Good Research Paper On Effects Of Corruption On Capitalism And Foreign Investment

Corruption undermines economic growth, encourages poverty and impacts nations in an adverse way. The concept of corruption refers to the perversion of integrity in carrying out public duties by bribery or favor . Corruption generally associates with public officials; however, it has also expanded to the private organizations in the recent decades. The various sources of corruption include campaign finance, procurement and poor rules in the sector of financial management. Various companies indulge in corrupt practices in order to obtain government practices. Corruption destroys development in a nation by lowering the efficiency of both national as well as domestic investments. It lowers the quality of public infrastructure by diverting the funds intended for public goods to private pockets. In terms of companies, corruption has both direct as well as indirect consequences as it involves investors, employees and various other stakeholders.
Corruption occurs in different forms and different types at different levels within the organizations. There categories used to describe the types of corruption, such as petty corruption, administrative corruption, corporate corruption, political corruption, grand corruption and many others . Petty corruption refers to the corrupt practices that range from small amounts paid for frequent transactions to bribes in order to escape taxes. Administrative corruption refers to the corrupt practices for winning minor procurements to massive and wholesale corruption. Corruption that occurs within the private corporations refers to corporate corruption. Corruption in the political as well as public sector organizations refers to political corruption. On the other hand, grand corruption refers to the corruption, which is prevalent at all levels of the society and involves senior officials, ministers, businessmen, criminal elements and politicians .
There is a strong relationship between private and public sector corruption as private sector is responsible for most of the government corruption. Corruption takes away essential resources from the developing countries and contributes to several inequities in business operations carried out by the MNCs . Smaller MNCs are the major victims of corruption as they suffer in the long-run if they do not indulge in corrupt practices. They support corruption as it increases incentives in order to refrain from policy reforms. MNCs in the developing countries bear a proportionately large burden from the institution of corruption in the form of offshore accounts, opaque commissions and other means. MNCs are the major victims of corruption as they lose out on investors who show keen interest to conduct business operations with well-governed firms.
Corruption adversely affects the multinational companies as it reduces revenue and increases the cost of conducting the business. Various forms of corruption occur either between a firm and a government or between the firms. For example, an MNC might lose its revenue when a government awards its contract to a local firm. MNCs have a powerful interest in broad initiatives as business depends on property rights, contract enforcement, regularity and legal predictability . Managing business operations in high corruption locales is a challenging issue for the MNCs. In such situations, the MNCs have no option other than supporting public-sector corruption. Lack of consensus on what constitutes corruption creates conflicts between the government officials and managers of the MNCs, and creates transaction costs for the businesses.
The role of MNCs in the war against corruption is naïve and idealistic. They should replace the old politics of corruption and execute a strategy to put an end to foreign bribes. MNCs should support the implementation of anti-corruption programs and pressurize the governments to enforce anti-bribery laws. However, the anti-corruption measures merely succeed in changing the methods by which corruption occurs or shifting the identity of the corruptor, while leaving the problem intact . MNCs in the developed nations should push hard for active and uniform convention enforcement of anti-corruption conventions. MNCs should learn to minimize the effects of corruption in order to succeed in the marketplace as corruption is an obstacle for foreign subsidiaries. They should properly align their structures with the business environment and minimize the employee opportunism in order to reduce transaction costs.
MNCs have several strategies to deal effectively with the problems caused by corruption. MNCs can address the issue by educating, training and enforcing commercial laws for broader legal changes. The role of commercial laws extends to not only the building of courts and administrative agencies, but also financial management institutions, which play a major part in the development equation. MNCs should participate in the public policy debates to maintain a fundamental balance between equity, efficiency, sustainability and growth of the business in the international market . They should advocate for principles instead of supporting political parties. Anti-corruption efforts supported by MNC efforts help to build institutional and governance capacity in the developing nations. MNCs should prohibit bribery through their corporations by employing voluntary cooperative efforts with IFIs, business associations or the UN convention against corruption.
MNCs can not only avoid contributing towards corruption by fusing their performance with integrity within the organization. Other strategies that help the MNCs to fight against corruption are through their contribution to economic development. Transferring global management practices, exporting of goods and services, building infrastructure, providing foreign direct investment, establishing research and development centers, transferring technology and utilizing local and third parties for global supply chains are a few ways of fighting against corruption . MNCs should possess a strong and self-direct interest to seek contracts in a fair and transparent manner. They should ensure that their economic and foreign policies should build transparent and accountable institutions. They should adopt local practices in order to fight corruption and run businesses in a more profitable way. However, the implementation of host-country practices involves legal, cultural and institutional norms, which are often tacit. The governments should address the needs of the poor in order to make sure that they do not become a threat to the international market.

References.

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