i Bribe Incidence in Transition Economies: Does Foreign Ownership matter?*

This paper attempts to trace out empirically the causal relationship between bribing, foreign ownership structure and firm’s ability in corrupt practices for the small and medium sized enterprises in the transition economies. Using a wide range of explanatory variables along with host-specific control variables, this paper finds the following results for the firms in 28 transition economies. A foreign-domestic partnership reduces the probability of being forced to pay bribe. However, given that bribing can not be avoided, the foreign firm’s share fails to create any significant impact on magnitude of bribe payment. Also, higher the amount of time spent in managing the authorities, higher is the realized amount of bribe payment for the firm as a percentage share of earning. The causality is reversed when the firm is confident that administration related to tax management is not a problem and in that case spending more time in dealings with the officials in fact reduces the percentage of bribe payment. * Preliminary and incomplet