Abstract
Corruption is generally defined as the use of public office for private gains (Bardhan 1997). Jain (2001) provides an overview of the agency model of the origin and spread of corruption in an economy. The economy consists of three groups of actors: firms and households, government leaders, and appointed public officials. The firms and households are the principals who are utility/wealth maximizers. They employ two groups of agents: government leaders and public officials. The government leaders formulate the regulatory laws and processes in the country. The appointed public officials interpret, implement, and uphold the regulatory laws and processes. Acceptance of the position of a government leader or appointed public official indicates that the incumbent has agreed that the pay is sufficient reward for his/her effort. The principals' well-being is impacted by actions (or inactions) of their agents. The focus of this article is on factors that originate in other countries and, therefore, are beyond the scope of national policies. Until 1977, the encouragements to public officials to act corruptly that came from foreign sources were largely ignored, and the bribing of foreign officials did not attract any sanctions. The Foreign Corrupt Practices Act of 1977 (FCPA) was the first instance of a home country attempting to put legal limits on business practices employed by its residents abroad. This unilateral step expanded into a multilateral effort criminalizing the bribing of foreign officials by multinational enterprises (MNEs) from countries in the Americas in 1997 and Europe in 1999. However, perceived corruption and the use of bribes around the world was not significantly reduced (Getz 2006). This situation led to suggestions that a uniform sanction against the use of bribes for all MNEs, from all countries doing business anywhere in the world, is needed to prevent some MNEs from gaining by using bribes at the expense of others who do not (Cuerv°Cazurra 2008). In 2006, a full global sanction against the bribing of foreign officials by MNEs was agreed upon. Table 1 presents a chronology of the expansion of the anti-bribery regime in the watershed years: 1997, 1999, 2003, 2005, and 2006. This article examines whether the global anti-bribery regime has led MNEs to cut back on the use of bribes. In the following sections, we first present the sources of data and the measures of bribes and corruption used in the study and then examine the available data for evidence of changes in the trajectory of bribing by MNEs and corruption in the MNE host countries corresponding to the aforementioned watershed years.