Academic journal article Journal of Business Economics and Management

The Relationship between National Intellectual Capital and Corruption: A Cross-National Study

Academic journal article Journal of Business Economics and Management

The Relationship between National Intellectual Capital and Corruption: A Cross-National Study

Article excerpt

Introduction

Corruption, which is often defined as the misuse of public office for private gains, is a new challenge for managerial sciences during last decade. Although corruption is a widespread phenomenon that has existed from the earliest times and has been a significant phenomenon in public institutions for centuries, during the last years it has become one of the most important managerial issues. Both governments and private firms face similar problems related to corruption. Empirical research shows that the presence of high corruption significantly hinders the inflow of foreign direct invest ment (FDI) to host countries (Zhao et al. 2003) and negatively affects economic success (Seleim, Bontis 2009). Dealing with corruption has become an important issue in building national wealth. In the same period of time another complex phenomenon named intellectual capital has attracted the interest of the managerial sciences. The early phase of intellectual capital research in the eighties and nineties concentrated mainly on the microeconomic context, but at the beginning of the 2000s macro-level research on intellectual capital started to emerge. It is widely believe that investing in National Intellectual Capital creates opportunity to a country's development and the wealth of its citizens. Hence, the main objective of this paper is to examine the relationship between National Intellectual Capital and the Corruption Perception Index.

1. Corruption impact on the country's development and citizens' wealth

During the past decade corruption has ranked highly on the agenda of multinational development agencies, private firms, and policy-makers; it has become one of the most prominent managerial issues at the individual (Trevino 1986; Aquino, Reed 2002; Marcus, Schuler 2004; Eisenberg 2000; Reynolds 2006; Banaji et al. 2003), organizational (Ashforth et al. 2008; Baucus, Near 1991; Brief et al. 2001; Pinto et al. 2008), national and international (Callahan 2004; Punch 2003) level.

The recent increase in interest in corruption is related to a couple of factors, the most important being that corruption has become more prevalent in the global economy (Coupet 2003; Seleim, Bontis 2009). The recent corruption scandals made us realize that many corporations operating in the international marketplace have no clear notion of their responsibilities to the individuals and whole nations. Unethical corruptive behavior of corporations operating multinationally can have a devastating impact on individuals and communities, and it has become one of the most important managerial issues at the individual, organizational, and national levels. Corruption practices in international business are widespread and growing (Seleim, Bontis 2009), and research investigated corruption and its impact on a country's political, economic, and cultural infrastructure has focused a great deal of attention. Corruption weakens markets, reduces competitiveness, diverts investments, and increases economic uncertainty (Shkolnikov, Wilson 2005).

Empirical research shows that high levels of corruption mean reduced investment, a lack of credible guarantees for property and contract rights, and poor institutionalization of the government (Moily 2009). To a large extent most of researchers have provided support for a negative effect of corruption on investment and economic growth, showing that corruption negates the standard of living (Seleim, Bontis 2009). Corruption is closely related to GDP per capita and to human capital. These correlations are consistent with the economic and human capital theories of institutional development (Moily 2009). Countries with high levels of corruption invest very little in human capital and in particular, the investment in education is only minimum. Robert Cooter's study (2000) shows that a society with high levels of corruption has low levels of social interaction and is characterized by the weaknesses of the rule of law. …

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