The Dark Side of Family Embeddedness: Family Firms Engagement in Private-Sector Corruption

Abstract

This research analyzes how family embeddedness affects the decision of owners in charge of small entrepreneurial family firms operating in an emerging country to participate in private-sector corruption. Prior research has typically assumed that those in charge of family firms choose to participate in corruption to receive an immediate economic benefit. We challenge this assumption and argue that family influences the decision of the owner of small entrepreneurial family firms to participate in private-sector corruption driven by the pursuit of both short-term economic (profit maximization) and long-term non-economic goals, including attaining upper social class status (even if this decreases economic gains) for the family unit. We further find that in the context of an emerging market, trusted intermediaries can be seen as family members by the owners in charge of small entrepreneurial family firms and can influence them to participate in illicit activities. We also contend that those in charge of small entrepreneurial family businesses manage participation in private-sector corruption by dissociating and framing means.

Keywords

emerging countries family embeddedness private-sector corruption small entrepreneurial family firms

Family embeddedness theory argues that the family and the entrepreneurial business can be inextricably intertwined (Aldrich & Cliff, 2003). Scholars have employed family embeddedness theory to argue that strong ties with family members have advantages for the entrepreneurial firm (Aldrich & Cliff, 2003; Minola et al., 2021), such as enhanced firm performance (Cruz et al., 2012), ensuring well-being of family members and workers (Webb et al., 2015), enabling the creation of new ventures (Aldrich et al., 2021), and ensuring clear succession (Pittino et al., 2018). Unsurprisingly, scholars have sought to further family embeddedness to amplify its benefits. However, strong family ties can also have the potential to incentivize participation in illicit activities, since the individual in charge of the firm can focus strongly on the benefit of the family unit, defined as the person in charge of the firm, his or her spouse, and his or her children (Sharma, 2004), to the detriment of the public good (Banfield, 1958). Nevertheless, current scholarship has largely ignored the potential negative impacts of family embeddedness on entrepreneurial ventures (Jaskiewicz et al., 2021). Understanding the potential dangers of family embeddedness is important to anticipate and prevent possible negative outcomes for businesses and society in general. Here, we examine this dark side of family embeddedness by analyzing the role of family embeddedness in small entrepreneurial family firms engaging in private-sector corruption.

Cuervo-Cazurra (2016) defines private-sector corruption as the abuse of entrusted power for personal gain in private, for-profit organizations. Private-sector corruption can transpire between two private organizations (i.e., commercial bribery, kickbacks, extortion, and influence trafficking) or within a single private organization that pursues illicit acts without involving an outside party (Fleming et al., 2022). Private-sector corruption by a single organization can include egregious activities such as drug and people trafficking, but those instances are deeply hidden and dangerous to observe, and as such we do not include them in this study. Instead, we focus on more widespread private-sector corruption occurring in emerging markets, such as not reporting or underreporting income, the number of employees on the payroll, or not declaring import activities to avoid those related taxes (Temouri et al., 2022) as well as discriminatory business practices (Sanyal & Samanta, 2002). In this study, we focus on organizational private-sector corruption practices by owners in charge of small entrepreneurial family firms. Focusing on corruption occurring in small entrepreneurial family firms allows us to examine the person responsible for the firm’s operations who is also deciding to partake in corrupt activities (Eddleston et al., 2020).

We conducted our study in Guatemala, an emerging market characterized by high corruption levels (Godinez & Dunlap, 2021; Zimmermann, 2019), which is the result of a weak formal institutional environment characterized by fragile state structures that lack widespread presence and authority (Tonoyan et al., 2010). Also, as with other emerging markets, in Guatemala, the family has a strong influence on business decisions (Discua-Cruz et al., 2020). While we examine a single nation, we argue that our results can have applications to other emerging countries with similar weak formal institutions and a strong presence of family firms.

Our study makes four contributions to the existing literature. First, we help develop a richer understanding of private-sector corruption and how those in charge of small entrepreneurial family firms pursue it not only to bring immediate economic benefits but also to increase the family unit’s social status. Specifically, we argue that those in charge of small entrepreneurial family firms base their decision to participate in private-sector corruption in pursuit of both short-term economic (profit) and long-term non-economic (status) goals to benefit the family unit. Moreover, rather than being guided solely by economic motives (Eddleston et al., 2020), owners of small entrepreneurial family firms can choose to decrease immediate economic gains to signal belonging to the country’s coveted social upper class (B. Gray & Kish-Gephart, 2013), which benefits the social status of their family unit. Second, we contribute to family embeddedness theory by discovering two sets of trusted intermediaries, namely accountants, and lawyers, who are regarded as part of the extended family of the person in charge of a small entrepreneurial family firm, and as such, they can influence the owner in charge of a small entrepreneurial family firm to participate in private-sector corruption as family members do. Thus, we extend family embeddedness theory by proposing that in the context of an emerging country, such as Guatemala, the concept of family is a complex social unit that transcends mere blood relations (Goulbourne et al., 2010; Koechert, 1989); rather “family” in an emerging country can include trusted external intermediaries whose role in a small entrepreneurial family business is similar than those of the immediate family unit that in turn can influence owners to participate in corruption. This contribution responds to the call of Bruton and colleagues (2022) for new theoretical perspectives on and approaches to contexts in which Western theories of management can offer limited explanatory power, especially when studying businesses and their relation to wider society (Hauser et al., 2023). Third, we present a theoretical model that shows how those in charge of small entrepreneurial family firms participate in private-sector corruption driven by the pursuit of economic and status goals. Moreover, we theorize that the family unit and trusted intermediaries influence the pursuit of economic and status goals by dissociation and framing, which in turn perpetuate engagement in private-sector corruption. Fourth, we add a higher degree of contextuality to the understanding of family business ethics in an emerging country. Specifically, our insights depart from Western approaches to understanding engagement in corruption by looking beyond economic motives and extending the definition of “family.” Thus, our study responds to calls to “tease out conceptual idiosyncrasies based on a sharper illustration” (Wickert et al., 2024: 12) of engagement in private-sector corruption.

We start the next section by providing an overview of the family embeddedness literature and participation in private-sector corruption. In this section, we argue that small entrepreneurial firms might participate in corrupt activities to receive benefits beyond immediate economic gains. We then provide our arguments for conducting a qualitative analysis in Guatemala. These sections are followed by our results and their analysis. Finally, we present our implications for policymakers and practitioners, future research directions, and conclusions.

Theoretical Development

Family embeddedness theory addresses family firms’ leadership composition, relations between family members, and the family members’ roles in society (Aldrich & Cliff, 2003; Aldrich et al., 2021). Specifically, family embeddedness focuses on the dynamism of families and how this phenomenon can influence “fundamental entrepreneurial processes” (Aldrich & Cliff, 2003, p. 574). Thus, the family embeddedness theoretical lens is appropriate for our analysis as it recognizes the interconnected characteristics of the family unit and its influence on firms regarding decision-making and outcomes (Chrisman et al., 2005; Pittino et al., 2018), especially on small entrepreneurial family firms.

