Corruption and the Role of Information

Author(s): Cassandra E. DiRienzo, Jayoti Das, Kathryn T. Cort and John Burbridge Jr
Source: Journal of International Business Studies, Vol. 38, No. 2 (Mar., 2007), pp. 320-332
Published by: Palgrave Macmillan Journals
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Corruption and the role of information

rational behavior. In May 2001 the US Department

of State released a report on global anti-corruption
efforts stating:
Corruptionresultsfrom a variety of economic, institutional,
political, social, and historical factors. It flourishes when
democratic institutions are weak, laws are not enforced,
political will is lacking, and when citizens and the media are
not allowed to be partnersin democracy.

Park (2003: 30) states that, in order to combat

corruption, an understanding of 'the major determinants of this multifaceted social and economic
phenomenon' is needed. Empiricalstudies focusing
on the causes of corruption have found that the
determinants of corruption ranged from political
institutions, government regulations, legal systems,
GDP levels, and salaries of public employees to
gender, religious cultural dimensions, and poverty,
as well as the role of colonialism (Husted, 1999;
Sanyal and Samanta, 2001; Ali and Said, 2003;
Davis and Ruhe, 2003; Park, 2003).
While all of the above factors have been empirically proven to affect corruption levels, a factor that
has yet to be investigated is the impact of the access
to information on corruption levels. Salbu (2001)
states that the Internet offers people unprecedented
access to information, resulting in a more knowledgeable society. Specifically, as citizens acquire
more access to the Internet, they should be more
aware about the conduct of government and
business. The resulting increase in transparency
should be expected to lower corruption levels, as
such openness discourages corrupt practices. Therefore it is logical to contend that increased access to
information should result in fewer transgressions
by individuals, businesses, and government.
Further,international business could become more
open and transparent. Can something as fundamental as providing worldwide access to the
Internet reduce corruption and result in a better
climate for international business? The policy
implications of such a finding would be significant.
Efforts to increase access to information could
result in a country and the businesses that operate
in that environment becoming more responsible
global citizens.
Using cross-country data from 85 countries, the
initial thrust of this paper is to empirically explore
the general relationship between the access to
information and the level of perceived corruption
within a country, using regression analysis. The
second major thrust of this study will employ the
regression analysis results to explore the possibility

EDiRienzo
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of emerging global patterns of corruption, using

cluster analysis. The cluster analysis divides the
individual countries into groups based on factors
that are found to significantly affect corruption.
The possibilities of global patterns of corrupt
behavior are then explored. No empirical study
has attempted to understand the growing importance of the access to information on the level of
corruption within a country.

Background, hypotheses, and presentation

of variables
Impactof corruptpractices

As international business expands, greaterattention

is being focused on the ramifications of corrupt
practices. Numerous studies have explored the
definition, costs, causes, and effects of corruption.1
In regard to the definition, Johnston (1996) discusses the various meanings of corruption, ranging
from bribery among public officials (Heidenheimer,
1989; Van Klaveren, 1989) to commercial bribery
between two private parties (Klitgaard,1988). The
World Bank defines corruption as the abuse of
public power for private benefit; however, corrupt
practices can occur within the private sector as well.
Further,Tanzi (1998) acknowledges that, although
corruption may be difficult to describe,2 corrupt
practices are generally recognized when they occur.
In this study, the TransparencyInternational (2005)
definition of corruption as the 'misuse of entrusted
power for private gain' is used. Defining corruption
in this manner embodies both public and private
corrupt practices.
Studies have also shown that corruption raises
the cost to host countries in the form of reduced tax
revenues, and also distorts the impact of industrial
policy (Ades and Di Tella, 1997; Tanzi and Davoodi,
1997). Corruption is found to be widespread in
countries with a lack of transparency with respect
to operations, process, and laws (LaPalombara,
1994; Tanzi, 1998). Further, Mauro (1995) and
Bardhan (1997) have highlighted the harmful
effects of corruption on income inequality. Alternatively, Haque and Sahay (1996); Tullock (1996)
and Van Rijckeghern and Weder (2001) justify the
existence of corrupt practices as traditional giftgiving and a substitute for undervalued wages,
incomes, and prices, as such practices can be used
to more equitably allocate resources in heavily
distorted and regulated markets.
Overall, the consensus of these theoretical and
empirical studies is that corruption has a negative

