Prof’s Studies of Corruption in Asia Are in Demand Worldwide

Seung-Hyun Lee

A Naveen Jindal School of Management professor’s findings on corruption in Asia are in demand by business universities around the world.

Two articles by Dr. Seung-Hyun Lee, an associate professor in the school’s Organizations, Strategy and International Management area, examine how bribery and corruption influence profits and business practices in various Asian countries. He also analyzes how U.S. firms fare when competing in such environments.

“Bribery is a reality of doing business in most Asian countries,” Dr. Lee said. “Bribery is almost like paying a tax in many countries.”

Since the papers appeared in the Asia Pacific Journal of Management in 2007 and 2010, Dr. Lee has frequently received requests to use the papers to enhance learning at various universities, including the Singapore campus of INSEAD, one of the world’s foremost graduate business universities.

Dr. Lee’s 2007 paper, “Corruption in Asia: Pervasiveness and Arbitrariness,” uses two factors to study bribery:

  • Pervasiveness, a measure of how rampant bribery is and how easy it is to tell whether bribery is acceptable
  • Arbitrariness, the likelihood the bribe will result in the requested service.

“High arbitrariness,” as a review in The Economist explained, “discourages foreign investment in a way that high pervasiveness does not, since firms cannot well afford to be unsure whom to bribe and whether the bribe will work.”

Dr. Lee uses practices in Indonesia and India to illustrate.

“Indonesia is a very corrupt country, but, at the same time, if you bribe, you get preferential treatment as promised,” he said.

“In countries like India, on the other hand,” Dr. Lee said, “bribery is very prevalent, but uncertainty associated with bribery is very high…you may not know who to bribe, how much to bribe, and whether or not you will get the benefits that you are told you will get.”

Dr. Lee’s second paper, co-authored by JSOM faculty member Sungjin J. Hong, looked at how corruption impacts profitability. That study, “Corruption and Subsidiary Profitability: US MNC Subsidiaries in the Asia Pacific Region,” concluded that subsidiaries of multinational corporations (MNCs) operating in the Asian region enjoy higher profitability in countries with lower levels of corruption.

Because the Foreign Corrupt Practices Act of 1977 made it illegal for U.S. firms to engage in bribery, U.S. firms may have a disadvantage when going into countries where bribery is rampant, Dr. Lee said. “However, U.S. firms are more competitive and so, even with the constraints, get the business because they have more to offer overall.”