Summer Talk before Formal Hall

Brent B. Allred

The Value of Using Field Experiments in IB Studies and an Application through a Study of the Price of Corruption

Field experiments allow international business researchers to address critical questions that cannot be effectively studied employing other methodologies such as surveys, non-experimental databases, or small sample cross-country/firm studies. To highlight the value of field experiments, we conduct research testing the price-sensitivity for roughly 782 firms in 148 countries resulting in 1,046 responses to solicitations from customers with sharply different risk profiles. Specifically, we test whether incorporation firms charge a price premium when asked, in violation of international standards and laws, to create an anonymous shell corporation by customers with varying risk profiles including would-be money launderers and terrorist financiers. Confounding conventional bedrock assumptions about businesses responding to higher risks by requiring higher rewards (i.e., charging a price premium), we find that businesses supplying shell companies are remarkably insensitive to even the most obvious risks of serious criminal intent by their customers.