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Corruption and the role of Information

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impact on a country's ability to become a significant player in the global economy. Given that
corruption has such negative global ramifications,
many studies have explored why corruption exists
to the degree that it does. This paper extends these
past studies by considering how the access to
information in conjunction with socio-economic,
institutional, and cultural variables affects the level
of corruption within a country.

Digitalaccess, informationtransparency,and
corruption

The main theoretical argument in this study is that

access to digital information should provide ordinary citizens with knowledge regarding public and
private business transactions. Increased exposure to
information creates a more open and free society.
Research has shown that a more open and transparent economy experiences a lower level of
corruption.
Schroth and Sharma (2003) state that both technology and legal means can be used and, if deployed
synergistically, should significantly reduce corruption. Forms of digital access including the Internet
and mobile technology can be effectively deployed
to allow the dissemination of news concerning
corruptpracticesas well as providing access. Furthermore, Tanzi (1998) highlights the transparency of
rules, processes, and laws as important weapons in
the war against corruption.Ades and Di Tella (1999),
Treisman (2000), and Wei (2000) show that more
open and transparenteconomies aspiringto become
players in the global economy experience lower
levels of corruption.Thus this researchindicates that
governments and societies desiring to be significant
players internationally should strive to improve
access to information to create a more open and
transparentsociety.
The importance of information transparency in
governmental affairs is now impacting on China,
one of the more information-restricted countries.
Scholars, government officials, and members of the
business community are calling for greater openness in order to assist economic development and
to thwart official corruption. Guangzhou has made
history in China by being the first jurisdiction to
legislate and institutionalize government transparency. Since 1 January 2003 the Guangzhou munihas disclosed government
cipal government
information that complies with the World Trade
Organization (WTO) requirements, and has made
nondisclosure the exception rather than the rule
(Horsley, 2003).

Access to information has been recognized as a

tool for fighting corruption in Indonesia as well.
Schroth and Sharma (2003) stated that, in the mid
1990s, Indonesian journalists reported the corrupt
practices of the Suharto government in various
unofficial, web-based journals. Even though only
200,000 of Indonesia's 210 million people had
Internet connections, these web-based publications
aided in the dismantling of the Suharto government in 1998. Schroth and Sharma state: 'in short
the Internet has emerged as a powerful tool to fight
corruption.'
The availability of information by means of digital
access can create more transparent rules, laws and
transactions, resulting in greater accountability.3
This theory is supported by Bhatnagar (2000), who
finds that increased access to the Internet and the
prevalence of e-government raises transparencyand
accountability, and lowers unethical practices. Thus
openness in public and private institutional operations should reduce the prevalence of corrupt
practices. Digital access provides better delivery of
services to citizens, and improves the interactive
effects between all stakeholders, while giving individuals a sense of empowerment through access to
information. Therefore building information infrastructures and increasing digital access results in
increased revenue and lower transaction costs, and
can also reduce corruption levels. As stated by
Norris and Zinnbauer (2002), widespread Internet
access and an independent free press are often
associated with nations that experience greater
administrative efficiency, improved social and economic conditions, and lower corruption.
Thus it can be argued that access to information
lowers corruption levels. The main hypothesis
tested in this paper is:
Hypothesis 1: The higher the access to information and technology in a country, the lower the
degree of corruption in that country.
Control variables
Before a statistical analysis examining the relationship between the level of corruption and the
availability of information within a country can
be performed, the other factors (socio-economic,
institutional, and cultural variables) affecting corruption need to be controlled in order to prevent a
model mis-specification. It is necessary to control
for these variables in an effort to illuminate the true
relationship between corruption and information.
The socio-economic and institutional factors are

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Corruption and the role of information

proxied by economic freedom and development,

while cultural factors are represented by Hofstede's
four main cultural attributes. Each of these control
variables will be briefly discussed.

