284 Int. J. Business Environment, Vol. 6, No.

3, 2014

Multinational firms and political actors: the issue of

corruption and transparency

Amjad Hadjikhani* and Cecilia Pahlberg

Department of Business Studies,
Uppsala University,
Box 513, 751 20 Uppsala, Sweden
E-mail: amjad.hadjikhani@fek.uu.se
E-mail: cecilia.pahlberg@fek.uu.se
*Corresponding author

Abstract: Globalisation and increasing availability of information frequently

face multinational firms with the serious issue of transparent business activities
and avoidance of corrupt behaviour. The question addressed is how MNCs
handle these issues. Based on business network theory, the article presents an
analytical view on business and political actors relationship, with emphasis on
transparent and corrupt behaviours. The analytical view holds the relationship
elements of knowledge and legitimate/illegitimate commitment and this is
illustrated with cases showing two European MNCs and their behaviours in
foreign markets. By adding elements from behavioural theory, the study
contributes new knowledge on: a) analytical tools for studying both transparent
and corruptive behaviour; b) embeddedness of transparency and corrupt
behaviour in a network of business and political relationships; c) the impact of
the transparent and corrupt behaviour of the firms both locally and in foreign
countries.

Keywords: business-political relationships; transparency; commitment;

corruption; legitimacy; knowledge; multinational firms; political actors.

Reference to this paper should be made as follows: Hadjikhani, A. and

Pahlberg, C. (2014) Multinational firms and political actors: the issue of
corruption and transparency, Int. J. Business Environment, Vol. 6, No. 3,
pp.284299.

Biographical notes: Amjad Hadjikhani is a Professor of Marketing at the

Department of Business Studies, Uppsala University. His research interests
cover different fields of industrial, consumer and international marketing. He
has published several books and articles in different scientific journals. In
addition to the membership of editorial boards of a number of international
journals he has also acted as special guest editor for several international
scientific journals.

Cecilia Pahlberg is an Associate Professor at the Department of Business

Studies, Uppsala University. She conducts research within the areas of
international business and marketing, especially on topics related to
headquarters-subsidiary relationships, knowledge, influence and cultural
differences within business networks. Her most recent research project focuses
on the impact from socio-political actors on multinationals in emerging
markets.

Copyright 2014 Inderscience Enterprises Ltd.

 Multinational firms and political actors 285

1 Introduction

During the last decades, research into the question of how multinational companies
(MNCs) manage their interaction with political organisations has increased. One reason is
the rapidly growing access to information which has augmented the attention of business,
society and political units towards the question of how the interaction follows the
prevailing ethical and legitimate rules. A number of scandals and accusations of
corruption have attracted the interest and affected both the political and the business
sphere. While information on illegitimate actions can result in severe negative
consequences, transparent legitimate actions can strengthen the international firms
market position. Due to the growing interest of researchers towards this field, the aim of
this article is to study the interaction between business and political actors, with the focus
on the question of transparency and corruption.
Corruption can be defined as illegitimate actions which are against the economic,
political and social values, like bribery of corruptible governments or agents (see e.g.,
Burguet and Che, 2004; Compte et al., 2005). Uhlenbruck et al. (2006) define corruption
as the abuse of power for private benefit and the discretion of an actor to favour a
business firm above others, against the existing values and rules. In other words,
corruption is illegitimate actions to favour an actor and it is most often discussed and
connected to the expected punishment cost when/if information about it is revealed.
When defining transparency, some refer to its broadest sense consisting of all factors that
affect the information flow (Street and Meister, 2004) while others
like Hadjikhani and Ghauri (2006) stress asymmetry in the flow of information and
specifically connect it to the activities of business firms like lobbying. As far as the
activities of the business firms are considered legitimate and ethical, there will be no fear
about the availability of information to the business, society and political actors. On the
contrary, the openness enhances the firms business performance. Researchers normally
view transparency on a continuum from high to low, i.e., exhibiting signs of less
and more (Forza, 1995; Street and Meister, 2004). According to Koessler and
Lambert-Mogiliansky (2013), transparency and corruption stand on the two ends of a
scale presenting different relationship behaviour that affects the business performance.
The extent of low or high has accordingly become connected to corruption.
In recent years there has been an increasing number of studies and articles on
corruption (Putrevu et al., 2012) and the impact of legitimate transparent and illegitimate
corrupt behaviour (Brown and Dacin, 1997; Mohr and Webb, 2005; Treisman, 2007). In
these contributions, the demands of societies and the necessity of business transparency
has often been stressed. There has also been a growing interest towards studies on
the connection between democracy and transparency (Hollyer et al., 2011), corporate
social responsibility (Putrevu et al., 2012), corporate governance (Hess, 2007), factors
determining corporate transparency (Miller, 2004), and cross-national variations in
corruption (Treisman, 2007). In these contributions, researchers focus on the economic or
social effects of transparency/corruption and do not consider the behaviour of firms in
terms of relationships between business and political organisations. There is, however,
some research studying the impact of corruption on issues like firms entry strategy
(Uhlenbruck et al., 2006), thus moving the analysis from an aggregate economic view
towards firms and managerial theory. In line with these thoughts and the call from
researchers like Koessler and Lambert-Mogiliansky (2013) and Su et al. (2011), this
article employs a relationship perspective for further research on transparency and
286 A. Hadjikhani and C. Pahlberg

