The effect of individualism on bribery risks

Abstract

Cultural difference has emerged as one of the most powerful factors of corruption and institutional quality among the broadly recognized range of factors such as the level of economic development, type of institutions, disease environment, political backgrounds and colonial histories. The role of how individualism could affect bribery risks in international business transactions among countries remains relatively unexplored and elusive. Moreover, individualism is recognised as the most significant cultural dimension by cross-cultural psychologists. This paper attempts to fill this gap in the literature by exploring the repercussions of a specific aspect of culture - individualism on the level of bribery risks, which is one of the distinctive measures of corruption. We hypothesise that the effect of individualism should exert a negative impact on countries’ bribery risks. Using the TRACE Bribery Risk Matrix for the years 2014 to 2018 for 99 countries to measure bribery risks, our empirical evidence supports the notion that individualistic cultures are associated with lower bribery risks. This can be further explained especially in countries possessing high scores for certain economic characteristics such as high GDP growth and average years of schooling. Overall, our research supports existing literature which argued that cultural factors have a crucial effect on the development of institutional quality.