Economicfreedomand development

An economically free nation is considered to have a

government that promotes a stable legal system,
provides sound money, has efficient labor and
product markets, and does not limit trade and
investment, thus providing an environment for
growth. Global businesses thrive in these environments in which institutions and policies are
consistent, providing an infrastructure to protect
individuals and businesses from corruption and
coercion. Rose-Ackerman(1978), Alam (1995), and
Tanzi (1998) state that unwieldy government
institutions tend to increase the chances of officials
becoming corrupt, while Ades and Di Tella (1999)
and Treisman (2000) point to the fact that more
open economies tend to have lower corruption.
This research has found that countries with a
higher level of economic freedom are generally less
corrupt. Furthermore,in regardto economic development, Mauro (1995), Husted (1999), and Ali
(2003) have provided empirical support that countries with higher levels of economic development
tend to have lower levels of corruption.

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responsible for their individual actions, and they

are not emotionally dependent on organizations or
groups. Conversely, collectivist societies identify
with group membership and decision-making,where
the group protects the individual in exchange for
loyalty. Thus more individualisticcountries generally
have lower levels of corruption.
Regarding masculine-feminine cultural values, a
masculine culture emphasizes power, wealth, and
status, while feminine cultures emphasize the
quality of life, sometimes over productivity (Adler,
2002). Vitell et al. (1993) and Cohen et al. (1996) all
state that higher levels of corruption are found in
more masculine societies. Finally,with regardto the
degree of uncertainty avoidance, societies that have
a high uncertainty avoidance are those in which
people feel uncomfortable in unpredictable situations, which often results in an unwillingness to
challenge authority and rules. Although there is not
a consensus in the literature,6 it is generally believed
that individuals in high uncertainty avoidance
countries tend to be more prone to corruption.

Data and regression analysis

Many studies4 have concluded that corruption

within a country is very much a cultural phenomenon. It is therefore necessary to control for the
cultural make-up of a country when considering its
level of corruption. Most empirical studiess exploring the role of cultural values use Hofstede's (1980,
2001) four dimensions characterizing cultures
across the world. A discussion of each of Hofstede's
work-related values and their relationship to a
country's corruption levels follows.
In regard to Hofstede's power distance, TakyiAsiedu (1993), Cohen et al. (1996), and Husted

Data description
The Corruption Perception Index7 or CPI (Transparency International, 2005) is selected as the
means for measuring corruption, as it is the most
comprehensive quantitative indicator of crosscountry corruption available. The CPI assesses the
degree to which officials and politicians are
believed to accept bribes or illicit payments in
public procurement, embezzle public funds, or
commit offenses, making the measurement of
corruption perceptual rather than absolute. The
CPI is a continuous scale from 1 to 10 (1 = high
corruption, 10 - no corruption). Despite some of its
limitations, noted by Husted (1999), this index has
been used in several academic studies.8 Furthermore, Lancasterand Montinola (1997) conclude in
their study that, while no index or measure is

(1999) state that cultures with an unequal distribution of power tend to discourage questioning
authority, and, as a result, citizens of such societies
tend to shy away from whistle-blowing activity when
confronted with corrupt behavior. Thus it has been
found that the greater the power distance, the higher
the degree of corruption in the country. In regard to
Triandis (1994) and
individualism-collectivism,
Husted (1999) found that countries with high levels
of individualism maintain a belief system in which
individual achievement is the ideal: people are

perfect, Transparency International's Corruption

Index is robust. This index is not based upon
information from the organization's own experts,
but is constructed as a weighted average of different
indexes from 10 different organizations, and it
reflects the impressions of business people and risk
analysts who have been surveyed.9
The Digital Access Index or DAI 2002 is used10 as
a proxy for access to information. The DAI
measures the overall ability of individuals across
178 countries, to not only access but also use

