results demonstrate that education can be a cornerstone for abandoning damaging behaviours and creating new anti-corruption norms.

However, it must be noted that a reason for change does not translate into change. For the change in a norm to occur, a sufficient number of people must enact the change. This must happen with both descriptive and SN because if we do not observe an adequate number of people behaving differently, we may fear losing some gains or even fear being the only “suckers” taken advantage of (as is the case with a descriptive norm), or be afraid of the social sanctions that follow deviance (as is the case with SN). While the number of people required to effect change varies according to the type and extent of corrupt behavior, it should be large enough for people to believe they are not acting alone in opposing corrupt practices.

Individuals must develop new empirical expectations and a sense of belonging to a larger movement. To achieve this, measures need to be taken to publicize the efforts taken by individuals and institutions to fight corruption. A key reason why the Egyptian revolution in Tahrir Square was successful was publicizing people’s efforts on social media. Similar coordination of actions and expectations is needed to reject corrupt practices. Individuals need to know that by preceding corruption, they are not disadvantaging themselves and that an adequate proportion of others also abide by the same new rules.

A new SN must be established to eradicate corruption permanently that condemns and penalizes corrupt practices. Injunctions may assist in signaling what is approved. Nonetheless, the primary focus should be on developing new normative expectations, backed up by widespread shifts in normative beliefs about the harms caused by corrupt practices. Once normative and empirical expectations in favor of abandoning corrupt practices are established, the new SN will assist in regulating and maintaining ethical behavior. Corrupt individuals will incur social costs due to norm violations and possible legal fees. By imposing an informal reward and punishment structure, the new norms will support the formal systems (e.g., the judicial system) in regulating people’s engagement in corruption.

Modifying Institutions

The United Nations Global Compact (UNGC) is an instance of a global anti-corruption initiative. The Global Compact is a non-profit organisation that encourages businesses to incorporate ten principles into their activities in their places of origin and operations worldwide.

Transparency International (TI) and its Polish chapter recommend putting corruption at the top of the public agenda to break the vicious loop of drug trafficking, violence, and organised crime as corruption scenarios.

The anti-corruption policy must be waged on a broad scale, with backing from various stakeholders, including the business community. The importance of the business community stems from the fact that it is at the forefront of the fight against dishonest corporate practices. As a result, it must understand accepted business practices. Similarly, corporate management practices affect whether or not a company complies with changing regulatory frameworks and societal demands. The ease with which outside actors can monitor the success of their anti-corruption initiatives is influenced by their reporting processes.

In terms of management processes, the study reveals that in the battle against corruption, businesses use a very uniform set of methods and that a de facto standard of practice exists. Companies’ presentations about anti-corruption management focus on shared vocabulary and concepts, in contrast to how they communicate their policies and commitments in the fight against corruption. This agreement on management practices could be because the battle against bribery uses the same expertise and management tools as other areas of financial control. As a result, bribery compliance programs may have substantial and direct synergies with current control systems. This sets anti-corruption compliance apart from other types of compliance. For example, the most significant environmental management standard, ISO 14001, had to be negotiated over several years, a procedure that anti-corruption management standards may not require.

There is little evidence of a de facto standard for corporations’ publicly disclosed anti-corruption efforts despite the apparent consensus on management concerns. 57 of the top 100 MNEs[2] do not publicly mention the problem on their websites. Although there is some progress toward a shared position on “party to bribery” (in comparison to the findings of a previous survey), the top-100 MNEs had divergent views on other essential corruption concerns such as political activity, gifts, and entertainment, and facilitation payments. As a result, this research implies that international discourse and consensus-building are still needed to establish acceptable and unacceptable corporate practices.

The study also reveals that few corporations report on their performance compared to their thorough environmental reporting. This finding shows that it could be worthwhile to consider why this is and whether such reporting might improve transparency.

One deterrent factor of corruption is the fear of punishment. Punishment becomes a disincentive for corrupt behavior. Another theory that supports that the penalty would reduce bribery Entrepreneurial Intent is the TPB. The theory of planned behavior, which we proposed in this study as well as in our two books entitled (Risk Management in Public-Private Partnerships (2020), and Corruption, Infrastructure Management and Public-Private Partnerships (2021) these books written in twelve chapters and accepted by Taylor & Francis Group and focus on Anti-corrupt implementation based on this dissertation (2020)) predicts that the positive consequences of an action, the person will tend to want to do. On the other hand, if a person views the consequences of an action negatively (i.e., penalties), they will reduce their intentions. According to our research, the primary motivator of action is a reward, not a punishment. Additionally, the type of punishment affects how bribes behave. There is a relationship between the low and high deterrent effects when placed on a continuum.