Previously, most scholars have seen a family in terms of the nuclear family comprised mainly of parents, children, and grandparents (Aldrich & Cliff, 2003), which dominates North America. However, outside North America the concept of family is different. For instance, in Guatemala, where our research took place, the concept of family unit has been defined as a social group that allows its members to feel part of a unit and perceive their well-being from a collective dimension, even if they are not blood-related (Gonzálvez-Torralbo, 2016). Hence, the concept of family in Guatemala includes extended relations that transcend mere blood relations, such as spiritual kin in the form of godparents (Goulbourne et al., 2010; Koechert, 1989), that can help advance economic cooperation (Caballeros, 2010). However, the concept of family may be even broader as other agents have a clear economic impact on the family in Guatemala acting as intermediaries that are critical sources of information and resources for the family (Alcaraz et al., 2020; Battisti & Williamson, 2015; Craig & Lindsay, 2002; Espinoza, 2018; Zarazaga, 2014). Here, we focus on examining this broader conceptualization of family within the family embeddedness theory, which is relevant to emerging countries such as Guatemala.

Scholars employing the family embeddedness theoretical lens tend to focus on the positive aspects of “familiness,” although strong family ties have been recognized as also leading to “amoral familism,” or the sacrificing of the public good for the sake of the immediate family (Banfield, 1958). In addition, family embeddedness can also create negative constraints because embeddedness with kinship-centric firms prevents new ideas and perspectives from coming into the firm (Jaskiewicz et al., 2021). Moreover, the individual in charge of a family firm can also face the challenge of integrating the, at times, competing financial and non-financial goals of the firm and the family (Gómez-Mejía et al., 2007). Thus, while the research on family embeddedness tends to focus on its positive impacts, existing studies have recognized some negative aspects without extensively examining them. Here, we examine the potential negative impact of family embeddedness influence on the decisions of owners in charge of an entrepreneurial family firm that engages in illegal activity—private-sector corruption. Such contextualization of family embeddedness theory is consistent with arguments regarding the importance of expanding management theories to provide a broader view of factors of different management practices in non-Western settings (Bruton et al., 2022; Wickert et al., 2024). Such contextualization increases theory’ predictability and accuracy by allowing scholars to better understand “issues, actors, and behaviors in a specific” emerging country settings (Bruton et al., 2022, p. 1058).

Scholars have extensively studied corrupt acts that involve private firms and public servants because of the harm that these acts have on businesses, societies, and political systems (Argandoña, 2003). However, few studies have examined private corruption, which is difficult to detect, since organizations conceal it (Bahoo et al., 2020). To add to the analysis of private-sector corruption, we focus specifically on private-sector corruption where the owner of a small entrepreneurial family firm acts against existing laws and regulations to advance his or her own interests or that of his or her company and family (Sartor & Beamish, 2020; Temouri et al., 2022; Weaver et al., 2014) without engaging with an external actor, such as a public servant.

Extant scholarship argues that corruption within a firm becomes institutionalized when a corrupt act or decision becomes embedded and eventually routinized (Misangyi et al., 2008). While firms of all sizes can participate in private-sector corruption, there is a distinction between small and large publicly traded firms in terms of their engagement in this activity (Fleming et al., 2022). Researchers have proposed that private-sector corruption is easier to distinguish in smaller family firms as the decision to participate in this activity mainly rests on the person responsible for its operations (Eddleston et al., 2020). In contrast, the state often more easily detects and prosecutes private-sector corruption in larger corporations as they are more visible, yet the ultimate decision-maker for that corruption is not often clear (Stahl & Sully de Luque, 2014). Therefore, we focus on owners in charge of small entrepreneurial family firms since they may choose to participate in private-sector corruption and on the influence that the family unit has on such decisions.

Current scholarship argues that at the core of the decision to participate in private-sector corruption in small firms is the owner who can choose to engage in this illegal activity to gain a personal or organizational benefit (Hossain & Krysanowski, 2021; Liu et al., 2023). However, from a family embeddedness perspective, family ties may also influence the decision to participate in private-sector corruption to benefit the family unit. While extant literature has assumed that participation in private-sector corruption is mainly associated with pursuing economic gains (Chrisman et al., 2012), we argue that the owner in charge of a small entrepreneurial family firm is driven by both economic and non-economic goals. Thus, specifically from a family embeddedness theoretical perspective, participation in corruption may bring benefits to the family unit beyond those purely economic. Here, we develop theoretical insights into how a negative act on society, such as participation in private-sector corruption, can generate positive economic and social benefits for the family unit.

Method

We adhered closely to established techniques for building theory in the management discipline (e.g., Gioia et al., 2013) employing a qualitative approach (Doz, 2011; Eisenhardt, 1989; Tracey & Phillips, 2016). Such a qualitative approach necessitates that we purposefully select a defined geographical area (Bruton et al., 2011; Nilsson, 2023). Thus, in this study, we focus on Guatemala as our research setting. Guatemala is the most populous country in Central America, with 17.25 million citizens, and has a GDP of $78.47 billion ($4,549 per capita), which makes it the second largest economy in the region behind Panama (The World Bank, 2021). Also, the corruption levels in Guatemala play a role in the volatility in the Northern Triangle (Guatemala, El Salvador, and Honduras) which in turn leads to exporting extensive instability and violence to other nations (U.S. Department of State, 2021). As with most emerging countries, Guatemala’s formal institutional environment has a fragile foundation characterized by high levels of corruption (Godinez & Liu, 2018), fast economic growth, and poorly developed formal institutional supports (Schwartz, 2021) in which there is a lack of widespread presence of authorities, regulatory agencies, judiciary, and public service mechanisms (Welch et al., 2022) for effective enforcement (Tonoyan et al., 2010). Also, a personal interview, where a trustful connection could be established, is more conducive to obtaining the desired data in comparison to conducting surveys (Fleming et al., 2022). The goal of the interviews was to gain insights into the firm’s actions of avoiding paying taxes, smuggling goods, not registering all employees in an organization, and discriminatory business practices (Godinez & Liu, 2018). To gain this strong level of trust and rapport proved extremely valuable in eliciting the interviewees’ unique perspectives on the events (Mikecz, 2012) in which private-sector corruption practices are not seen as blatant transgressions, such as drug or people trafficking, but as commonplace practices, such as avoiding required taxes or smuggling articles into a country (Cuervo-Cazurra, 2016).