Culturalfactors

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Cassandra
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Corruption and the role of Information

324

information and communication technology. It

consists of eight variables organized into five
categories. The overall country score is based upon:
* infrastructure (fixed telephone subscribers and
mobile cellularsubscribers,
both per 100 inhabitants);
* affordability of access (Internet access price as a
percentage of GDP per capita);
* knowledge (adult literacy, and combined primary,
secondary and tertiary school enrolment levels);
* quality of ICT services (international Internet
bandwidth per capita, Broadband subscribersper
100 inhabitants); and
* usage (Internet users per 100 inhabitants).
The DAI index is represented on a scale of 0 (low
access) to 1 (highest access).
The Economic Freedom of the World (EFW)index
is used to measure a country's degree of economic
freedom. This index is published by Gwartney et al.
(2002) and co-published by the FraserInstitute. This
index consists of five categories:
* size of government (government expenditure,
taxes, etc.);
* legal structure and security of property rights
(level of judicial independence, protection of
intellectual property, military interference in the
rule of law, etc.);
* access to sound money (growth of money supply,
freedom to own foreign currency, etc.);
* freedom to exchange with foreigners (level of
tariff and non-tariff barriers,international capital
controls, size of the trade sector, etc.); and
* regulation of credit, labor, and business, specifically the ease of entry of a new business.
The scale ratings for the Economic Freedom Index
range from 0 to 10, with 10 being most free,

representing countries with advanced socioeconomic structures, and 0 being least free,
representative of countries with less-developed
socio-economic structures.
GDP per capita (2002) from the World Development Report is used to measure the level of
economic development within a country, and
Hofstede's four measures of culture are used as
control variables.11With the exception of culture
variables,12 the digital access and control variables
are lagged approximately13 two years behind the
CPIdata. Digital access and the control variables are
lagged in an effort to allow time for their values to
affect a country's perceived level of corruption.
Table 1 summarizes the data used in this analysis.14

Regressionanalysis

A set of 85 countries is used to test the previously

stated hypotheses. Table 2 provides the descriptive
statistics and the correlation matrix for all the
variables. As expected, CPI has a positive relationship to DAI, IDV, EFW,and GDP, and a negative

Table 1 Variablesummary
Variable

Proxy(name, year reported)

Corruption

Corruption Perception Index

(CPI,2005)
Access to information
Power distance
Individualism-collectivism
Masculine-feminine
Uncertaintyavoidance

Digital Access Index (DAI,2002)

Hofstede's Power Distance (PDI)
Hofstede's Individualism(IDV)
Hofstede's Masculity(MAS)
Hofstede's UncertaintyAvoidance
(UAI)

Economicfreedom

EconomicFreedomof the World

Economic development

GDP per capita (GDP, 2002)

Table 2 Descriptivestatisticsand correlationsafor the model

Variable

Mean

s.d.

CPI

DAI

PDI

IDV

CPI
DAI
PDI
IDV
MAS
UAI
EFW
GDP

4.98
0.53
61.69
40.05
48.58
65.14
6.71
9,783

2.43
0.21
20.84
22.26
18.30
22.10
0.87
11,492

1
0.880**
0.682**
0.604**
0.059
0.083
0.795**
0.878**

1
0.584**
0.589**
0.021
0.031
0.649**
0.954**

1
0.597**
0.096
0.176
0.580
0.657**

1
0.169
0.170
0.458**
0.614**

MAS

UAI

EFW

1
0.006
0.008
0.087

1
0.269*
0.056

1
0.725**

GDP

aUsingthe Jarque-Bera
test,allvariables
weretestedfornormality.
At95%confidence,the CPI,IDV,andGDPwerefoundto be non-normal.
Asa result,

all pairedcorrelations
for these variablesrepresentthe Spearmanrankcorrelations.
The pairednormalcorrelations
representthe Pearsoncorrelation
coefficients.
*P<0.05;**P< 0.01.