Behavioral change strategies have gained traction in policymaking to influence how individuals behave and make decisions. These strategies aid in the understanding of why people choose to act corruptly and commit corrupt acts in anti-corruption policies. To begin, this requires an understanding of corruption’s psychology and a holistic strategy for influencing an individual’s decisions and mind.

Studies demonstrate that the cost-benefit calculations of corruption are not only based on logic. They are often impacted by false intuitions, mental shortcuts, how individuals process emotions, organise information, and social norms. A behavioral strategy against corruption is according to an understanding of corruption, and it takes into account communication and social perspective. Behavioral practices can take several shapes, such as collective deliberations, information campaigns, promotion of intrinsic motivation, and civic engagement.

Suppose mental shortcuts are internal psychological processes that influence how individuals deal with corruption. In that case, social norms are external factors that influence how individuals engage in and anticipate others engaging in corruption. SN are informal norms resulting from cultural values, customs, and traditions that shape people’s social behavior and expectations. They are embedded in organisational contexts, personal and local, and explain psychological justification processes of corrupt behavior.

When confronted with the devastating repercussions of corruption, few people still dismiss it as merely a moral or cultural issue that excludes outside intervention or so widespread that little can be done. International organisations, national leaders, and the corporate sector come together to develop a broad-based reform consensus. Several reasons have contributed to this new approach. With the end of the Cold War and the emergence of democracy, we are witnessing the growth of free investigative journalism, open political competition, more independent judiciaries, and prosecutors, and the emergence of civil society as a political force demanding responsibility from those in power; policymakers are less likely to support corrupted leaders for other geopolitical objectives, and success in the global market has become a driving force in foregrounding; and,

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Transparency International (TI), a relatively young nongovernmental player in the anti-corruption movement, is charged with mobilizing public demand and bringing stakeholders together to build a coalition for systemic reforms. TI national chapters work with government and institutional leaders in over sixty countries to establish a credible commitment to fighting corruption. TI advocates for a holistic approach that includes reforms to strengthen institutions across the board, including encouraging transparency in procurement and customs, improving civil service training and pay, reducing regulation and promoting privatization to reduce corruption opportunities, strengthening the independence of the judiciary, and attacking judicial impunity, protecting a free, investigative press, and fostering public participation in the foreground.

Recognising that the rules cannot be modified suddenly and that rivals are concerned about being disadvantaged if everyone follows the same anti-bribery regulations, TI has devised the “islands of integrity” concept as a workaround. The regulations are the same for all players on an “island of integrity.” All private sector bidders on a public procurement project would sign an “anti-bribery pact” (ABP), or reciprocal agreement, with the national government procurement agency under such a setup. The agency would commit to following transparent procurement regulations, take reasonable precautions to prevent government personnel from extorting money, and implement fines for noncompliance. Bidders would give reciprocal assurances not to bribe and implement effective compliance processes.

Institutional changes are also necessary to counter corruption. The introduction of new anti-corruption laws is beneficial in this regard. A study by Fisman and Miguel examined how cultural norms and legal enforcement control corruption by analysing the parking behaviours of United Nations (UN) officials in Manhattan. United Nations diplomats were protected from parking enforcement actions because of diplomatic immunity; therefore, their parking behaviors were mainly recognized by their cultural norms. Diplomats from countries with a high level of corruption were more likely to accrue parking violations than diplomats from countries with a low level of corruption. To combat parking violations, New York’s enforcement authorities acquired the authority to seize violators’ diplomatic license plates in 2002. Unsurprisingly, the implementation of legal enforcement resulted in a significant reduction in unpaid parking violations.

By and large, prosocial policies have been linked to high levels of ethical behavior. However, a field study by Weaver and Treviño (2006) revealed that for prosocial policies to have the most impact, they should highlight ethical rule compliance and consequences for noncompliance and emphasize the institution’s values and expects its representatives to uphold. Their results showed that employees’ perceptions of an institution as values-based (as opposed to simply compliance-based) were positively connected with employees’ awareness of morality at work, levels of integrity, willingness to seek ethical advice, and lower levels of observed unethical conduct.

Additionally, effective monitoring systems are necessary to combat corruption. Di Tella and Schargrodsky (2003) discovered that during the first nine months following a new monitoring system, prices paid by hospitals for basic, homogeneous raw materials decreased by 15%. Although it was found that the purchase prices enhanced after the initial period of monitoring, they remained 10% lower than the preintervention prices. Similar results have been found in experimental studies. An experimental study by Covey, Saladin, and Killen (1989), for example, revealed that undergraduates’ levels of cheating on an incentivized task were lower when a surveillance system was present compared to when such a system was absent.

