Fighting Corruption from Home: How Multinational Firms Learn to Navigate Corrupt Markets

Corruption is one of the most persistent obstacles to fair and sustainable global business. For decades, policymakers and researchers have warned that corruption distorts market mechanisms, increases costs, and discourages much-needed foreign direct investment. However, the reality is more complex: some multinational companies (MNCs) continue to invest in corrupt markets despite the risks. Why? Because such markets offer multinational corporations high growth potential, experience teaches them how to survive in such environments. But what exactly are they learning—and what happens when their home country enforces strict anti-bribery laws?

Our recent research at UNU-MERIT sheds light on this critical question. Looking at over 91,000 greenfield investments by over 25,000 multinational corporations (MNCs) across 101 countries, we examine how home country enforcement of anti-bribery policies shapes how multinationals behave when investing in corrupt foreign markets. 

 Learning from Corruption: Clean Hands vs. Dirty Hands

When firms operate in corrupt environments, they often develop experiential knowledge to navigate and exploit these systems. We distinguish between two types of corruption learning: clean hands and dirty hands.  

• Clean Hands Learning: Companies learn how to avoid paying bribes while navigating business challenges in corrupt countries. They build strong compliance systems and maintain ethical standards—even under pressure.
• Dirty Hands Learning: On the other hand, some companies learn how to engage in bribery discreetly. Over time, they become more adept at identifying and interacting with corrupt officials, using opaque accounting methods and complex financial arrangements to conceal illicit payments and hide bribes.

Both learning paths make it easier for companies to navigate corruption, but with very different implications for governance and development. Our study shows that policy enforcement at home is key to steering companies away from the dirty hands learning path. 

The Role of Home Country Enforcement

Many countries—especially members of the OECD—have laws that criminalise bribery committed by their firms abroad. These anti-bribery laws target foreign corruption, holding companies accountable for unethical behaviour in other countries. The key insight? These laws make a difference.

If clean hands learning dominates, we would expect that strong home-country enforcement would support and reinforce ethical behaviour, encouraging more investment from firms with prior experience, as their anti-bribery systems align with the law. But suppose dirty hands learning is more widespread. In that case, strong enforcement should deter investment in corrupt countries, because firms realise they can no longer safely rely on the unethical strategies they’ve learned. Our findings point clearly to the latter and suggest strong evidence that policies enacted in the home country—though targeting bribery committed abroad—effectively influence multinational strategies in countries with weak institutions.

Implications for Policymakers and Business Leaders

The study underscores the critical role of robust anti-bribery enforcement in the home country. When laws are strongly enforced and violations lead to real consequences, it sends a powerful signal to firms: unethical behaviour abroad will not go unnoticed or unpunished. This pressure changes how companies behave and what they learn when operating in complex institutional environments.

Policymakers in home countries should go beyond simply signing international anti-bribery agreements—such as the OECD Anti-Bribery Convention—and prioritise consistent and effective enforcement. Strong enforcement acts as a deterrent to unethical business practices, discouraging firms from adopting corrupt strategies abroad. It also promotes fair competition by supporting firms that adhere to ethical standards, helps prevent the spread of corruption through global value chains, and contributes to building a more transparent and accountable global business environment. However, recent trends signal a withdrawal from anti-bribery agreements and enforcement. The Trump administration announced a rollback in enforcing the Foreign corruption practices Act, weakening the consensus on anti-corruption. Enforcement of the OECD anti-bribery convention has generally been dropping in recent years in many signatory countries. Disparities in enforcement risk create an uneven playing field and incentivise regulatory arbitrage by MNCs,

Policymakers in host countries who aim to attract responsible and sustainable foreign investment should prioritise institutional reforms that reduce corruption and strengthen governance. Such efforts improve the overall investment climate and signal credibility to international investors, particularly those from countries with strong institutions. This can help attract higher-quality investments that bring long-term economic benefits and promote ethical business practices.

For transnational organisations,  coordinated international efforts are needed to harmonise enforcement standards, reinforce ethical norms, and close governance gaps. Furthermore, expanding the OECD Anti-Bribery Convention to include major emerging economies and enhancing cooperation among enforcement agencies can help level the playing field. These efforts should be backed by political commitment and civil society engagement to ensure sustained accountability.  

The message is equally important for executives: ethical behaviour isn’t just a legal obligation—it’s a strategic advantage. Firms that build clean hands learning systems are more resilient in the long term and less exposed to legal and reputational risks. 

ORIGINAL WORK

Dedho, N.H., Belderbos, R. & Cuervo-Cazurra, A. (2025). Corruption experience and foreign investments: clean hands or dirty hands learning?. Journal of International Business Studies 56, 542–553. https://doi.org/10.1057/s41267-024-00763-x