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Corruption and the role of Information

relationship to PDI, MAS, and UAI. These relationships suggest that higher levels of digital access,
individualism, and economic freedom and development yield lower levels of corruption. Further,
greater power distances, masculinity, and uncertainty avoidance imply higher levels of corruption.
To further examine the relationship between the
degree of corruption within a country and these
variables, two ordinary least squares (OLS) regression analyses were performed. The first regression
analysis uses CPI as the dependent variable and the
six control variables as the independent variables,
and is referredto as Model 1. The second regression
is the same as the first with the exception of the
inclusion of DAI, and is referredto as Model 2. The
analyses are presented in this manner in order to
highlight the additional explanatory power of DAI.
Model 1 and Model 2 are respectively defined:
Model 1:
CPI = flo - JIPDI + /2IDV - /3MAS - f4UAI

+ /f5EFW+ f6GDP +

Model 2:
CPI = flo -

+ f2IDV - f3MAS - 14UAI

LlPDI
+ /sEFW + fl6GDP+ J7DAI+ e

The regression results for both models are provided

in Table 3. The Adjusted R2 values and the F
statistics indicate that the both regression models
provided a good fit to the data. In an effort to
validate these results and test the significance of the
coefficients, a series of tests for heteroskedasticity,
normality of the error term, and multicollinearity
were carried out for both models. White's (1980)
test for heteroskedasticity indicated that the residuals from both regression models were homo-

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skedastic. Further, the residuals were tested for

normality using the Jarque-Beratest,s15and at the
95% confidence level results indicated that the
residuals from both models were normally distributed. Finally, a test of multicollinearity for each of
the independent variables using the variance-inflation factor (VIF) was performed.16 As shown in
Table 3, the VIFvalues ranged from 1.05 to 2.73 in
Model 1 and from 1.05 to 3.63 in Model 2. Since
VIFvalues greaterthan 5.3 have been suggested17as
cutoffs for multicollinearity, it does not appear that
multicollinearity is a problem in this analysis using
the VIFs as the criterion. However, as shown in
Table 2, DAI and GDP are correlated at 0.95. Strong
correlations between explanatory variables are
evidence of multicollinearity even if the corresponding VIFs are low. The presence of multicollinearity can make the regression results
sensitive to the data used. Further,changes in the
model specification may result in significant
changes in the coefficient estimates. However, the
classic signs of multicollinearity are not present in
the final regression results.18
Given that the regression results were generally
supported by the tests discussed above, an interpretation of the coefficients and tests of the
research hypothesis can be considered. In regression Model 1, two of the four cultural variables individualism (IDV) and masculinity (MAS) - are
significant. The coefficient on IDV is positive,
suggesting that more individualistic societies tend
to have lower levels (see footnote 14) of corruption,
which is consistent with existing literature. The
negative coefficient on MAS indicates that economies that are more masculine suffer from higher
levels19 of corruption, which also adheres to the
existing literature. In regard to economic freedom
and development, the analysis results show sig-

Table 3 Regressionresults(dependent variableCPI05)

Int.

PD!

IDV

Model 1
Estimate
St. error
VIF

-1.683
(1.445)
0

-0.009
(0.007)
2.2

0.017*
(0.007)
2.32

Model2
Estimate
St. error
VIF

-1.258
(1.27)
0

-0.008
(0.007)
2.2

0.01
(0.006)
2.46

MAS

UAI

EFW

-0.018**
(0.006)
1.05

0.002
(0.005)
1.09

0.930**
(0.174)
2.1

-0.017**
(0.005)
1.05

-0.006
(0.005)
1.24

0.711**

(0.159)
2.28

GDP

DAI

0.0001**

R2

0.847

77.64**

0.882

90.08**

(0.00001)
2.73

0.00007**
(0.00002)
3.63

4.032**
(0.819)
3.39

*P<0.05; **P<0.01.