Again, typical of most emerging countries, Guatemala has high levels of inequality, ranking as the 18th most unequal country in the world (Central Intelligence Agency [CIA], 2021). This inequality is rooted in the colonization of the region by Spain more than 500 years ago, like much of Latin America. From this initial colonial period, individuals of European descent have managed to accumulate and retain wealth while creating an underclass of indigenous and mixed-race people, largely excluded from the formal economic activities of the country (Godinez & Dunlap, 2021; Gott, 2007). Approximately 95% of Guatemala’s population is indigenous or mixed-race, while only 5% of the population of the nation is of European descent. This very small European ancestry group dominates the large formal businesses in the nation. Guatemalans have held the upper class in high regard since colonial times, as in many Latin American countries, because of the power members of such class wield (Torres-Rivas, 2014). While race still plays a prominent role in the status of a person, recently the country has focused less on a person’s lineage and more associated on a person’s level of education, physical address, and occupation (Diaz, 2011). Thus, owners in charge of businesses in Guatemala now also choose symbols to show a higher status, such as formalizing their businesses and locating them in exclusive areas perceived as part of the upper class, even if choosing these locations increases their costs.

Sample Selection

In each case examined, we interviewed the owner who makes strategic choices for their small entrepreneurial family business regarding whether and how to navigate laws within their environments in a way that does not occur in mature economies (Siqueira et al., 2016). One key strategic decision made by owners of small firms in emerging countries is their choice to participate in private-sector corruption. We examined cases that share common characteristics otherwise cross-case comparison would not be possible (Miles & Huberman, 1994).

Participation in private-sector corruption requires a formal business that is registered with the relevant authorities and secures the necessary certificates and licenses needed to operate in a particular location but that also participates in activities that are considered a criminal offense in their local legislation (Argandoña, 2003). Our sample includes single-unit and multi-unit small entrepreneurial family firms where a single family owns the entire business, but outside workers were hired to work in the organization, thus being family firms as opposed to own-account firms (Gollin, 2008). In the case of firms that operate multiple units, we focus on one unit to ensure consistency in our sample and analysis. The units included had to have the necessary permits and licenses to operate. However, to be in the sample, the firms also had to participate in private-sector corruption including avoiding paying taxes, failing to declare all imported products, conducting cash transactions without recording them, and avoiding paying social security for certain employees.¹ Thus, private-sector corruption practices had to occur within the firm without the participation of a third party. We followed a theoretical sampling with “the cases . . . selected because they are particularly suitable for illuminated and extending relationships and logic among constructs” (Eisenhardt & Graebner, 2007, p. 27). Specifically, we focused on selecting firms that meet four parameters following Miles and Huberman (1994): (a) setting (firms participating in private-sector corruption as defined above); (b) actors (ability to interview the decision-making owner of small entrepreneurial family firm where the family owns the entire business); (c) events (actions related to participating in private-sector corruption the owner was willing to discuss); and (d) processes (the possibility to gain insights into the reasons and actions to participate in private-sector corruption).

Data

Consistent with the nature of this study, we utilized a qualitative, longitudinal methodology (Penttilä, 2020). This approach means that we followed an interpretative process of carrying out our data collection and analysis in multiple stages, which helped us strengthen the basis for analytical generalization (Hall et al., 2001). We specifically chose 30 small entrepreneurial family firms as our sample and conducted 50 interviews with owners in charge of them in the period between 2020 and 2021. Consistent with previous studies (e.g., Raitis et al., 2021), we conducted three stages of investigation to increase the reliability of their results inspired our data collection approach. Specifically, first, in 2020, we conducted 20 interviews to gain an understanding of the nature of the businesses analyzed. Second, in 2021, we conducted 20 follow-up interviews with the 20 previous respondents previously interviewed for a total of 40 interviews. In the follow-up interviews, we added questions to better capture the motives for engaging in private-sector corruption, the influence behind those motives, and how respondents justified their actions. Each round of interviews allowed us to hone our theoretical understanding of participation in private-sector corruption decisions in small firms. Third, in 2021, we conducted an additional 10 interviews with new respondents to ensure the accuracy of our understanding of this domain. Thus, we generated a total of 50 different interviews over 38 hours and produced transcripts of each interview.

The result of the design of our study was the ability to longitudinally observe the phenomena (participating in private-sector corruption) for 20 firms over time, instead of a snapshot of a process. This approach helped us to comprehend how and why things occur as they do; it also assisted us in evaluating a phenomenon in a particular setting (Miles & Huberman, 1994). The longitudinal nature of the interviews helped to gain more specific insights into the nature of the private-sector corruption in which our sample firms engaged. We then confirmed our analysis through 10 further interviews with owners of different firms participating in private-sector corruption during 2021. We followed the suggestions of Eisenhardt (1989) to discuss, within a few days of each interview, the first impressions of the author who conducted them. Doing so helped us to identify emerging themes and patterns.

Interviewees

The respondents selected for this study were members of the 2003 class of a Guatemalan university with degrees in industrial and civil engineering. The Guatemalan Ministry of Economy (2015) has recognized graduates of its nation’s engineering schools as prone to start their own businesses. Also, these majors required all students to take at least one entrepreneurship class to graduate. We interviewed 30 graduates—23 industrial and seven civil engineers—out of the total of 53 graduates in the two engineering disciplines in the 2003 class, or approximately 56% of the potential respondents. We chose the interviewees specifically to ensure we had a mix of success among the respondents interviewed. We identified this range of success by interviewing alumni of the university not in the 2003 class. The peers of the interviewees were familiar with their levels of success as is typical among classmates in emerging countries (Bellino, 2018). Since the first author conducting interviews had previous personal relations with the potential respondents, none of the initial respondents refused to participate in the research.

Conducting Interviews

We conducted each of our interviews in Spanish. The first author transcribed these interviews verbatim and then translated them to English. In addition, a researcher who is fluent in English and Spanish reviewed all transcripts to ensure that the translation was accurate. Due to the sensitivity of the topic researched, we do not identify our informants to maintain confidentiality. All the interviews were semi-structured, and we carried out the initial 40 interviews with the help of voice over internet protocol (VoIP). We chose to conduct the interviews over VoIP because the COVID-19 pandemic made it impossible to travel to Guatemala to gather data face-to-face. Nevertheless, internet-based methods of communication are becoming increasingly important tools to conduct qualitative studies (L. M. Gray et al., 2020). In addition, the benefits of gathering data via VoIP outweigh its detriments (Lo Iacono et al., 2016). Interviews averaged 40 min, were semi-structured, and followed a protocol that progressed with the research at hand (Strauss & Corbin, 1998). In 2021, we conducted the 10 confirmatory interviews in person as vaccines against the virus became widespread. These 10 interviews again averaged 40 min each and generated another 8 hr of interviews, also transcribed verbatim and translated. It is worth noting that our results remained consistent with both VoIP and in-person interviews, and we found no major differences between them.

