Beyond the Culture of Corruption: Staying Ethical While Doing Business in Latin America

By Stanfill, Bruce A.; Villarreal, Amanda D. et al. | Journal of Organizational Culture, Communications and Conflict, January 1, 2016 | Go to article overview

Beyond the Culture of Corruption: Staying Ethical While Doing Business in Latin America


Stanfill, Bruce A., Villarreal, Amanda D., Medina, Mario R., Esquivel, Edward P., de la Rosa, Erika, Duncan, Phyllis A., Journal of Organizational Culture, Communications and Conflict


INTRODUCTION

Background

High levels of corruption and poor economic performance are inextricably tied together, and are a self-perpetuating situation in many Latin American countries. Corruption is commonly defined as the use of a position of power for illegal personal gain (Argandoña, 2005; Cleary, 2007; Charoensukmongkol & Sexton, 2011), and the payment of unofficial fees to authorities for personal benefit (Hofstede, Hofstede, & Minkov, 2010). Adverse impacts from corruption range from the relatively small but ubiquitous mordida [the nibble] that many drivers pay a traffic officer to not fine them what the infraction truly merits (Cleary, 2007; Fried, Lagunes, & Venkataramani, 2010) to vast sums of money paid for preferential treatment during the bidding of government contracts (Mahagaonkar, 2008; Kenny, 2009).

In the private sector, corruption flaunts intellectual property rights, hindering the trust needed for successful collaboration and innovation. Improper payments for business deals undermines fair competition (Maloney, 2002; Argandoña, 2008; Transparency International GCR, n.d.), further suppressing economic productivity (Crespi & Peirano, 2007; Veracierto, 2008). When corruption is present within the court system, it prevents the fair and impartial justice for citizens in many nations of the world, and precludes recourse to a higher authority for businesses, both domestic and foreign, who attempt to take an ethical stand against improper solicitations in the normal conduct of their trade. With the erosion of trust in the courts, greedy individuals are empowered to take advantage of the disenfranchised without concern for any adverse consequences (Fried et al., 2010); without a fair system of justice, all other sectors of society are laid bare to corruption. A country's courts send a blaring message to their citizens: "In this country corruption is tolerated," (Transparency International - GCR, n.d.).

Problem

The prevalence of corruption in Africa, Asia, and Latin America contrasted with the lack of widespread corruption in Northern Europe and the Anglo world (Transparency International, n.d.) begs the question: Is corruption cultural? But this is a loaded question - corruption has been shown to be correlated with culture (Hofstede et al., 2010), but does the culture cause the corruption or does corruption influence the culture to become self-perpetuating? This study draws heavily on the work of Stanfill, Medina, Esquivel, de la Rosa, and Villarreal (2015), and goes beyond it to identify the values and beliefs within the bounds of Latin American culture which, if influenced by international businesses through their commercial and societal efforts, can lead to a lower prevalence of incidents of corruption (Veracierto, 2008) or lessen the adverse impacts from corruption on their business development efforts (Anokhin & Schulze, 2009).

REVIEW OF LITERATURE

Corruption, Trust and Innovation

Maloney (2002) asserts that the causes of Latin America's economic under-performance are related to its deficiency in innovation and technological adaptation. First, there has been and continues to be a lack of "learning capacity," which is its human capital as well as the linkages between institutions facilitating the adoption and development of new technologies. Also, the failure is perpetuated by the reluctance to embrace technology, generally associated with artificially constructed monopoly power. Analysis shows that not only had Latin America lagged the rest of the world in economic growth over many decades, but that it appears to be related to a lack of openness to trade, domestic investment, and a "knowledge index" which represents many innovation-related factors. Maloney decries the continuing eschewing of competition with monopolistic industries: "[I]t is worrying that many Latin American leaders, in the face of vast international evidence, are even today reverting to policies that will guarantee that the region remains far from the knowledge frontier," (Maloney, 2002, 149). …

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