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Corruption and the role of information

nificant and positive coefficients on both EFWand

GDP. Since higher values of the EFW index
represent countries that are freer and less regulated,
the positive coefficients on EFWand GDP support
previous theoretical and empirical research.
Regression Model 2 contains the same control
variables, but includes the main variable of interest,
DAI. In regard to the control variables, the regression results are similar to those in Model 1, with
the exception that IDV becomes insignificant in
Model 2. Most importantly, the coefficient on DAI
is positive and significant. Given that higher values
of the corruption index indicate lower levels of
corruption, and higher values of the DAI index
imply increased access to information and technology, the positive coefficient on DAI indicates that
higher levels of digital access suggest lower levels of
corruption, thus supporting Hypothesis 1, which is
the main hypothesis of this study. As further
evidence, a partial F test indicated that the inclusion of DAI significantly increases the explanatory
power of the regression at 99% confidence.20 This
result can also be observed by noting the change in
the Adjusted R2 value from Model 1 (0.847) to
Model 2 (0.882), suggesting that DAI adds approximately 3.5% additional explanatory power to the
regression. In summary, the results of the regression
analysis indicate that countries with more masculine cultures with lower levels of economic freedom
and development and less access to information are
more likely to exhibit high levels of corruption.
The regression results show the general relationship between the level of corruption experienced in
a country and the cultural, socio-economic, institutional, and digital access variables. In the next
section, the analysis is extended to consider how
specific countries can be grouped by the independent variables,21 and how these country groups
differ in regardto their corruption levels. To address
this issue, a country-based cluster analysis is
performed. As a consequence of the cluster analysis,
potential emerging regional and/or global trends
across the 85 countries can be illuminated.
Cluster analysis
A cluster analysis is used to group the 85 countries
into distinct clusters using the cultural, socioeconomic, institutional, and digital access variables
found to be statistically significant in the regression
analysis as the criteria. In particular,the MAS,EFW,
GDP, and DAI variables are used as the country
characteristicsupon which the clusters are formed.
A cluster analysis groups objects, in this case

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countries, into groups such that the objects within

a group are most similar to each other with respect
to specified characteristics and least similar to
objects in the other groups. In other words, the
cluster analysis groups the individual countries
based on how similar or 'close' they are in regard
to their masculinity, economic freedom and development, and digital access. Segmenting the countries into clusters provides a more meaningful and
intuitive description of the countries in the dataset,
as one is able to see how specific countries can be
grouped by the independent variables, and how
these groups differ in their corruption levels.
A non-hierarchical cluster analysis is preformed
using the squared Euclidean distance22 as the
measure of how 'close' or similar two countries
are in regardto the four variables. Non-hierarchical
cluster analysis requires that the number of clusters
to be created in the analysis be set prior to
performing the analysis. There are no hard guidelines for determining the number of clusters to be
created in an analysis, and this is generally an
exploratory process. After considering many different cluster analysis results, a grouping of four
countries clusters was chosen, and the results are
presented in Table 4. The cluster analysis results can
be interpreted as follows. Country cluster 1 represents the group of countries that are most homogeneous in regard to their masculinity, economic
freedom and development, and digital access, and
most heterogeneous to the other country clusters
(clusters 2, 3, and 4) in regard to these variables,
and so forth for the remaining clusters.
In order to gain a more in-depth understanding
of the different country clusters, the means of each
of the four variables used to create the clusters are
presented in Table 5. Table 5 shows that the
countries belonging to Cluster 1 have the highest
mean access to information, level of economic
freedom and development. However, compared
with the other clusters, the countries in Cluster 1
also have a more masculine culture on average. It
should be noted that this average is influenced by
the inclusion of a few countries with exceptionally
higher levels of masculinity such as Japan (95) and
Austria (79). Alternatively, Cluster 4 has the lowest
mean access to information, level of economic
freedom and development. Unexpectedly, the
countries in Cluster 4 tend to have a more
moderate degree of masculinity within their cultures. Again, this result can be explained by a few
outliers within the cluster, such as Sri Lanka,23with
exceptionally low levels of masculinity within their