corruption. Connected to this is research on lobbying and influence of business and

interest groups on political actors (Austen-Smith, 1987; Potters, 1992; Andersen and
Eliassen, 1996), but while most of those studies deal with the unidirectional influence of
the political actors, the attempt here is to study the political activities and interactions of
firms in connection with transparency and corruption. Not least in Europe, interest in
these questions has increased during the last decades because of the development of the
EU (Hooghe, 1995) where firms can strive for transparent influence which might
ultimately subsidise their business activities (Alt and Chrystal, 1983; Boddewyn and
Brewer, 1994).
However, there are few studies that define transparency at the business level and they
seldom introduce theoretical views to capture and analyse the behaviour of firms. In this
article, we define transparency as an outcome measure of behaviour and communication
with reference to the involved parties (Ang et al., 2000) and it involves,
a actions undertaken by parties
b availability of information about actions
c closeness of the actions to the existing ethical and legitimate values in both local and
foreign countries.
Further, it can be regarded as availability of information about exchange processes
between two or more parties. Eventually, transparency is connected to what the firm is
doing and what is declared to others. The definition incorporates not only information
flows, but even more important, it considers the behaviour of the business and political
entities.
While business research is predominantly based on the implicit assumption of
corporate and political transparency and equal availability of information and action for
all participants (Berton and Salanie, 2003), this study pinpoints information and action
specificity (cf. Hadjikhani and Ghauri, 2006; Koessler and Lambert-Mogiliansky, 2013).
Hence, transparency in management of relationships is considered heterogeneous and
specific. The notion is constructed of;
a transparency specifically related to the heterogeneous resource capability of the
firms
b information specificity and asymmetry among business and political actors
c specificity in the type of actions undertaken by political units
d heterogeneity in legitimacy and values in the home and foreign markets.
We argue that, due to heterogeneity in resources and the fact that they do not have access
to the same information, firms will act differently. Based on the concepts of commitment
and knowledge, this will be further discussed and illustrated with two cases, one showing
transparent and the other corrupt behaviour.
To sum up, our aim is to develop a theoretical view based on relationships in
networks for further understanding of the transparency in interactions between
political organisations and multinational firms. The focus is to address the question
of how these firms manage the transparency in their interactions with political
organisations. The analytical view presents the relationship elements of knowledge and
legitimate/illegitimate commitment constructing transparent and corrupt behaviours. The
 Multinational firms and political actors 287

article emphasises the vital role of transparency in business performance where neglect
will significantly affect the MNCs business activities.

