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If you are an executive in a government company and you hire your cousin, is it nepotism or are you ensuring your recruit is trustworthy? The answer is not as clear-cut as it may seem, as new research shows. In fact, the answer depends on the importance of informal networks in your country, whether you belong to one or not, and who benefits from their use.

In the very strong words of advocacy group Transparency International, “corruption can cost you your freedom, health, wealth, and sometimes, even your life” – hence the global fight to end the practice. Yet a number of practices that would be labelled nepotism or bribery according to Western norms are still common in many parts of the world. In Kazakhstan, clanism means that employee recruitment based on kinship is widespread, leading to “the economy of nephews and son-in-laws”; guanxi relationships in China create obligations for the continued exchange of favours; the use of personal networks to achieve a certain goal is known as wasta in Arab countries. The list could go on.

However, because these informal networks are tolerated locally, the usual definition of corruption (the abuse of entrusted power for private gain) may not be completely relevant. Worse, describing these practices in simplistic, black-and-white terms makes anti-corruption efforts ineffectual, as a team of researchers points out in a recent paper. “It is this lack of understanding of corruption as a context-dependent phenomenon that leads to inefficiency in the fight against corruption by international agencies such as the IMF or the World Bank,” write Maral Muratbekova-Touron from ESCP Business School and Camila Lee Park and Mauro Fracarolli Nunes from EDC Paris Business School. Instead, they set out to examine corruption in terms of power flows and relationships.

Community logics shape individual decisions

To better understand how individuals cope with corrupt situations, the researchers adopted a perspective of institutional logics. These refer to a socially constructed set of beliefs, principles, values and rules – those of a state, religion, nuclear family, etc. – that shape individual action.

The informal networks mentioned above, such as clanism, guanxi and other indigenous kinship ties, represent such a logic: community logic. “The embeddedness of an individual's behaviour in community logic may be dictated by loyalty and a sense of responsibility, social obligation, a desire to demonstrate their affiliation with a community,” explain the researchers.

However, such ties are not necessarily about bribes or crooked dealings. On the positive side, mutual trust within a strong network may ensure “lower transaction costs” and “prevent free-riding behaviour through peer pressure,” argue Maral Muratbekova-Touron and her co-authors. But to what extent do people follow the logic of informal networks?

Adaptable ethics?

In theory, individuals have different levels of adherence to a given logic: novice (no knowledge of the logic), familiar (merely acquainted with it) or identified (attached to it). In a situation of competing logics, individuals may comply with one or the other, or combine them or ignore both.

In practice, the culturally appropriate response depends partly on the environment (pristine Scandinavian nations or bottom-of-transparency-index countries like South Sudan). In the former Soviet republics for instance, describe the researchers, “an owner of a small business may acquire through his/her connections a 'roof' [krysha in Russian], i.e. a public official who offers protective services and receives informal payments in exchange”. This is more the norm than the exception.

It is also of interest whether an individual belongs to a network capable of benefiting from corrupt actions. In countries where favouritism is acceptable, previous research has found that managers acquiesce to communal logic if job applicants are related to them, but defy it if the applicants are not. Conversely, network outsiders, who are therefore refused appointments, selections or promotion, will see things otherwise.

Comparing Anglo-American and post-Soviet attitudes

The researchers hypothesized that outsiders would challenge the corruption logic and defend the ethical logic, while insiders would tend to follow the locally dominant logic, possibly out of self-interest (albeit unconsciously). To test these, they conducted a study with 464 participants from the UK, the US, Russia and Kazakhstan, presenting them with a fictitious scenario involving a potentially tainted bidding process.

Broadly, their results suggest that the ethical logic is more strongly internalized by outsiders, independently of the corruption levels of the environment. Thus attitudes may boil down to opportunism, i.e. corruption is viewed as unethical by those who cannot be part of it. This would explain the hypocritical conduct of certain political groups. Brazil's workers' party, for example, took an anti-corruption stance when in the opposition, yet engaged in massive bribery when in power, as the authors point out.

While the insider results (following ethics) were expected for a non-corrupt environment, the results for corrupt contexts were counter-intuitive, with many respondents rejecting corrupt behaviour. Yet the researchers note that they had a very high incomplete response and drop-out rate among the Russian and Kazakh participants, possibly signalling the sensitivity of the topic or a social desirability bias (giving an expected rather than sincere answer) .

What it means for HR

The dynamics of informal networks (clanism etc.) reflect an invisible dimension of international human resources and social expectations such as favouritism, while considered a corrupt practice in many countries, must be managed carefully. In a context of expatriate integration for example, the participation in recruitment or promotion processes of individuals who are not part of local informal networks may diminish the problem of unethical choices.

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