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Corruption and the role of information

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Table 4 Clusteranalysisresultsa

Cluster1

Cluster2

Cluster3

Cluster4

Australia
Austria
Belgium
Canada
Denmark
Finland
France
Germany
Hong Kong
Iceland
Ireland

Brazil

Argentina
China
Colombia
Dominican Republic
Ecuador
Hungary
Jamaica
Mexico
Philippines
Poland
Slovakia
South Africa
Venezuela

Angola
Bangladesh
Egypt
Ethiopia
Ghana
Guatemala
Honduras
India
Indonesia
Iran
Kenya
Malawi
Morocco
Namibia

Bulgaria
Chile
Costa Rica
Croatia
Czech Republic
El Salvador
Estonia
Greece
Israel
Jordan
Korea
Kuwait
Malaysia
Malta
Panama
Peru
Portugal
Slovenia
Spain
Thailand
Trinidadand Tobago
Uruguay

Italy
Japan
Luxembourg
Netherlands
New Zealand
Norway
Singapore
Sweden
Switzerland
United Kingdom
United States

Nigeria
Pakistan
Romania
RussianFederation
Senegal
Serbia
Sri Lanka
Syria
Tanzania
Turkey
Vietnam
Zambia

LowCorruption',
and Cluster4 'HighCorruption'.
aCluster1 'LeastCorruption',
Cluster2 'Moderately
Cluster3 'ModeratelyHighCorruption',

Table 5 Independent variablemeans by cluster

Cluster

DAI

Cluster 1
Cluster 2
Cluster 3
Cluster4

0.76
0.58
0.49
0.29

MAS
49.00
41.00
70.23
44.23

EFW
7.70
6.85
6.21
5.97

Table 6 CPImeans by cluster

GDP
27,053.91
6,874.15
3,380.15
944.22

culture. Compared with the other clusters, clusters

2 and 3 fall into the middle ranges in regardto their
mean access to information and levels of economic
freedom and development.
The primary objective of the cluster analysis is to
explore how these countries differ in their levels of
corruption levels. Having described the country
clusters, a series of tests of means are now performed
to determine whether the country clusters have
statistically different mean levels of corruption. The
regression results indicate that these four variables
influence the level of corruption in a particular
country and, by clustering the countries by these
variables, differences in their corruption levels

Cluster
Cluster 1
Cluster 2
Cluster 3
Cluster4

Mean(CPI) Samplesize
Leastcorruption
Moderatelylow corruption
Moderatelyhigh corruption
High corruption

8.42
5.01
3.43
2.77

22
23
13
26

should be detectable. Table 6 shows the sample

mean corruption index for each of the four clusters
and the corresponding sample size.
In order to statistically determine whether the
mean level of corruption differs pair-wise across the
country clusters, a test of means is required. Given
the sample sizes (each country cluster has a sample
size less than 30), it is necessary to assume that the
corruption index is normally distributed in order to
use a t-test to test for differences in the means. The
Jarque-Bera test was used to test for normality of
the corruption index, and the results indicated that
the corruption index is not normally distributed.
Given the small sample sizes and the non-normal-