Sample Characteristics

We followed the recommendations of Eisenhardt (1989) on developing theory from case studies. This approach was appropriate due to the lack of previous theory and research regarding the decision of owners in charge of small firms to engage in private-sector corruption (Graebner, 2004). We ensured that the 30 firms in our sample operated in a variety of industries to take a more holistic approach to examining the phenomena. Building on our interviews, we identified that all firms sampled had private-sector corrupt practices—failing to pay all applicable taxes, failing to declare all imported products, failing to record all cash transactions, and choosing not to pay social security for all employees. From our interviews, we ultimately reached theoretical saturation from the 30 cases in that no new information was discovered by the end of the interview process. As a result, we decided to stop conducting further interviews as we reached informational redundancy and elicited no new information from the firms examined (Lincoln & Guba, 1985). Table 1 provides information on all 50 interviews.

Table 1.

Profile of Respondents.

No	Type of business	Single or multiple unit business	Founded	No. of employees	Interview protocol	Year of conducting the interview(s)
1	Restaurant^a	Single	2011	20	WhatsApp Video	2020 and 2021
2	Optic^a	Multiple units	2011	18	FaceTime	2020 and 2021
3	Cardamom exports^a	Multiple units	2006	45	WhatsApp Video	2020 and 2021
4	Boutique^a	Single	2013	1	WhatsApp Video	2020 and 2021
5	Publicity agency^a	Single	2012	31	Facebook Video	2020 and 2021
6	Soda distribution	Single	2009	13	WhatsApp Video	2020 and 2021
7	Boutique^a	Single	2017	1	WhatsApp Audio	2020 and 2021
8	Construction^a	Single	2012	15	WhatsApp Audio	2020 and 2021
9	Construction^a	Single	2007	77	WhatsApp Audio	2020 and 2021
10	Country club	Single	1974	80	WhatsApp Audio	2020 and 2021
11	Private school	Single	1989	46	Zoom Video	2020 and 2021
12	Construction	Single	1995	25	Facebook Video	2020 and 2021
13	Environment consulting^a	Single	2005	11	WhatsApp Audio	2020 and 2021
14	Juice manufact^a	Single	2013	25	Zoom Video	2020 and 2021
15	Security services	Single	1999	280	Skype Video	2020 and 2021
16	Ice factory	Single	1994	33	Zoom Video	2020 and 2021
17	Coffee exports	Single	1986	20 permanent 100–150 temporary	FaceTime	2020 and 2021
18	Restaurant^a	Multiple units	2009	48	WhatsApp Video	2020 and 2021
19	Construction	Single	1983	105	WhatsApp Audio	2020 and 2021
20	Avocado exports	Single	2003	21 permanent 200 temporary	WhatsApp Audio	2020 and 2021
21	Distributor spare parts	Single	1957	88	In person	2021
22	Metallic structures	Single	1978	50	In person	2021
23	Boutique hotel	Single	2011	33	In person	2021
24	Spanish school	Multiple units	1998	11	In person	2021
25	Serigraphy	Multiple units	1994	42	In person	2021
26	Industrial cleaning^a	Multiple units	2009	42	In person	2021
27	Chain of restaurants	Single	1929	34	In person	2021
28	Bar^a	Multiple units	2001	15	In person	2021
29	Kids party venues^a	Multiple units	2009	122	In person	2021
30	Vehicle repair shops	Single	2006	111	In person	2021

Respondent is also founder

Data Analysis

The inductive approach to our analysis allowed us to identify from our interviews what motivated the owners of small entrepreneurial family firms to engage in private-sector corruption. To conduct our analysis, we pursued systematic coding of the interviews based on relevant theoretical justification (Bardi & Schwartz, 2003). This coding scheme assisted us as we developed insights into the family embeddedness underpinning participation in private-sector corruption. During the first stage of our research, we focused our coding on ensuring that the sampled firms were truly participating in private-sector corruption and investigated the motives for such participation. We next combined the initial interviews with a second round of interviews with the same owners to understand the influence of family embeddedness on the owners in charge of the sampled firms and how the respondents justified engaging in an illicit activity. In the third stage, we examined the 10 new interviews and conducted the same analysis we had done in the prior stages. During this stage of the interviews, we focused on confirming the analysis and findings from the first two rounds of interviews. We will next discuss each stage of this research in greater detail.

First Stage of Research

During the first stage of our research, in 2020, we began by ensuring that all our sampled firms were participating in private-sector corruption. We then analyzed their motives, both economic and non-economic. Our coding was inspired by Lok (2010, p. 1311) who mentions “I would not focus on obvious, explicit (self) identifications. . . which previous work has shown to be particularly important.” Specifically, we employed axial coding to categorize items (Miles & Huberman, 1994) plus open coding to identify differences and common patterns in the unique cases that we examined (Corbin & Strauss, 2007). Our codes included how family embeddedness influenced participating in private-sector corruption due to economic-driven motives such as “profit-seeking,” “profit maximization,” “registering and formalizing to increase profits,” “avoid paying taxes,” “not registering employees,” “importing products illegally,” and such non-economic motives as “social class,” “not part of indigenous population,” “no informality to retain social class,” and “retain social status by participating in private-sector corruption.”

Second Stage of Research

During the second stage of interviews, in 2021, we sought to understand the specific groups influencing the causal mechanism associated with the motives to participate in private-sector corruption identified in the first stage of research. This process and analysis of causal mechanisms served as “yielding the building blocks of emerging theory” (Van Burg et al., 2020, p. 10). By following these scholars’ suggestions, we moved forward from the basic description of the relationship between participation in private-sector corruption to further economic and non-economic goals and analyzed the outcome of this relationship. Thus, we extensively iterated between data and existing literature to develop a theory.

To complete this process, we repeated the coding of the interviews conducted in 2020, adding the interviews conducted with the same owners of small entrepreneurial family firms in 2021 to the analysis. However, in this analysis, we focused on the actors who influenced the owners’ actions to participate in private-sector corruption and how respondents justified engaging in an illicit act. The new codes that emerged from our analysis were: “the family unit” (family members such as siblings, parents, or grandparents) or “trusted intermediaries” (such as lawyers and accountants) who influence the owners of small entrepreneurial family firms to participate in private corruption. Thus, we coded relevant keywords such as “trusted intermediaries influencing practices,” “illicit practice distancing,” and “excuses.” Our data reduction and analysis are summarized in Figure 1.

Third Stage of Research and Data Reliability

In the third stage, we conducted the same coding and analysis done in the prior stages of analysis but focused only on the 10 interviews conducted in person in 2021. To ensure the reliability of the data, we pursued three specific actions. First, we followed Lincoln and Guba (1985) and used a very detailed archive of the list of informants, the interview transcripts, and notes that the researcher who collected the data took. Second, we employed the third stage of interviews to confirm our analysis in the first two stages of research. Finally, after completing our analysis, we validated our results by presenting them to two scholars who confirmed the link between theory and data analysis. This ability to gain the views of other researchers not involved in the research helped to enrich our analysis (Kirk et al., 1986).

