Managers’ Corruption Prevention Efforts in Small and Medium‐Sized Enterprises: An Exploration of Determinants

• DOI: http://doi.org/10.1111/emre.12165
• Author: Anna Werner,Henning Best,Tanja Rabl
• Date: 01 September 2019
• Published date: 01 September 2019

Managers’Corruption Prevention Efforts in

Small and Medium-Sized Enterprises: An

Exploration of Determinants

ANNA WERNER,

1

TANJA RABL

1

and HENNING BEST

2

1

Chair of Human Resource Management, Leadership, and Organization, Technische Universität Kaiserslautern, Kaiserslautern,

Germany

2

Chair of Sociology andSocial Stratification, TechnischeUniversität Kaiserslautern, Kaiserslautern, Germany

Based on an extension of the theory of planned behavior, this paper examines the determinants of managers’

corruption prevention effortsin small and medium-sized enterprises (SMEs). For this,we collected survey data from

339 managers in German SMEs and conducted five supplementary in-depth interviews. Our quantitative findings

show that the SMEs’managers’moral obligation, subjective norm, self-efficacy, perceived controllability, and

perceived threat of employees’corrupt behavior are positively related to managers’intention to apply corruption

prevention measures in their SME. This intention in turn is positively related to the application of such measures

as is the managers’perceived controllability. The supplementary qualitative analysis mostly supports these results.

Based on our findings, we identify starting points to reach a higher sensitization of managers in SMEs to corruption

prevention.

Keywords: corruption; corruption prevention; ethical decision making; smalland medium-sized enterprises; theory

of planned behavior

Introduction

Companies today are increasingly threatened by

corruption, defined as ‘the misuse of authority for

personal, subunit and/or organizational gain’(Ashforth

and Anand, 2003: 2). In particular, small businesses with

less than 100 employees face high risks of becoming a

victim of fraudulent incidents, with corruption ranking at

the highest risk (33%) compared to other forms of fraud

(Association of Certified Fraud Examiners, 2014). They

are also likely to be affected to a greater extent than larger

companies by direct and indirect negative financial

consequences of detected corrupt acts (see Association of

Certified Fraud Examiners, 2014), such as, for example,

lawsuits, fines, penalties, and loss of reputation

(Argandoña, 2003). However, companies’efforts to

actively fight corruption differ considerably depending on

company size. While most large corporations with more

than 10,000 employees (83%) were found to have

implemented anti-corruption measures, only 30% of

companies with 500 to 999 employees have done so

(Pricewaterhouse Coopers (PwC) and Martin-Luther-

Universität Halle-Wittenberg, 2013). This percentage is

expected to be even lower for small and medium-sized

enterprises (SMEs) (see KPMG, 2010), that is, companies

that have up to 499 employees (Günterberg and Wolter,

2003). Thus, the question arises as to why SMEs are

lagging behind compared to larger companies when it

comes to the application of corruption prevention measures,

that is, measures that aim at detaining, discouraging, or

hindering individual organizational members or groups of

organizational members from corrupt acts (see Wiehen,

2001). What are the reasons for the subdued engagement

of SMEs in corruption prevention, given that corruption

prevention has the potential to offer SMEs a number of

opportunities such as avoiding negative consequences of

corruption or fulfilling stakeholders’expectations and legal

requirements (Transparency International, 2014)?

This paper contributes to answering the question of

what encourages SME managers to apply corruption

prevention measures in their organizations or hinders

them from doing so. As managers’values, cognitions,

and perceptions influence strategic organizational choices

according to the upper echelon theory (Hambrick and

Correspondence: Tanja Rabl,Technische UniversitätKaiserslautern,Chair

of HumanResource Management,Leadership,and Organization,P.O. Box

3049, 67653 Kaiserslautern, Germany, Tel: + 49 631 205 3650. E-mail:

tanja.rabl@wiwi.uni-kl.de

DOI: 10.1111/emre.12165

©2018 European Academy of Management

European Management Review, Vol. 16, 741–616 , (2019)

759

7

Mason, 1984), we develop and test a model that helps to

identify the key individual and situational factors

determiningSME managers’intention to apply corruption

prevention measures in their company and their actual

behavior regarding the application of such measures.

