University of Applied Sciences of the Grisons, Switzerland
The concept of liability of newness implies that young firms face numerous challenges, including adapting to demanding environments, managing scarce resources, and building relationships with unfamiliar third parties. These challenges make young firms more vulnerable and increase their likelihood of failure. Firms operating abroad are further confronted with liability of foreignness. Corruption remains widespread around the world. For firms operating abroad, corruption can appear lucrative, as it may allow them to overcome bureaucratic obstacles or gain economic advantages. In light of these considerations, we analyze a sample of 484 internationally active Swiss firms to determine the relationship between a firm’s age and its likelihood of engaging in corrupt behavior. The results indicate that there is no significant relationship between a firm’s age and whether firms are expected to make informal payments. In other words, younger and older firms are equally likely to face informal payment demands. Conversely, younger firms are significantly more likely to give in to informal payment demands. In addition, younger firms spend a higher proportion of their turnover on informal payments. This indicates that younger firms feel a greater need to establish themselves in the international market through corruption, given their liability of newness.