Results

Our first round of interviews highlighted that the individuals heading the small entrepreneurial family firms were participating in private-sector corruption and the foundational understanding of that participation. A key element that became clear is that participation in private-sector corruption was not only driven by the idea of immediate profit maximization, or cutting costs but was also used to signal that the family unit belonged to the local business upper class, even if this pursuit decreased their profits in the short-term. For instance, Respondent 2 said that he or she does not declare all operations to the authorities to “increase [their] income by not paying all applicable taxes.” However, the same respondent acknowledged that he or she could operate without registering the business at all, and thus avoiding all taxes, which would further increase his or her income. Thus, a purely economic rationale alone did not drive the decision to register the business and pay some taxes. Instead, participating in private-sector corruption allows him or her to associate the business with other economically powerful private firms, principally owned by families of European descent, which in turn elevates his or her family unit status since, according to this respondent “in Guatemala appearances matter a lot.” To illustrate engagement in private-sector corruption, our coding, and its justification, we present relevant quotes in Table 2.

Table 2.

Establishment That Firms Are Engaging in Private-Sector Corruption.

Code	Description	Example quotes
Increasing profits and furthering social status (decreases costs)	Owners of a small family firm engage in private-sector corruption to maximize profits (economic motives) and to increase the social status of the family unit (non-economic motives).	“My family comes from Europe. My last name is [. . .] and we are of German descent. Everyone knows my grandfather, my dad. We are members of the chamber of commerce, we participate in the college boards, that is out of reach for people participating in the informal economy. Having my business registered and with the necessary permits is a way to show that I am a serious businessman. By not complying with the law, I can save a little money.” (Respondent 3) “I have a restaurant that caters to people who know about gastronomy, an informal restaurant would not attract this type of people because I would have to move it to another part, I imagine. So, my competitive advantage would go along with the restaurant. I am not an informal entrepreneur. I am an entrepreneur who sometimes has to do things that are against the law to provide a high-quality service at reasonable prices, but the quality of my product will never be compromised. . . I have a Spanish passport and people know my family; my mother gave me the house where I have the restaurant” (Respondent 18)

Our findings depart from established studies that argue that owners of small entrepreneurial family firms participate in private-sector corruption focused solely on economic benefits (Eddleston et al., 2020). Instead, we find that the effort to raise the family’s status can be as, or more, important than economic gains in an emerging economy. The small entrepreneurial family business owners want to signal to the business community and social peers that they, their families, and their firms possess high social status, thus they ensure that the firm is registered with local authorities and pays some taxes. As previously stated, Guatemala is a deeply unequal country in which belonging, or aspiring to belong, to a particular social class is of high importance (Godinez & Dunlap, 2020). Guatemalans tie social class to race (Paredes, 2017) as European descendants are perceived as upper class in general, while those in the underclass are typically of Mayan descent (Godinez & Dunlap, 2020). One of the characteristics of European descendants is that they formally register their businesses with the government (Chirix-Garcia & Sajbin-Velasquez, 2019). Thus, our analysis showed that owners in charge of small entrepreneurial family firms spent economic resources to formalize their businesses to indicate that they belong to the upper class, even when operating in total informality was an option. Thus, our results show that respondents pursue formalization although it increases their costs with no clear immediate economic benefit. For instance, when asked why they formalized their business despite the increase in costs this represents, Respondent 15 argued that:

My company could be providing security to sellers in farmers markets. Although you might not believe it, astronomical amounts of cash are spent in those markets, and we would not have to be registered with the government. . .But you will never see any of our badges in places for the lower classes. . . the image of our company is more important.

But the higher status is not the only motive. As most scholars assume, economic incentives also have a role in owners’ participation in private-sector corruption. Guatemala’s formal institutional apparatus is weak due to fragile state structures that lack widespread presence and authority (Tonoyan et al., 2010), which makes it easier for firms to avoid following all the laws and regulations (Jimenez-Badillo, 2023). While the firms may have formally registered with the government, the sampled owners still participate in private-sector corruption where they avoid the costs associated with full compliance with registering. For instance, most respondents acknowledged smuggling some goods into the nation without paying the necessary import taxes, a common practice in Guatemala. To illustrate the nature of crossing by boat into the nation, a leading newspaper uploaded a YouTube video showing this practice being carried out with impunity at the Tecun Uman border with Mexico (Prensa Libre, 2017). Also, one respondent in our sample would pay duty on one truckload of goods and then use the same paperwork on a dozen other trucks bringing goods into the country on the same day. Other firms would register with the local authorities but report that they had only a single employee when in fact they had dozens. However, owners participated in private-sector corruption not solely because of the costs associated with full legal compliance of their operations, but also because of their deep mistrust of the local authorities. For instance, when asked for the reason to avoid paying taxes, Respondent 3 said that:

If the state really provided a good service. . ., I would be happy to pay taxes and all that. As I imagine that for you, in the United States, social security is great, or at least they won’t let you die. Instead, here you go to the social security hospital, and they will surely kill you.

In the same breath, owners of small entrepreneurial family firms could talk of following the law and then also of participating in private-sector corrupt activities, such as not paying taxes, since they felt the money only went to “corrupt authorities” who pocketed the taxes they paid. Thus, the owners of small entrepreneurial family firms may register with the government to indicate they are part of the desired upper class, but they participate in private-sector corruption at the same time to avoid costs and bureaucratic processes associated with following existing regulations. Respondent 2 describes this setting when he or she said:

My business is legitimate in the eyes of the authorities, in the eyes of my clients, and in the eyes of my family. . . Apart from my father, and my close collaborators, no one knows that I sometimes do things that are not following the laws. . . but I cannot be totally illegal because not everything is about money. Here, it is not like in the United States. Many people know us here and we have a name that we have to take care of. . . So, even if it sounds bad, in Guatemala appearances matter a lot. I cannot be completely informal. That is for other types of people, for people who work in the farmer markets, in the streets.

Influencing, Dissociating, and Framing

Following the second round of interviews, we sought to have a clearer understanding of the role of the family in the decision to participate in private-sector corruption driven by the pursuit of economic and status goals. In this regard, our results show that all owners sampled participated in private sector corruption to benefit their family unit and trusted intermediaries who were seen as part of the extended family. At the same time, these owners were influenced by their family unit and trusted intermediaries to engage in private-sector corruption. Although participation in private-sector corruption was commonplace in Guatemala, respondents dissociated themselves from this illicit practice and framed it as a necessary evil that they must pursue to remain competitive. Our results also indicate that the dissociation and framing means helped drive and influence participation in private-sector corruption. Figure 2 presents a model of participation in private-sector corruption.

