U.S. Entrepreneurial Risk in International Markets: Focus on Bribery and Corruption

Abstract

Research from the Kauffman Foundation shows that without startups, there would be no net job growth in the U.S. economy. Since the mid-1990s, businesses with fewer than 500 employees have created 60 to 80 percent of U.S. net new employment. The phenomenal growth of the Internet during recent years results in a rational perception by entrepreneurs that rapid access is available to international markets and sales. However, lurking in the allure of international expansion is the very real threat of exposure to widespread bribery and corruption. Every entrepreneur needs to consider their response before being confronted with this problem. Substantial fines, penalties, legal and other expenses and even jail time may result from running afoul of the FCPA, U.K. Bribery Act or other local anti-bribery or corruption laws. While the cost of anti-bribery compliance for entrepreneurs is heavy, the ethical, economic, and social impact of bribery is equally onerous. A review of bribery and corruption among the United States’ top three trading partners (Canada, China, and Mexico) illustrate these risks. I discuss the Foreign Corrupt Practices Act; OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions; the U.K. Bribery Act 2010; and offer a few thoughts about the cost of anti-bribery compliance, as well as the ethical and societal cost of corruption. I believe that this article contributes to the existing small-business literature by better equipping entrepreneurs to recognize and understand risk as they plan to enter international markets.