Threat of Falling High Status and Corporate Bribery: Evidence from the Revealed Accounting Records of Two South Korean Presidents


Thursday, November 9, 2017, 4:30pm to 6:00pm


Thomas Chan-Soo Kang Room (S050), CGIS South Building, 1730 Cambridge Street, Cambridge, MA 02138

Kim Koo Forum on Korea Current Affairs
Nov. 9 KKF Poster

Jordan Siegel
Associate Professor of Strategy, University of Michigan

Yujin Jeong
Assistant Professor of International Business, American University

Moderator: Katharine H.S. Moon, Professor of Political Science and Wasserman Chair of Asian Studies, Wellesley College; Nonresident Senior Fellow and inaugural holder of the SK-Korea Foundation Chair in Korean Studies, The Brookings Institution

Jordan Siegel is an Associate Professor of Strategy and Michael R. and Mary Kay Hallman Faculty Fellow at the University of Michigan Ross School of Business. Professor Siegel is also a Research Fellow at the William Davidson Institute and an Associate-in-Research at the Harvard Korea Institute. Professor Siegel specializes in the study of how companies gain competitive advantage through their global strategy. Professor Siegel finds that there are numerous opportunities for companies to attain superior sustainable corporate performance through creative strategies for corporate governance and human resource management. A set of studies written by Professor Siegel explores how companies borrow, leverage, and arbitrage institutions across borders as a means of attaining long-term competitive advantage. By institutions Professor Siegel refers to the formal and informal rules of the game that affect companies’ competitive behavior and resource access. Formal institutions include corporate, securities, and bankruptcy law; informal institutions include a society’s cultural stance toward meritocracy and egalitarianism. (While a thorough list of rules of the game might be near-infinite, Professor Siegel concentrates on those that directly affect governance of companies.) The main idea is that companies—even single-country-focused companies—exhibit a surprising ability to attain competitive advantage via their choices of other countries’ institutions.

Another set of studies written by Professor Siegel and his coauthors shows that companies can make their approach to the labor market a core component of their competitive advantage.  The goal has been to examine whether the hiring and promotion of female managers leads to improved corporate performance, whether foreign multinationals disproportionately engage in the hiring and promotion of female managers, and whether foreign multinationals act differently in the hiring and promotion of senior female managers in Japan and South Korea compared to what they do at home. Overall, the results show that foreign multinationals have been the most active in both Japan and South Korea in exploiting the social bias and hiring and promoting women to senior management positions. Professor Siegel and his coauthors argue based on panel analysis with company fixed effects, and based on systematically ruling out alternative explanations, that the aggressive application of this outsider’s advantage has led to demonstrable improvements in performance over time for foreign multinationals in Japan and South Korea. Moreover, this source of competitive advantage is not short-lived, but appears to be as much as a decade-long opportunity.

Professor Siegel’s work has been published in the Journal of Financial Economics, Administrative Science Quarterly, the Review of Financial Studies, Management Science, Organization Science, the Journal of International Business Studies, and the Journal of Economic Literature.

Yujin Jeong is an Assistant Professor of International Business at the American University Kogod School of Business. Professor Jeong’s research interests are in the areas of political economy, institutions, corruption, business-government relations, multinational firms, and emerging economies. Professor Jeong’s scholarly work has been published in Strategic Management Journal, the International Handbook on the Economics of Corruption, Vol. II., and Significance (an official statistical publication of the Royal Statistical Society and the American Statistical Association). Yujin has been awarded a POSCO Fellowship (2017) and won two Korean Studies Grants (2015-2017) through a selective research funding competition from the Academy of Korean Studies to further her research on solutions to corruption in emerging economies.

Social status and its dynamics may be an important predictor of which firms will engage in large-scale bribery. Prior theory is incomplete, however, and prior empirical studies have lacked comprehensive and reliable data on firm-level bribery decisions. We offer a new theoretical prediction and a novel data set on high-level corruption in South Korea, where the accounting records of two presidents in the 1987–1992 era were exposed to after-the-fact legal and public scrutiny. We find that, controlling for a range of alternative explanations, the threat of falling high status—that is, the combination of longstanding high social status with current-period economic performance inferior to industry peers’—is a significant predictor of increases in the amount of large-scale corporate bribery.

The Korea Institute acknowledges the generous support of the Kim Koo Foundation.