Business Management Training Reduces Corruption in Emerging Markets

Research conducted in Vietnam suggests that improving firm productivity and internal controls can reduce the incentives for businesses to engage in bribery. The study, funded by USAID through the LASER PULSE mechanism, tested the effectiveness of online management courses for restaurant owners and managers in Vietnam. The research team designed three online courses: a Restaurant Management Course, an Internal Controls course, and a Marketing course that served as a placebo treatment. The courses were developed in collaboration with the Sustainable Development for Business Office at the Vietnam Chamber of Commerce and Industry and the Institute for Sustainable Development at the National Economics University. The courses aimed to enhance manager awareness of regulations and compliance within their firm, reducing the risk of extortion by regulatory inspectors. Experimental evidence from the study revealed striking effects on reducing bribery. Less than half of the students in the Restaurant Management course and Internal Controls course reported paying bribes in the previous month, compared to 75 percent of businesses in the placebo Marketing Course. The average cost of bribery in the previous month for Marketing students was $427, which was close to three times as much paid by those in Restaurant Management ($153) and five times more than students in the Internal Controls course ($87). The study also used a shielded-response technique, called a List Experiment, to measure bribery. The results showed a similar pattern, estimating that nearly every Marketing student paid bribes to regulatory inspectors in the past month, compared to 38 percent of Internal Controls students and 40 percent of Restaurant Management students. The differences in bribery frequency and amounts were statistically significant and confirmed by econometric analysis and randomization inference. The policy implications of this study are clear. Government officials or non-state actors can place a large dent in corruption payments through broadscale Management and Internal Controls training. This will insulate businesses from malicious bribe requests, as regulatory inspectors are less likely to find obvious violations for which they can threaten fines to extract bribes. In Vietnam, the courses designed by ISD-NEU are already openly available on the Vietcourse to all participants. However, the study's findings are based on a small sample size of 45 firms, which may limit the ability to generalize to the larger population of Vietnamese businesses. To verify these findings, the researchers recommend expanding to other industries, moving to in-person training, and increasing financial inducements to convince firms to enroll, complete courses, and fill out their accounting workbooks. Entrepreneurs of SMEs are extremely busy and operate at very narrow financial margins, making it challenging for them to commit to external coursework.