The effects of ICT use and ICT Laws on corruption: A general deterrence theory perspective
Introduction
Corruption is endemic in modern society. More than one trillion dollars is paid in bribes every year (UNODC 2005). A survey of 1000 people from 107 countries found that over 27% of respondents paid bribes in their countries when dealing with public officials (Global Corruption Barometer 2013). Corruption reduces economic growth, increases inflation, and increases economic volatility in both developing and developed countries (Evrensel 2010; Krishnan, Teo, & Lim 2013). Foreign investors investing in a relatively corrupt country can experience a 20% increase in business costs due to corruption (UNODC 2005). Any reduction in corruption can therefore improve economic efficiency, free up resources for public programs, and increase quality of life for citizens.
The United Nations Development Program defines corruption as the misuse of entrusted power for private gain (UNDP 2011). Corruption may take several forms, including bribery, extortion, collusion, fraud, embezzlement, misappropriation, trading influence, illicit enrichment, obstruction of justice, abuse of function, and money laundering.
Despite its widespread occurrence, investigation and prosecution of corruption is made difficult by the lack of observable evidence. Unlike traditional crimes such as homicide where there are often physical and forensic evidence, such evidence is often lacking in white-collar crimes such as corruption (Gottschalk, Filstad, Glomseth, & Solli-Sæther 2011). Corruption investigations often follow unauthorized financial trails, whistleblower accounts, and wiretapped conversations, which are often inadmissible in courts of law in many countries. Corrupt officials try to avoid detection by using cash transactions and by avoiding electronic communication. Moreover, individuals involved in corrupt acts are often educated, wealthy, well-respected, and influential members of society, who leverage their political connections to escape prosecution, especially in countries with weak legal frameworks (OECD 2010). When corrupt individuals walk free, the society bears the cost of their corruption in the form of resources siphoned out of public welfare programs to private wealth creation, harming the citizenry at large.
Since combating corruption requires acquiring and processing information that is hard to obtain, ICT tools that enables the acquisition, storage, and processing of information may play a key role in identifying, curbing, and prosecuting corruption (Blurton 1999). ICT refers to “a diverse set of technological tools and resources used to communicate, create, disseminate, store, and manage information” (Charoensukmongkol & Moqbel 2012, p. 63). These tools and resources include computer hardware, networks, software, telephony, mobile and satellite systems, surveillance tools, databases, data mining programs, and many others. ICT can help in the investigation and prosecution of corruption and other white-collar crimes in at least four ways: (1) by generating electronic documents that are easily searchable, (2) by creating an online trail (e.g., money flow between banks) that can be used to track suspicious transactions or audit prior transactions, (3) by enabling collaboration between many agencies, that are often need to prosecure white-collar criminals, and (4) by providing whistleblowers with the opportunity to expose corruption through anonymous tips, blogs, and websites like WikiLeaks.
Although many studies correlate ICT investments with lower corruption at the country level (Bertot, Jaeger, & Grimes 2012; Kim, Kim, & Lee 2009; Lio, Liu, & Ou 2011), recent studies have cast doubt on how effective ICT really is in reducing corruption (Charoensukmongkol & Moqbel 2012; Garcia-Murillo 2013; Heeks 1998; Wescott 2001). One reason for the ineffectiveness of ICT may be the lack of ICT laws to adjudicate and prosecute corrupt activities using evidence acquired using ICT. For example, many courts around the world do not recognize electronic documents or digital signatures as admissible evidence, and instead require signed and/or notarized paper documents. In 1985, UNCITRAL, a United Nations body for harmonizing trade, recommended that its member states review existing rules governing the use of computer records as court evidence, from requirement and acceptability of electronic submission to public administration (UN 2007). ICT regulations that require the maintenance of electronic records for a period of time discourage corruption by flagging suspicious transactions and identifying the parties involved in those transactions. Similarly, ICT laws that allow electronic messages and documentation as evidence in the court of law expedite the process of bringing perpetrators to justice.
In light of the above expectations, the two research questions of interest to this study are:
- 1.
How does ICT use impact corruption at the national level?
- 2.
What role do ICT laws play in influencing corruption?