Influence

Influence in this case refers to participation in private-sector corruption practices that resulted from the influence not only of family members but also of trusted intermediaries, such as lawyers and accountants close to the family unit. Since participating in private-sector corruption entails carrying out illicit operations, owners of small entrepreneurial family firms cannot simply learn these practices from printed material, or trade associations. Our results show that close interaction with family members, especially from parents, influences owners in charge of small firms to participate in private-sector corruption. For instance, Respondent 8 argued that his or her father taught him or her to pay some but not all the taxes required by the local tax authorities. Also, Respondent 2 expressed that his or her father has a saying that “you have to give little but constantly to the authorities” to avoid problems.

However, departing from established family embeddedness theory, we also found that trusted institutional intermediaries with strong ties to their families also exerted a strong influence on the owner in charge of a small firm, just as family members do. Our results indicate that owners were receptive to being influenced to participate in private-sector corrupt practices due to a strong socio-emotional bond between themselves and trusted intermediaries, a practice common in family firms (Gómez-Mejia et al., 2007). Specifically, we identified that lawyers and accountants were seen as extended family members who influenced the decision to partake in private-sector corrupt practices. For instance, Respondent 11 reports that:

The lawyer advised [the company to hire full-time employees as private contractors] because this way [the company] can save money on all those benefits [required by law].

Besides lawyers and family, participants identified accountants as a key influencers regarding operating with private-sector corrupt practices. To illustrate this phenomenon, Respondent 3 argues that the accountants “are [his or her] tax advisers, and they are the ones who tell [him or her] to declare this invoice, declare this cost, or not to declare this other one.”

Dissociating

As partaking in private-sector corruption entails engaging in illicit activities, respondents in our study utilize a dissociation technique to protect themselves from moral condemnation and from the possibility of unlikely random enforcement by the authorities. Respondents have applied dissociation techniques mainly to understand why some managers commit unethical behaviors against their company. Nevertheless, we highlight managers of our sampled firms utilize dissociating techniques to distance themselves from the illicit acts of participating in private-sector corruption to benefit the family unit. Respondent 4 sells some contraband products in his or her store and does not provide invoices to all customers. However, at the end of the accounting cycle, the store needs to report some sales to “not raise suspicious with the authorities.” Respondent 7 provides an example of how dissociation occurs:

There have been months that no customer was given an invoice, so, [his/her] accountant had to fabricate 20 or 30 invoices at the end of the month to justify sales.

In addition, respondents also dissociated from illicit activities because of the deeply rooted discrimination practices and the socio-economic inequality present in the country (CIA, 2021). These discriminatory practices still drive many business decisions and can be seen in how managers dissociate from illicit activities, especially when deciding who receives all the benefits afforded by law; the owners in charge of small entrepreneurial family firms justify their actions such as not paying benefits to employees or not paying into required health and retirement funds for employees arguing that their underclass indigenous employees did not deserve such benefits. As a result, business owners of small entrepreneurial family firms try to disassociate themselves from their corrupt practices by justifying them. For instance, Respondent 17, who hires temporary workers to pick coffee at his or her plantation, argued that:

Here in Guatemala the Congress passed a law saying that all temporary workers need to be registered with social security, but they did that just to gain votes. In practice, that is an impossible task. These Indians² don’t even have an ID, an address, how are they then going to be registered with social security?

Framing

Scholars have found that individuals utilize mechanisms that allow them to justify their illicit behavior in their own eyes and in that of society (Sykes & Matza, 1957). Framing an illicit activity as “necessary,” or as “the lesser of two evils,” allows the perpetrators to neutralize their guilt while defending themselves against social condemnation (Cromwell & Thurman, 2003). Individuals learn neutralization techniques through social interactions and deploy them either when they commit the deviant action or later to justify it (Sykes & Matza, 1957). In the case of our sampled respondents, our results show that as all respondents are aware of their private-sector corrupt activities, they frame them as necessary to operate in the complex Guatemalan business environment, characteristic of most emerging countries (Sartor & Beamish, 2020). To illustrate the influence of parents and trusted intermediaries on respondents’ efforts to dissociate from and frame their practices, we present our coding, their justifications, and relevant quotations in Table 3.

Table 3.

Illustrative Quotes on the Influence of Parents and Trusted Intermediaries.

Code	Description	Example quotes
Influencing
Influence from parents	Owners of a small family firm are influenced to engage in private-sector corruption by their parents (family unit).	“I mean, we all do tax evasion. . . I learned from my father who has used that all the time in his other businesses.” (Respondent 6)“My dad, who has been in agribusiness for a long time, was the one who did the business in this way. He is an agriculture producer who knows how the matter works in Guatemala . . .” (Respondent 20)
Influence from accountants	Owners of a small family firm are influenced to engage in private-sector corruption from their accountant (trusted intermediaries).	“That’s the job of the accountant. He looks for someone to give us blank invoices if we need them or to whom to give us invoices if we have excess. But it is not something very complicated either, it is something that everyone does.” (Respondent 25)“The one who helps us not pay all the benefits to employees is the accountant. So, he presents documents as if the employees have all the benefits when in fact they do not. So, for that service we have to reward you. If we take away benefits or payment, then he has a lot of information that it would not be good to get out.” (Respondent 28)
Influence from lawyers	Owners of a small family firm are influenced to engage in private-sector corruption from their lawyer (trusted intermediaries).	“The lawyer takes care of that. I have helped my mother since she started the school, and he is the one who has always helped us. He is a very loyal person who is always looking at our well-being and thus he has helped us to lower our costs with practices that are not always legal.” (Respondent 24)“That was the lawyer who did it. He always helps us find solutions to our problems. He told us about the possibility of hiring certain employees with all the benefits and others without them.” (Respondent 29)
Dissociating
Distancing	Owners of a small family firm distant themselves from private-sector corruption practices	“Not giving invoices for small projects that pay in cash is something that everyone does. I didn’t want to do it at first but that was the advice from the accountant. I honestly didn’t know but one day the accountant told me (to follow this practice.” [Respondent 5].“If the taxes one pays were used in a good health system, a good educational system, on decent roads and bridges, then I would feel bad for not paying my taxes. But we do not live in Switzerland. Here, the roads and bridges are falling, public education is embarrassing, and national hospitals make you want to cry when you see them. So, why am I going to pay taxes to a failed state that the only thing that does is steal the money that we work for?” (Respondent 14)
Framing
Justifying	Owners of a small family firm justify their decision to engage in private-sector corruption practices.	“Based on what I tell you, In the sector in which I work, the amount of supply increased exponentially, now it is a price war, that has generated that we do not declare the taxes that should be, it also leads us sometimes not to invoice all customers. . . what we do is raise the cost of equipment depreciations to save us taxes. Also, we declare that we spend more on machinery maintenance items. But that’s only because as I say, here the price is what commands. But we do declare taxes to the SAT. Here, one has to see how one survives” (Respondent 5)“Because we have to survive. Here in Guatemala the system is made to break the rules. From the speed limits, the traffic light that nobody pays attention to, everything is done so that nothing is respected. So, in theory we could receive a very big punishment, but in reality, we are only one more company that does a couple of things outside the law but not everything. If the government were really serious about seeing that we all followed the rules, I would be much better off than 90% of the companies in the country that really do nasty stuff” (Respondent 13)
Rationalizing	Owners of a small family firm rationalize their decision to engage in private-sector corruption practices	“Because it is of no use to them. These workers are not going to go to the IGSS hospital for any reason. You know that the Indians prefer to go to the health center of their community because there they know the people who are going to treat them. The IGSS hospital is not close to their home, they don’t treat them if they want to see a doctor, so they only pay for nothing” (Respondent 23)“They are not in that position to pursue a career. They are mostly young employees who are studying and working with us while they finish their degree, so they are so unstable, that is, they come and go very fast, so it is better to hire them as professional service providers. Now the cleaning employees are also hired in that area, but they are not students. They are workers without any training or education, but they resemble our hosts in that they are very unstable and come and go from work very quickly.” (Respondent 29)

