The effects of bribery on the digitization of small and medium enterprises in Latin America

Abstract

AbstractIn this study, we examine the effects of bribery on the digitization of small and medium enterprises (SMEs) within Latin America. We apply neo‐institutional theory as the overarching theoretical framework to establish that bribery negatively influences digitization. We propose that firm characteristics (i.e., managerial experience and firm size) affect the firm‐level relationship between bribery and digitization. We also examine how the perceived tax burden mediates the effect of bribery on digitization. Our study is both theoretically and practically relevant. Theoretically, we are among the first to explicate the direct relationship between bribery and digitization. This novel perspective extends the information systems literature to explain digitization challenges in Latin America. For managers and policymakers, we present a path towards essential digitization for Latin American SMEs. Our empirical analysis uses secondary data from a World Bank survey of 1549 Latin American SMEs conducted over three years in six countries. Our findings show that bribery negatively influences digitization while SME characteristics positively moderate this relationship. In addition, we show that the perceived tax burden mediates the effects of bribery on digitization.