lournal of International Business Studies

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330

Corruption and the role of Information

the United Nations' World Telecommunication

Development Report (2003). There are other
indices, such as the Networked Readiness Index
published by CID (Harvard),and World Bankindicators measuring individual phone line and cellular
use, but DAIis the largest, most comprehensiveindex
thus far.
11Hofstede'smeasureof nationalcultureis based on
the surveysthat were conducted duringthe late 1960s
and early 1970s from more than 116,000 employees
of 72 IBM international subsidiaries. Initially, Hofstede's surveys assessed personal values and aspirations in the workplaceacross53 countries.Usingfactor
analysis,Hofstededeveloped indices rangingfrom 0 to
100 to measure power distance, individualism-collectivism, masculinity-femininity,and uncertaintyavoidance. The higher the score (from 0 to 100), the more
the country is individualisticand masculine,and has a
stronger level of uncertaintyavoidance with a greater
power distance.
12Hofstede's cultural variables are not reported
annually. The values for the cultural variableswere
collected from Hofstede's2001 text.
13Giventhat the indicesare based partiallyon survey
data, the 'reported'year for an index is not necessarily
the year in which the data were collected. For
example, the 2005 CPI is based partiallyon survey
data collected in 2003-2004.
14Higher values for IDVrepresentmore individualistic societies.
15sTheJarque-Beratest evaluatesthe null hypothesis
that the residuals are normality distributed with
unspecifiedmean and varianceagainst the alternative
that the residualsare not normallydistributed.
16TheVIFdetermines the effects of the correlations
among the independent variablesand their influence

Cassandra
EDiRienzo
et al

on the variancesof the regression coefficients (Maddala, 1988; Kennedy,1992).

17Kennedy(1992), Studenmund (1992), and Burns
and Bush(2003) suggest a cutoff of 10, and Hairet al.
(1992) suggest a strictercutoff of 5.3.
18Someclassicsigns of multicollinearityin regression
resultsare insignificantcoefficientsin conjunctionwith
a high R2 and/or signs of coefficients that are
inconsistent with theory. In Model 2, coefficients on
GDP and DAIare both significantand have signs that
are consistent with theory.
19Highervalues for MASrepresent higher levels of
masculinity.
20TheFstatisticfor the partialFtest is 24.24 and the
critical value is 3.96, yielding a P-value less than
0.0001. Thisindicatesthat the null hypothesisthat the
inclusion of DAI does not significantly increase the
explanatorypower of the regressionmodel should be
rejected.
21Jain (2001) suggests using a multiple variable
approachto clusteranalysis.
22The squaredEuclideandistance between countries
_ - cn)2, where N is
i and j is defined as dij=
(c,
weeNi
-(Ci"njn)2,
EN-1
equal to 6, the number of country characteristics
considered, ci,nrepresentscharacteristicn for countryi,
representscharacteristicn for countryj.
andc/
23Sri Lankahas an MASvalue of 10.
241nthis case the Mann-WhitneyUtest evaluatesthe
null hypothesisthat the population relativefrequency
distributionsfor country clusters i and j are identical
(the population mean corruption levels are equal in
clusters i and j) against the alternative that the
population relativefrequency distributionof country
cluster i is shifted to the right (or left) of the relative
frequency distribution of country j (cluster i has a
higher (or lower) corruptionlevel than clusterj).

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About the authors

Cassandra E DiRienzo is an Assistant Professor of
Economics at Elon University. She holds an ME and
PhD from North Carolina State University. Her
researchinterests are econometrics, and the economic and business applications of nonparametric and
spatial statistics. She has published in Challengeand
the Journalof GlobalCompetitiveness,
among others.
Jayoti Das is an Associate Professorof Economics at
Elon University. She holds a Masters and PhD from

the University of Cincinnati. Her research interests

are international trade, global business, and development. She has published in the Journal of
International Trade and EconomicDevelopmentand
the Journal of Global Information Management,
among others.
Kathryn T Cort is an Assistant Professor of
Marketing at North Carolina A & T State University.
She holds a Masters from Ohio State University
and a PhD from Kent State University. Her
research interests include global marketing
and entrepreneurship. She has published in Marketing Management and Business Horizon, among
others.

John J Burbridge Jr is Dean of the Love School of

Business at Elon University. He received a BS, MS,
and PhD in Industrial Engineering from Lehigh
University. He has published many articles in
journals such as the Journalof GlobalCompetitiveness
and Journal of Global Information Management,
among others.

Editor,30 June2006. Thispaperhas beenwiththeauthorsfor threerevisions.

AcceptedbyJose'ManuelCampa,Departmental

BusinessStudies
Journalof International
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