In our sample, we found that all owners in charge of small entrepreneurial family firms had an excuse that allowed them to frame their private-sector corrupt practices as inevitable. For instance, Respondent 13, who manages a consulting company expressed that his or her company “does not comply 100%” with what the authorities require because “there is a lot of unfair competition, so [they have] to see how [they] can survive.” Likewise, Respondent 19, who operates a construction company, replied to the question of why the company did not pay social security for all its employees by saying:

When I hire a construction worker, I am hiring a person who generally has not finished elementary school. So, I have to civilize them first and teach them to work and that represents a high cost to me that nobody else covers. On top of that, construction workers leave without giving me any notice, and then a month or two months later they come back saying that they got sick or that they had an emergency when the truth is that they got a small project where they were paid more, or most likely they just went on a drinking binge. So, with this kind of workers and under these conditions, how can I be paying for social security?

Confirmatory Interviews

As we note above, we conducted the initial 40 interviews (two interviews each with 20 respondents) via VoIP and generated robust insights. However, to ensure we were accurately interpreting the activities of the sampled firms, we next conducted 10 interviews in person. Our results from these 10 interviews confirmed our results from the prior 40. The in-person interviews confirmed the nature of the social and economic drivers of private-sector corruption, who influenced the managers to engage in corruption, and the means, dissociating and framing, our respondents used to justify their participation in private-sector corruption. We will discuss below how the recognition of these findings helps in turn to expand the theory on family embeddedness in participating in private-sector corruption and future research.

Discussion

Our research provides a novel and nuanced view of small entrepreneurial family firm engagement in private-sector corruption in an emerging market. Specifically, we argue that participation in private sector corruption is not solely the result of pursuing short-term economic gains but is tied to a more complicated social issue of pursuing higher status in the long run. Through a family embeddedness lens, we build a theoretical understanding of two main reasons why small entrepreneurial family firms engage in private sector corruption: (a) to gain immediate economic benefits and (b) to increase the family unit’s social status in the long term. We then further the family embeddedness theory by arguing that the concept of family is complex and that in the context of an emerging country, it can include trusted intermediaries who are not part of the traditional family unit. We also discuss the means that owners of small entrepreneurial family firms utilize to justify their engagement in private-sector corruption, and how their illicit activities impact the wider society of an emerging country.

Our contribution to the literature includes expanding the understanding of family embeddedness in the context of the influence of the family unit in the decision of the owner of a small entrepreneurial family firm to participate in private-sector corruption. Extant literature tends to focus only on economic reasons for engagement in corruption (Cuervo-Cazurra, 2016). However, using a family embeddedness lens, we highlight that business owners in charge of small entrepreneurial family firms in an emerging country (Guatemala) engage in private-sector corruption to obtain immediate economic benefits and to aid in their attempts to attain higher social status coveted by business owners (Martinez-Cuestas, 2021). The effort to gain higher social status, in the long run, requires some sacrifice of short-term economic benefits. Previous studies have recognized different motives for firm engagement in corruption (e.g., Weaver et al., 2014), yet corruption literature still relies fundamentally on economic drivers as the primary driving perspective to understand engagement in this activity (Eddleston et al., 2020). Instead, we show that in seeking enhancement of the status of the family unit, the decision-maker in charge of small entrepreneurial family firms sacrifices tangible short-term economic benefits by pursuing a higher social status for the family unit in the future. Indeed, we highlight that all our respondents acknowledged that they could increase their economic gains by deciding to operate totally in the informal economy, but such a decision would diminish their current and future standing in the Guatemalan society. Certainly, we acknowledge that it might be possible that belonging to the coveted upper class in Guatemala could bring economic benefits to the family unit in the long term. However, we argue that those possible benefits are not guaranteed, and thus, the decision to participate in private-sector corruption is not guided solely by short-term economic gain.

We also further expand the concept of family within the family embeddedness theory. The family embeddedness theory was developed from a Western perspective and proposes that frequent interactions with family members (mainly fathers, children, and grandparents) influence the actions of an individual by establishing expectations that create in him or her a sense of obligation (Aldrich & Cliff, 2003; Sieger & Minola, 2017). However, in Guatemala, as in many emerging markets, the concept of family is a wider social unit that encompasses bonds that go beyond blood relations. For instance, in Guatemala, godparents are an important and respected part of the family unit (Koechert, 1989) and they take a more prominent role due to the high numbers of migrating males who are traditionally the head of the family (Bonilla-Landaverry, 2020; Landry, 2011). This insight is important since in our study we observed that respondents acknowledged that they were influenced by their fathers and trusted male intermediaries. Hence, departing from established family embeddedness theory, we argue that two main sets of trusted intermediaries, namely accountants and lawyers, are seen as part of the family unit in Guatemala, and as such their frequent interactions with the owner of a small entrepreneurial family firm strongly motivate him or her to participate in private-sector corruption in a way that male family members do. Thus, we extend the family embeddedness theory by proposing that trusted intermediaries can have such strong influences in the family unit that they incentivize owners in charge of small firms to engage in illicit activities.