2 Analytical view

Adding the theoretical view of relationships between business and political actors, the
attempt is to explain firms political actions in managing the political environment, which
can be through transparent or corrupt actions. In this vein, transparency and corruption
represent completely different types of activities among the interactive parties. The
relationship is corrupt when parties have undertaken illegitimate actions and information
about the activities is hidden from other parties who are affected (Lambert-Mogiliansky
and Kosenok, 2009). From the standpoint of this study, management of political
relationships has two types;
a transparency in relationship is when actions are legitimate and the knowledge is
disclosed to all parties
b a corrupt relationship is when activities are illegitimate and unethical and knowledge
is not open.
The fields of corruption and transparency become more vital as international firms act in
different countries with a variety of value systems and definitions of legitimate actions.
Management of political relationships in this article is explained in the context of
the internationalisation of the firm (Johanson and Vahlne, 1977) and network theory
(Johanson and Vahlne, 1990, 2009; Kooiman, 1993; Hkansson and Snehota, 1995). The
business network approach, which has its origin in social network and behavioural
theory, has been extensively explored in industrial marketing (Ford, 1990; Hkansson
and Snehota, 1995; Ghauri, 1999) and international business studies (Buckley and
Ghauri, 1993; Forsgren et al., 1995). But these contributions rarely touch upon the
political relationships embodied with corrupt or legitimate transparent actions. This study
goes beyond the above streams and explains that foreign firms are dependent on the
actors in their political environment, and these political actors are also dependent on
foreign firms, as firms make investments that affect groups on which politicians are
dependent (Jacobson et al., 1993; Ghauri and Holstius, 1996; Hadjikhani, 1996). Further,
as far as activities in these relationships are legitimate and transparent, the involved
parties strengthen their positions. But when some actors undertake actions which are
illegitimate, the release of information harms the involved parties (Hadjikhani and
Hkansson, 1996). This is to say that business and political actors are seeking legitimacy
(Eliassen and Kooiman, 1993) and incorporate values from different groups into their
decisions to follow the legitimate rules for strengthening their position. Thus, in this
network, the business and political actors are interdependent, not only on one another but
also on actors surrounding them as their activities influence each other, i.e., enterprises
challenge the two interdependent areas of politics and business (Boddewyn, 1988;
Boddewyn and Brewer, 1994). When actors involved in a government-business
relationship undertake illegitimate actions, both government and business firms will be
harmed (Hadjikhani and Hkansson, 1996).
The relationship view developed is inspired by the study of Hadjikhani and Ghauri
(2001) on business-political relationship. Such a relationship is further developed to
288 A. Hadjikhani and C. Pahlberg

encompass transparent or corrupt actions. We also refer to the internationalisation model

(Johanson and Vahlne, 1977, 2009) that explains the firms management activity as a
consequence of its knowledge and market commitment. This view, as Keillor et al.
(1997) and Hadjikhani and Ghauri (2001) explain, can be explored for an analysis of the
behaviour of firms in their political environment. In this vein, commitment is connected
to learning about the existing relationship and the inherent values in foreign markets. By
increasing political knowledge, the perceived risk of market investment declines and
market commitment increases. Commitment is explained in terms of the size of
investment towards the counterpart alone or his connected actors (Becker, 1960; Scott,
1994; Denekamp, 1995).
The next aspect in the model is knowledge, which contains the experience of the firm
in the foreign market and also the knowledge that the firm accumulates from others in the
network (Johanson and Vahlne, 1990). Following this, business actors, in their interaction
with political actors, gain experience and information about the values and activities of
others in the network such as certain interested parties or the media and behave
accordingly. The variations in the degree of political commitment and knowledge among
the firms explain the differences in managerial behaviour, which makes the relationship
of each firm to the political actors unique (Lee, 1991; Keillor et al., 1997). This means
that each business actor has a specific relationship with political actors which are
interdependent with its political commitment and knowledge, not only to the focal but
also to the other connected actors. Relationships can follow the norms and values a
transparent behaviour with legitimate actions or in order to gain favouritism and private
benefit, choose not to follow the existing values and undertake illegitimate actions which
can harm the business when they are disclosed.
In this exchange relationship, firms require rules and supportive measures distributed
by governments, and governments gain legitimacy as these firms act ethically and follow
the existing rules to satisfy the people and other groups to whom they are responsible.
The interaction between the two requires the adjustment of conflicting interests, but
also provides the condition for exploring options and sharing common values (Hult
and Walcott, 1990). As Figure 1 illustrates, the alternative behavioural options for the
political actors are either coercive or supportive, and can contain general or specific
influence (Hadjikhani, 1996; Hadjikhani and Ghauri, 2006). The strategy of the firms in
these relationships is to convert the coercive or general support to specific support. The
crucial issue in reaching that strategy is how transparent and informed the actors are and
if and how they follow the ethical and legitimate values in the society.

