“Proximity and inter-firm corruption. A transaction costs approach"

The aim of this analysis is to understand how inter-firm corruption works and, at the same time, verify whether proximity between firms engaged in corruption matters. Through the lens of transaction cost theory, we explore the choice between two forms of corrupted exchange (negotiated vs productive) for their differential capacity to minimize the costs of transaction and the further role of proximity in reducing the costs of transactions. Using original data taken from the judgments of the Italian Court of Cassation, we first clustered homogeneous proximities. We then used separate binomial logistic regressions to show how the relationship between transaction properties, the consequences for transaction costs, and forms of corrupt exchange lead to different results for each subgroup of proximities. Our results show that both the forms of exchange benefit from the technological and geographic proximity in contribute to mitigate costs that exchange cannot minimize, in much the same way as they work on legal activities. On the contrary, exchanges, in particular, productive do not benefit of social proximity, differently from legal exchanges.