The Impact of Corruption on Entry Strategy : A study of Swedish companies in Russia

Abstract: Businesses today are constantly on the lookout for new investment opportunities. Often, they have to move away from their home market and enter new countries in order to continue to grow. One question that is sometimes omitted when planning such moves is that of corruption. Especially when moving into transition economies, the issue of corruption can be an obscure and complex one, on which little research has been made to date. Russia is one such economy, with a huge investment potential, but very unclear rules about how business is and should be conducted. It would be interesting to see to what extent corruption in Russia has affected Swedish companies’ entry strategies in the Russian market. The method chosen for the purpose of this thesis was to conduct a survey of 20 Swedish firms currently present in Russia. We also conducted interviews with 3 experts in the field of Russian business, and one representative of a Swedish firm considering expanding their operations in Russia. This combination of quantitative and qualitative methods would allow us to look at things from different perspectives and get a better view of the state of corruption in Russia. The interviews were in some cases conducted in person, allowing for a broader and less formal discussion of the topic, helping the authors gain more insight and generate new ideas to be used in the paper. The authors found that Swedish companies operating in Russia usually attribute little importance to the issue of corruption during the planning stages of the market penetration strategy. Many of these firms did encounter corruption at later stages of market penetration, and were forced to rethink their strategies accordingly, showing that corruption affect entry strategies to a great extent. It was concluded that the most appropriate method for Swedish firms to enter the Russian market is through fully-owned subsidiaries, with the assistance of local consulting agencies, which provide help when dealing with those areas where corruption is most likely to exist.