Corruption as Nonmarket Strategy: Evidence from the UN Oil-for-Food Program

This paper examines the relationship between corruption and nonmarket strategy in a cross-border context, using a unique dataset with accurate, firm-specific measures of corruption. We first examine the effects of home country corruption norms on firms’ strategy to corrupt abroad. We then move beyond the institutional context to explore the rationale behind the heterogeneity among firms from the same corrupt country in compliance with host governments’ bribery request. We find that firms’ home country corruption norm is related to their decision to pay bribes abroad, and propose that firms’ past exposure to corruption develops their capability to use such experience as a resource in expanding their business abroad. This study builds on a unique dataset using the OFFP program to conduct firm analysis. It contributes to the strategy literature by connecting corruption to firms’ nonmarket capability developed through their previous experience in forming their location strategies abroad, to the international business literature by expanding the study of corruption from country level to micro level, and to the small literature using OFFP as a unique data source to study firm behaviors.