Bribery Transfer Among Foreign‐Invested Firms in Vietnam

Abstract

Bribery in international business is an important field of study, but lack of research examines which types of firms are more likely to pursue bribery transfer, or subcontracting bribery‐related transactions to the third party or intermediaries, instead of handling themselves. We conduct an empirical investigation into this issue using rich data from the PCI survey, which has been conducted annually in Vietnam during the period 2017–2020. The empirical results show that, in dealing with risks associated with bribery engagement, foreign‐invested firms in Vietnam pursue two different types of risk self‐controlling and risk transferring. Investors from OECD countries, subsidiaries of multi‐national corporations, and firms with larger bribery amount are more likely to pursue risk transferring strategy by subcontracting bribery‐related transactions to intermediaries, compared to the other firms' cohorts. Firms operating a longer time in Vietnam and bigger sized ones are more likely to follow risk self‐controlling strategy by handling bribery‐related transactions themselves. These results are robust while controlling for firms' legal status, year‐fixed effects, and, especially, nonresponse and selection biases, which are inherent in the bribery decision process. This study thus contributes greatly to international business in emerging economies where foreign‐invested firms exhibit heterogenous motives in dealing with risks associated with bribery‐related transactions.