The role of international anti-corruption regulations in promoting socially responsible practices

We analyze how international anti-corruption rules impact the behavior of multinational firms in promoting sustainable practices. Competition from multinational firms is expected to lower bribe rents and hence corruption in host countries. However, we argue that the competition between domestic and multinational firms is unequal as (only) the latter face greater monitoring and sanction through international anti-corruption regulations. We de-velop a game theoretic model of bribing to examine the strategic response of firms un-der conditions of unequal competition. We show that under certain conditions the bribing probability of domestic firms increases when multinational firms facing greater penalties refrain from bribing. We use an agent-based simulation to analyze industries with hetero-geneous firms, showing that the optimal strategies converge to the Nash equilibrium, and identify the major drivers of profitability and bribing. (c) 2021 Elsevier B.V. All rights reserved.