Different role of lobbying and bribery on the firm performance in emerging markets

Abstract

Purpose Firms influence a government to their advantage in one of two ways: either through lobbying a government to change the rule, or through bribing bureaucrats to circumvent the rule. The purpose of this paper is to investigate whether and under what conditions do corporate political activities facilitate firm growth in a multinational context, especially in developing economies. Design/methodology/approach This study is based on the data of the World Bank’s Enterprise Survey, conducted by the World Bank in the 2002 to 2006 period in 12 countries. To deal with a multilevel structure, the authors applied multilevel regression as the main analysis method. Findings The analysis reveals that both political activities are prevalent in emerging markets, but they play very different roles on firm growth. The authors also find that the effect of lobbying is more pronounced in politically durable countries where firms can secure their vested benefits by lobbying. Originality/value The paper contributes to the corporate political activities literature by investigating the distinguishing and contingent role of bribery and lobbying on firm performance.