While private-sector corruption in Guatemala is commonplace, it still violates legal and moral norms. Hence, owners in charge of small entrepreneurial family firms create a system to avoid condemnation. Dissociating and framing allow the owners to justify to themselves, to others in society, and to their families their corrupt pursuits to attain economic and status benefits. Extant scholarship proposes that individuals utilize dissociating techniques to avoid moral condemnation and for personal protection when acting unethically. In our study, we argue that even though participating in private-sector corruption in Guatemala is a common business conduct, respondents still dissociated from these activities. Thus, while avoiding some taxes, importing illicit goods, and operating with discriminatory business practices is pervasive in Guatemala (Godinez & Dunlap, 2021), there is at least some acknowledgment that such practices are detrimental to the country. Concurrently, managers responsible for small entrepreneurial family businesses frame participating in private sector corruption as necessary to justify their behavior in society’s eyes (Sykes & Matza, 1957). In our analysis, we found that individuals in charge of small entrepreneurial family firms justified participation in private-sector corruption by arguing that in Guatemala this activity is inevitable, in line with recent studies (e.g., Beesly & Hawkins, 2022; Rodrigues & Barros, 2022). However, we further existing knowledge by uncovering those respondents justified not registering certain employees or not paying for their social security based on racist arguments on which individuals of Mayan descent were deliberately excluded from benefits afforded by law. This insight is important because in the Guatemalan context racist exclusionary activities are so common that they are even used to justify other unethical activities.

In our study, we also address a geographical area that remains largely unexplored by scholars: Central America. This region remains one of the least examined areas in business scholarship (Aguinis et al., 2020). Recently, the Central American area known as the Northern Triangle (Guatemala, El Salvador, and Honduras) has been of concern to policymakers because of their sociocultural and economic issues that are the result of unresolved post-colonial policies and the neoliberalism characteristic of Latin American countries in general, and in Guatemala in specific in the aftermath of a civil war (Molden, 2015). In addition, these unique conditions contribute to instability and violence exported to other countries in the region (U.S. Department of State, 2021). One of the main problems of this region in the world is its high levels of corruption (Godinez & Dunlap, 2021). Nevertheless, despite concerns about the alarming corruption levels in the area, scholarship has not devoted enough resources to understand this issue to propose evidence-based solutions. In our study, we take a step to begin a conversation about why firms participate in corruption that goes beyond immediate economic gains. We also propose the specific mechanisms that small entrepreneurial family firms utilize to engage in private-sector corruption. Thus, we argue that in an emerging market, it is important to include contextual explanations regarding social pressures that go beyond economic motives to analyze illicit business practices.

Future Research and Limitations

In our study, we show that an effort to demonstrate status is a driver of participation in private-sector corruption that coexists with economic drivers. Just as recent literature acknowledges that profit maximization cannot be the only goal of businesses (Kok et al., 2019), we also propose that economic gains alone cannot explain why owners of small entrepreneurial family firms engage in private-sector corruption. Hence, scholarship analyzing the reasons for and consequences of participating in corruption should look beyond immediate economic motivations to understand this issue and provide appropriate solutions. Future research should expand on the insight that since immediate profit maximization does not stand alone as the driver underpinning participating in private-sector corruption, does this mean that owners of small entrepreneurial family firms are expecting monetary gains in the future, and if so, how is this calculation made? Also, this insight raises many interesting questions for future research. For example, do owners of small entrepreneurial family firms seek to show their status to their communities both in their family business and in their lives outside of business? How do these efforts to show status affect the business? What are the limits to status given the severe resource constraints that a business in this society would face?

Scholars should build on our theoretical advances by conducting quantitative research in larger data samples in emerging countries to confirm the presence of such actions to balance seemingly incompatible motives. However, can managers balance their motivations to pursue private-sector corruption in ways that help their firms engage in other activities, not only in emerging countries but in more developed settings? Understanding how to manage and implement these activities together would also seem to be a rich domain for future investigation. The implementation and utilization of family embeddedness in the owner’s decision to participate in private-sector corruption is a topic that has largely been ignored in the literature. Also, future research should study the interaction of the impact of resource access, race, and the effort to obtain social status. Particularly, building an understanding of the underclass in emerging economies and how business specifically business ethics and practice can help to begin to address the needs of this group is a rich topic for future investigation (Bruton et al., 2022).

A limitation of our research is that although it presents a first step in analyzing small entrepreneurial family firms participating in private-sector corruption, is that it is specific to one single country. While Guatemala is an emerging economy that has many commonalities with other emerging locations, we acknowledge that our insights may not be generalizable to other geographic areas. Thus, future research should expand our analysis by examining larger family firms in countries with different institutional environments. In addition, another limitation is the sensitive nature of observing and discussing widely accepted corrupt behavior in a specific location. This means that other types of corruption that might not be as accepted might be more difficult to identify and study.

Conclusion

Extant scholarship analyzing firms’ participation in private-sector corruption has focused mainly on economic rational motives. While this approach has offered valuable insights, it has limited our understanding of firms in emerging countries. Our research has opened the door to a richer theoretical insight into the dark side of family embeddedness to understand how economic and non-economic motives persuade managers of family and entrepreneurial firms to engage in private-sector corruption. This theoretical insight should open new avenues of research into family firms in emerging countries. We also offer specific ways that those in charge of small firms can operationalize the integration of opposing motives to create a new normal in which private-sector corruption is institutionalized, namely by influencing, dissociating, and framing. We believe this theoretical insight will expand the research on firms in emerging countries.

Footnotes

Acknowledgements

The authors are grateful to Jonathan Doh, Elana Feldman, Chris Sutter, and Peter Tashman for their insightful and constructive feedback, which helped improve the manuscript.

Declaration of Conflicting Interests

The authors declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

Funding

The authors disclosed receipt of the following financial support for the research, authorship, and/or publication of this article: For financial support, we thank China National Science Foundation (grant nos. 72091310 and 72091315).

ORCID iD

Jose Godinez

Notes

Author Biographies

Jose R. Godinez (PhD, University of Edinburgh) is an assistant professor of management at the Robert J. Manning School of Business at the University of Massachusetts Lowell. His work lies at the intersection of strategy, international business, entrepreneurship, and business ethics disciplines, and he focuses on strategies for firms to operate ethically in locations characterized by high corruption levels. His articles have been published in such journals as Harvard Business Review, International Business Review, Journal of Business Ethics, Journal of International Business Policy, and Journal of International Management.

Spiros Batas (PhD, University of Edinburgh) is a senior lecturer in entrepreneurship and innovation at Queen Mary University of London. He has co-edited a textbook on megatrends in international business. He serves as the treasurer of the Academy of International Business UK & Ireland chapter. His research lies at the intersection of entrepreneurship, international business, and family firms.

Garry Bruton is a professor of management at the Neeley School of Business, Texas Christian University. His research interests are at the intersection of entrepreneurship, international business, and strategy. He has published more than 100 articles in leading journals such as the Academy of Management Journal, Academy of Management Review, Entrepreneurship Theory & Practice, Journal of Business Venturing, Journal of International Business Studies, and Strategic Management Journal. Previously, he was President of the Asia Academy of Management and former General Editor of the Academy of Management Perspectives and Journal of Management Studies.

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