Executive Briefings

Is It Really True that You Have to Pay to Play in Emerging Markets?

The ethical case against corruption is too obvious to need spelling out. But many companies still believe that, in this respect at least, there is a regrettable tension between the dictates of ethics and the logic of business. Bribery is the price that you must pay to enter some of the world's most difficult markets. It can also speed up the otherwise glacial pace of bureaucracy.

But is this true?  Philip Nichols, of the Wharton School, points out that plenty of Western firms have prospered in emerging markets without getting their hands dirty, including Reebok, Google and Novo Nordisk. What is more, Nichols argues, it is misguided to dismiss entire countries as corrupt. Even the greasiest-palmed places are in fact ambivalent about corruption: they invariably have laws against it and frequently produce politicians who campaign against it. Multinationals should help bolster the rules of the game rather than pandering to the most unscrupulous players.

The hidden costs of corruption are almost always much higher than companies imagine.

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The ethical case against corruption is too obvious to need spelling out. But many companies still believe that, in this respect at least, there is a regrettable tension between the dictates of ethics and the logic of business. Bribery is the price that you must pay to enter some of the world's most difficult markets. It can also speed up the otherwise glacial pace of bureaucracy.

But is this true?  Philip Nichols, of the Wharton School, points out that plenty of Western firms have prospered in emerging markets without getting their hands dirty, including Reebok, Google and Novo Nordisk. What is more, Nichols argues, it is misguided to dismiss entire countries as corrupt. Even the greasiest-palmed places are in fact ambivalent about corruption: they invariably have laws against it and frequently produce politicians who campaign against it. Multinationals should help bolster the rules of the game rather than pandering to the most unscrupulous players.

The hidden costs of corruption are almost always much higher than companies imagine.

Read Full Article