Our model is grounded in Ajzen’s (1991: 181) theory of

planned behavior, ‘a theory designed to predict and

explain human behavior in specific contexts’.Ithas

already been used in a related context, namely to explain

corruption in organizations (e.g., Powpaka, 2002; Rabl,

2008). As the application of corruption prevention

measures in SMEs reflects rational and thoughtful

behavior in which managers are significantly involved

but over which they do not have complete volitional

control, the theory of planned behavior appears as a

suitable base for our theoretical framework.

The contribution our paper makes is threefold: First,

our study offers em pirical insights into what m akes

SME managers apply corruption prevention measures

in their organization. Knowing the critical determinants

is essential for any efforts by, for example, policy

makers, non-governmental organizations, chambers of

industry and commerce, and consultancies in developing

effective strategies, policies, and procedures to sensitize

managers to corruption prevention and to promote

corruption prevention in SMEs. Second, our study is

the first to apply the theory of planned behavior to

corruption prevention, ‘a relatively underexplored area

of research’(Hauser and Hogenacker, 2014: 223). Third,

it adapts and extends this well-established theory

according to rece nt developments in ethi cal behavior

research and according to insights from research streams

that deal with other forms of prevention.

Theory and hypotheses

In order to identify the determinants of SME managers’

intention and behavior with regard to the application of

corruption prevention measures, we chose the theory of

planned behavior (Ajzen, 1991) as the base. This theory

has been successfully applied to explain ethical behavior

and moral decision making in business contexts (e.g.,

Randall and Gibson, 1991; Kurland, 1996; Buchan,

2005; Carpenterand Reimers, 2005) as well as managers’

behavior in an organizational context in general (see, for

example, Hill et al., 1996; Cordano and Frieze, 2000;

Flannery and May, 2000; Dennis et al., 2009;

Papagiannakis and Lioukas, 2012).

The theory of plannedbehavior (Ajzen, 1991) proposes

that SME managers’actual efforts in the application of

corruption prevention measures within their organization

are guided by three factors that, in combination, lead to

the formation of an intention to engage in corruption

prevention: managers’attitude toward corruption

prevention,managers’subjectivenorm to apply corruption

prevention measures, and managers’perceived behavioral

control regardingthe application of corruption prevention

measures in their SME (see Ajzen, 1991, 2002).

Following the callby Terry and O’Leary (1995) to regard

internal and external control factors incorporated in

perceived behavioral control as separate factors, we

consider both managers’self-efficacy regarding the

application of corruption prevention in their SME and

their perceived controllability regarding this behavior.

As we are examining ethical decisions in an

organizational context, we additionally incorporate the

organization’s ethical climate (see Flannery and May,

2000) and managers’moral obligation to applycorruption

prevention measures in their SME (see Conner and

Armitage, 1998). Finally, to take the preventive character

of the behavior-in-question into account, weborrow from

the health belief model (Becker and Maiman, 1975;

Becker et al., 1977) and consider perceived threatfactors,

that is, managers’perceived threat of employees’corrupt

behavior and managers’perceived threat of t he detection

of corrupt actions in their SME.

Managers’attitude toward corruption prevention

When it comes to managerial decisions of whether or not

to apply corruption prevention measures, managers’

attitude toward corruption prevention is a key

determinant. Attitude represents the positive or negative

evaluation of the behavior in question (Ajzen, 1991).

Managers having a positive attitude toward corruption

prevention will positively evaluate corruption prevention

measures and see the chances associated with them.

These not only include the opportunity to avoid

negative consequences of corruption (see, for example,

Rabl, 2008), but also the opportunity to fulfill legal

requirements (e.g., § 130 OWiG; Gesetz über

Ordnungswidrigkeiten, 1968/2015) and expectations of

stakeholders such as private and public clients,

banks, or investors (Transparency International, 2014).

Managers having a negative attitude toward corruption

prevention, in contrast, will be skeptical toward

corruption prevention due to high perceived bureaucratic

control that makes them judge the benefits as not

justifying the efforts and costs associated with corruption

prevention measures (PwC, 2010). Studies on

management decisions using the theory of planned

behavior showed that managers’positive attitude toward,

for example, envir onment protection (Cordano and

Frieze, 2000; Flannery and May, 2000) or benchmarking

(Hill et al., 1996) strengthens their intention to apply

such measures in their companies. Therefore, we expect

managers who positively evaluate corruption prevention

efforts to be more willing to engage in such efforts.

Thus, we propose:

742 A. Werner et al.

©2018 European Academy of Management