2020 Reports

The Darkside of Pursuing Growth in the Product Cycle — Corruption, Graft, and Bubbles

Rapp, William V.

This paper examines how MNEs operating within the International Product Cycle and an Improving Value-Added Chain between and within countries and industries can feel compelled by competitive pressures to expand globally through sales and FDI into emerging markets in order to find market growth and/or lower costs and then be trapped by graft and corruption and the risks associated with the US Foreign Corrupt Practices Act or similar statutes in other OECD countries. It also explains how herding, global competition and instant communication can create Financial Bubbles that amplify and exacerbate the existing corruption. It then offers MNE executives some possible approaches for identifying and managing corruption pressures including factor reversal and on-shoring strategies.