Does bribery in the home country promote or dampen firm exports?

TLDR

Preferential treatment from bribery can either boost exports by improving competitiveness or reduce them by strengthening domestic positions. The study investigates how domestic bribery affects firm exports, testing two opposing hypotheses. Using three‑stage least squares on firms in transition economies, the authors test the competing hypotheses. The analysis shows that domestic bribery reduces firm exports, contrary to the promotion hypothesis. © 2013 John Wiley & Sons, Ltd.

Abstract

This study examines the impact of bribery within the home country on firm exports by developing two contrasting hypotheses. On the one hand, preferential treatment resulting from government officials in exchange for bribes may promote exports by enhancing efficiency and enabling bribing firms to better compete in foreign markets. On the other hand, preferential treatment resulting from bribes may decrease exports by providing firms with more established positions within the domestic market diminishing the incentive to explore foreign markets. Adopting the three‐stage least squares method, we test these competing arguments using a sample of firms operating within transition economies. We find that bribery within the home country decreases rather than increases firm exports. The implications of our findings are discussed . Copyright © 2013 John Wiley & Sons, Ltd.