Corruption on Capitalism and Foreign

¶ … Corruption on Capitalism and Foreign Investment

There are several problems that most countries' governments struggle with. One of the most important problems that affect national economies, companies, and individuals is represented by corruption. The phenomenon of corruption is mostly met in poor countries in comparison with developed companies. This is because the political, economic, and legislative environments in such countries are more permissive for corruption to take place. In addition to this, the bureaucracy in these countries basically invites certain institutions to involve in corruption actions that facilitate their activity.

In order to understand the importance of the phenomenon, it is important to identify the different types of corruption. Economic theory has identified three basic types of corruption. These are represented by achieving or speeding up materialization of certain rights that citizens or companies are entitled to, corruption against legal rules, and corruption intended to change certain rules and regulations (Begovic, 2005). The type of corruption that refers to achieving or speeding up materialization of certain rights that individuals and companies are entitled to can be most frequently observed in less developed countries. This is because in these countries the state authorities are not able to provide these rights when and how individuals and companies need them (OECD, 2012). As a consequence, companies must provide financial or other types of incentives in order to benefit from their rights. This is usually the case of states with high levels of bureaucracy.

Corruption intended to violate legal rules is different. This type of corruption is somewhat the opposite of corruption intended to speed up the materialization of rights. Corruption against legal rules is intended to help companies develop their activity while not playing by the rules. The rules and regulations of the countries in case do not allow certain companies to develop their activity as they want to (Kwok & Tadesse, 2006). Therefore, they provide incentives to state authorities in order to permit them to break the rules.

This type of corruption can also be applied between companies. In other words, members of certain companies bribe members of other companies in order to provide inside information, to persuade superiors of taking certain actions, or to join efforts in the attempt of addressing competition. Such practices are against national and international rules and regulations regarding fair competition. Therefore, it is important to identify the objective of the action that refers to corruption in order to determine the type of corruption, and its implications.

The other type of corruption that refers to providing incentives in order to modify certain rules and regulations in the favor of the corruptor is also frequent in less developed countries, but also in developed ones. In most cases, this type of corruption is practiced by companies that need the rules and regulations changed in order to help them reach their objectives. However, this requires significant investments, and it is usually large companies that have the ability to successfully involve in this type of corruption.

There are numerous effects of corruption on MNCs. In case their competition engages in such practices, their activity is significantly influenced by this phenomenon. This is because their corrupt competitors can change rules and regulations that do not favor other companies. Therefore, they have to deal with the effects of such situations. This sometimes determines them to modify their activity.

In addition to this, there are situations where employees of certain MNCs are bribed by competitors in order to provide important information on these companies. This is extremely harmful to companies as it can lead to information leaks on strategies, price levels, and other types of investments that these companies intend to make. This means that these MNCs must increase investments in security issues.

In addition to this, MNCs are sometimes forced to become corruptors because some of their competitors do so. In other words, if certain companies provide incentives to state authorities in order to change rules and regulation, or to favor them in certain ways, their competitors are also forced to offer bribes in order to keep up with these changes.

There is little MNCs can do in such situations. The process of fighting corruption requires the joint efforts of individuals, companies, and state authorities. Therefore, MNCs must focus on identifying situations of corruption of any type. The issue in such situations is that corruption charges must be probed with evidence. It can be difficult to prove such accusations. This is because institutions and MNCs involved in such practices have great experience with such activities, and are able to hide their tracks.