We investigate these research questions using the theoretical lens of general deterrence theory (GDT) (Gibbs 1975) – a theory from the criminal justice discipline that explains why people commit crimes and what strategies can help deter such crimes. Deterrence is said to occur when people avoid crimes because of the costs or unpleasant consequence of those crimes. We use GDT to formulate six hypotheses relating ICT use and ICT laws to country-level corruption. We then test the proposed hypotheses using data from a sample of 90 countries for the year 2012 from multiple third-party sources such as Transparency International, World Economic Forum, and the World Bank. The findings confirm that ICT use influences corruption by increasing the certainty and celerity of punishment related to corruption. Moreover, ICT laws complements ICT investments by moderating the relationship between ICT use and corruption.
The rest of the paper proceeds as follows. The next section reviews prior research on ICT and corruption. The third section uses GDT to formulate six hypotheses for empirical testing. The fourth section describes our data collection and analysis methods. The fifth section presents our study's findings. The last section describes the implications of our findings for future research and practice.
Section snippets
Prior research
Most prior studies have examined the effect of ICT on corruption using two approaches: the first approach at the project level of analysis, and the second approach at the country level. For example, using electronic government implementation data in South Korea for the 1999–2007 period, Kim et al. (2009) found that broader use of e-government services increased transparency in the public sector, increased public opposition to corruption, and reduced corruption. However, ICT use was complemented
General deterrence theory
General deterrence theory (GDT) is a theory of criminal justice that examines why rational people commit criminal acts and what can be done to prevent such acts (Gibbs 1975). GDT assumes that criminals are not pathological or disturbed individuals who need help or psychological counselling, as often viewed in the traditional criminology literature, but are rather perfectly rational people whose criminal acts can be explained by a cost-benefit analysis. If the expected cost of committing a crime
Research methods
Data for testing the proposed hypotheses were compiled from multiple third-party sources: Transparency International, Global IT Report, and the World Bank for the year 2012. The choice of secondary data was motivated by the infeasibility of collecting primary data on corruption at the country-level, and the prior availability of such data from reputable third-party sources. These measures, sources, and component measures of each construct, which are further described below.
Corruption was
Statistical analysis
We tested the proposed hypotheses by jointly estimating a system of equations using the seemingly unrelated regression (SUR) approach (Greene 2012). The SUR approach was preferred over ordinary least squares (OLS) regression for three reasons. First, we had a system of multiple dependent variables with different sets of explanatory variables, such that the dependent variable in one equation was an independent variable in another. For such systems of equations, SUR tends to give more efficient
Implications for research
To the best of our knowledge, this is the first study to explore the interrelationships between ICT use, ICT laws, and corruption, and perhaps also the first to examine corruption from a theoretical perspective. While prior studies have demonstrated that ICT use may or may not relate to the level of corruption, they did not present a theoretical rationale as to why it might be so or the mechanisms or the pathways through which ICT influences corruption. Our study offers such a rationale using
Conclusions
While prior studies have demonstrated that ICT may help reduce corruption at the country level, this study empirically investigated why and how ICT can influence the level of corruption. We employed the “scientific method” to explore the role of ICT, by using general deterrence theory as our theoretical framework to postulate and test hypotheses on how ICT influences corruption, and then testing our hypotheses using data compiled from multiple third-party sources, multiple measures of
Anol Bhattacherjee is a professor of information systems and Exide Professor at the University of South Florida. In a research career spanning 22 years, he has published 66 journal articles in areas such as technology adoption, healthcare information systems, and innovations. He is also the author of a free research methods book titled “Social Science Research: Principles, Methods, and Practices” that has been downloaded 650,000 times, used in 217 countries, and is available in seven languages.
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Anol Bhattacherjee is a professor of information systems and Exide Professor at the University of South Florida. In a research career spanning 22 years, he has published 66 journal articles in areas such as technology adoption, healthcare information systems, and innovations. He is also the author of a free research methods book titled “Social Science Research: Principles, Methods, and Practices” that has been downloaded 650,000 times, used in 217 countries, and is available in seven languages.
Utkarsh Shrivastava is an assistant professor of information systems at Western Michigan University. His research interests include business analytics and ICT for development.