Even when a formal monitoring system is not present, individuals tend to act more ethically when they feel as if they are being monitored. Bateson, Nettle, and Roberts (2006) investigated the effect of an image of a pair of eyes on people’s contributions to an “honesty box” used to collect donations for the upkeep of a common coffee room. The study discovered that when participants’ eyes were displayed rather than another image, they paid nearly three times as much for drinks. Another study discovered that mirrors increased individuals’ self-awareness, which resulted in less self-centered decisions about fairness. Overall, these findings suggest that monitoring initiatives to improve transparency encourage individuals to behave more ethically.

In addition to monitoring, steps must be taken to ensure that individuals are not in positions where they can easily abuse their power. Indeed, a well-documented reason for corruption is the concentration of power. As such, institutional changes aimed at decentralizing power effectively reduce crime. In a cross-country study, Fisman and Gatti (2002) examined the relationship between the decentralization of government activities and the extent of rent extraction by private parties. Their results revealed a strong and significant relationship between fiscal decentralization and lower levels of corruption. However, decentralization efforts must be coupled with strong monitoring systems because decentralizations that produce more complex structures and are harder to monitor could potentially increase crime.

Institutional efforts to curb corruption must strive to build “ethical infrastructures” that align both formal systems (e.g., organizational structures, reward systems, legal policies, code of ethics) and informal systems (e.g., organizational culture) of communication and behavioural regulation. A misalignment between espoused and practised values could create space for information manipulation and egocentric interpretation of rules. Therefore, care must ensure that norms and vice versa support institutional structures and policies.

Reference

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(1994). Just and unjust punishment: Influences on subordinate performance and citizenship. Academy of Management Journal, 37(2), 299-322.

Bateson, M., Nettle, D., & Roberts, G. (2006). Cues of being watched enhance cooperation in a real-world setting. Biology Letters, 2(3), 412-414.

Covey, M. K., Saladin, S., & Killen, P. J. (1989). Self-monitoring, surveillance, and incentive effects on cheating. The Journal of Social Psychology, 129(5), 673-679.

Cunningham, G. B., & Kwon, H. (2003). The theory of planned behaviour and intentions to attend a sport event. Sport Management Review, 6(2), 127-145.

De Soto, H. (2007). Inoi put’: Ekonomicheskii otvet terrorizmu [The Other Path: The Economic Answer to Terrorism]. Chelyabinsk, Sotsium Publ. Di Tella, R., & Schargrodsky, E. (2003). The role of wages and auditing during a crackdown on corruption in the city of Buenos Aires. The Journal of Law and Economics, 46(1), 269-292.

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Gillespie, D., & Melching, M. (2010). The transformative power of democracy and human rights in nonformal education: The case of Tostan. Adult Education Quarterly, 60(5), 477-498.

Heydari, M., Lai, K. K., & Xiaohu, Z. (2020). Risk Management in Public-Private Partnerships. Routledge.

Heydari, M., Lai, K. K., & Xiaohu, Z. (2021). Corruption, Infrastructure Management, and Public–Private Partnership: Optimizing through Mathematical Models. Routledge.

Heydari, Mohammad. (2021). “A Cognitive Basis Perceived Corruption and Attitudes Towards Entrepreneurial Intention.” PhD diss. Nanjing University of Science and Technology, Nanjing, Jiangsu, China.

Messick, D. M., & Bazerman, M. H. (2001). Ethical leadership and the psychology of decision making. In The next phase of business ethics: Integrating psychology and ethics. Emerald Group Publishing Limited.

Shu, L. L., Mazar, N., Gino, F., Ariely, D., & Bazerman, M. H. (2012). Signing at the beginning makes ethics salient and decreases dishonest self-reports in comparison to signing at the end. Proceedings of the National Academy of Sciences, 109(38), 15197-15200.

Treviño, L. K., Weaver, G. R., & Reynolds, S. J. (2006). Behavioral ethics in organizations: A review. Journal of Management, 32(6), 951-990.


[1] The theory of planned behavior (TPB) is a psychological theory that establishes a causal relationship between beliefs and behavior. According to the theory, three central components shape an individual's behavioral intentions: attitude, subjective norms, and perceived behavioral control. In turn, one of TPB's central tenets is that behavioral intention is the most immediate predictor of human social behavior.

Icek Ajzen developed the theory in order to enhance the predictive power of the theory of reasoned action (TRA). Ajzen proposed incorporating perceived behavioral control into TPB. TRA did not include a component for perceived behavior control. TPB has been used to investigate the relationships between beliefs, attitudes, behavioral intentions, and behaviors across a range of human domains (Ajzen, 1985). These domains include, but are not limited to, advertising, public relations, advertising campaigns, healthcare, sports management, and sustainability (Cunningham & Kwon, 2003).

[2] A multinational enterprise, abbreviated as MNEs and sometimes also called multinational corporation (MNC).