This brief is part of the Insights @ Center for Emerging Markets, a publication focused on cutting-edge ideas and advice for global leaders about emerging markets.
By Negash Haile Dedho (Maastricht University), René Belderbos (KU Leuven) and Alvaro Cuervo-Cazurra (Northeastern University)
In short: Emerging markets offer multinational corporations high growth potential, but these opportunities are frequently beset by challenges such as bribery and other forms of corruption. Although corruption deters foreign investment, Negash Haile Dedho, René Belderbos, and Alvaro Cuervo Cazurra found that the way a company responds to these challenges hinges significantly on its home country experience, creating a divide between “dirty hands” and “clean hands” companies.
Companies from countries with higher levels of corruption often learn through experience how to navigate and exploit corrupt systems. They often demonstrate a greater ability to identify and engage with corrupt officials and conceal illicit activities, employing opaque accounting practices and complex financial structures to hide bribes. Furthermore, they may face fewer repercussions at home if their actions are uncovered, either due to lax enforcement or a cultural acceptance of such practices. This “dirty hands” experience can, ironically, unlock doors in highly corrupt markets that remain firmly shut to their “clean hands” counterparts, as companies more wary of legal and reputational risks might decide to avoid these markets.
In contrast, companies from countries with low corruption levels face a steeper learning curve. They lack the ingrained knowledge of navigating corrupt systems and are typically bound by stricter home-country regulations, such as the US Foreign Corrupt Practices Act or the UK Bribery Act. This often leads to one of two distinct responses. Some “clean hands” companies, through repeated exposure to corrupt environments, gradually develop their own “dirty hands” capabilities. They learn, sometimes through costly mistakes, how to disguise illicit payments and work within corrupt bureaucracies. Meanwhile, other companies strive to operate without resorting to bribery. This requires robust compliance programs and ethical guidelines, a focus on cultivating relationships with honest officials emphasizing the long-term benefits of their investment, and carefully selecting projects and partners to avoid situations where bribery is unavoidable. These companies also leverage their reputation for integrity and the backing of their headquarters to resist demands for bribes.
Practical Implications for Business Leaders and Policymakers
The study highlights the importance of strong anti-bribery enforcement at home. When laws are enforced consistently and violations carry real consequences, companies — even those with “dirty hands” experience — are far less likely to engage in bribery abroad.
For executives, there are several clear messages. First, carefully assess the specific risks and rewards of operating in high-corruption environments. Second, recognize that one-size-fits-all strategies rarely succeed; tailor your approach to the realities of each market. Third, prioritize building strong internal controls, investing in ethics training, and promoting a culture of integrity across the organization.
Finally, managers and policymakers alike should advocate for robust domestic and international enforcement of anti-bribery laws. Strong enforcement levels the playing field and encourages sustainable, ethical business practices. Corruption is a formidable challenge, but by understanding the dynamics of “dirty hands” and “clean hands,” companies can better navigate complex markets — and do so with greater resilience, responsibility, and long-term success.
Original Work
Dedho, N. H., Belderbos, R., & Cuervo-Cazurra, A. (2024). Corruption experience and foreign investments: clean hands or dirty hands learning?. Journal of International Business Studies, 1-12.
Contact
If you are interested in learning more about this work, contact Professor Alvaro Cuervo-Cazurra.
