Familiarity does not breed contempt: curbing subsidiary corruption through a legitimacy-enhanced ownership structure

Jose Godinez, Luis Sanchez-Barrios , Rodrigo Bandeira de Mello, Mahmoud Khalik

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    Abstract

    We analyze how the choice of firm ownership structure mitigates the effect of high dependence on a corrupt host government when investing abroad. We draw on a unique dataset of subsidiary-level engagement in corruption of 175 foreign subsidiaries entering three Central American countries. We found that there are two mechanisms to mitigate corrupt behavior when a subsidiary is dependent on a corrupt host government: internal legitimacy that accrues to wholly-owned subsidiaries, and external legitimacy built through a strong regional presence. The effect of dependency on a corrupt host government can be mitigated by enacting internal and external legitimacies.
    Original languageEnglish
    JournalLatin American Business Review
    VolumeLatest Articles
    Early online date3 Jun 2021
    DOIs
    Publication statusE-pub ahead of print - 3 Jun 2021

    Keywords

    • Subsidiary-level corruption
    • Ownership structure
    • Resource dependence
    • Central America

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