Figure 1 Transparent and corrupt behaviour (see online version for colours)
Business activities Political activities
-adaptation -coercive
-influence -supportive
Knowledge and Political actors
Business actors
legitimate/illegitimate commitment

Transparent-corruptive behaviour

Source: Adapted from Hadjikhani and Ghauri (2001)

 Multinational firms and political actors 289

As Figure 1 illustrates, the behavioural options for the firms are those of adaptation and
influence. Adaptation applies to the given political rules within which firms adapt their
behaviour (Miller, 1992; Makhija, 1993). Influence means negotiation and cooperation
(Boddewyn and Brewer, 1994), where firms aim to gain support for their business
activities. Negotiation and cooperation can be transparent or formed to gain specific
favourable benefits which harm other actors. By the development of knowledge and
commitment, the process of change in political behaviour proceeds from adaptation to
influence. Firms with a low level of knowledge and commitment first rely on the mode of
political activity, which may include internal changes in order to adapt the business
activities to the political rules. As far as the alternative action to obtain favourable
political rules is illegitimate, the behaviour is considered corrupt. The final outcome of
the management decision becomes an antecedent to the firms knowledge and its
legitimate or illegitimate commitment towards political actors.
In the relationships with political actors, political knowledge is the knowledge on
political decisions, the actors involved, and their embeddedness. For the business
activities, adaptation implies understanding and following the already transparent
established political rules, whereas influence refers to changing the established political
rules in the firms favour. While the former obliges the firm to follow the rules, the latter
assigns an active role to the firm in manipulating the political actors before the decisions
are made. The adaptive measures are the outcome of the coercive political actions which
generate organisational and production change, while the influence factor is aimed at
obtaining supportive measures. The gain can be through transparent or illegitimate
actions.
In studying firms commitment, from the simple negotiation to the more complex
interaction of lobbying to cooperation, marketing researchers make claims for transparent
strategic actions to convert adaptation to influence. When political actions are coercive
and distrust prevails, commitment activities can have negative effects. Unmanageable
coercive actions can, for example, force firms to change production units, exit, or resort
to corrupt behaviour like bribery. In cases where the information on corrupt behaviour is
disclosed, firms have to adapt or, in severe cases, file for bankruptcy. A highly coercive
impact from the government or keen competition generates high adaptation costs which
sometimes force the firms to undertake illegitimate actions. The crucial issue is how
legitimate and transparent the actions are. In Table 1, the strategy to gain specific
support influence is discussed as different types of relationship commitment and
knowledge which can be transparent or corrupt behaviour.
Table 1 Behavioural difference in managing a political relationship

Transparent Commitment of resources and knowledge to manage the relationship with

behaviour political actors. Information about activities for gaining specific support is open
for business, society, and political actors. Legitimate and ethical values known
among parties are followed.
Corrupt Commitment of resources and knowledge to manage the political relationship and
behaviour gain specific support, favouritism. The information is not disclosed since the
activities do not follow the legitimate and ethical rules.

In the following, the analytical view is used to present and analyse two cases of
transparent and corrupt behaviour.
290 A. Hadjikhani and C. Pahlberg

3 Case studies

3.1 Method
Two large MNCs, Ericsson and Teliasonera, both in the telecom industry and
headquartered in Sweden, are presented below. These firms have large market activities
in foreign countries and vast international experience. Many political decisions by the
foreign countries affect the firms market operations in these countries.
Ericsson is a world-leading provider in the telecommunication industry. The firm
was founded in 1876 and it is still headquartered in Stockholm. The firm operates
in 180 countries and it has about 110,000 people employed. In 2011, Ericssons
net sales were SEK 227 billion (USD 35 billion). More than 40% of the worlds
mobile traffic passes through Ericsson networks. Their vision is to be the prime driver
in an all-communicating world and concerning core values, they state; Respect,
professionalism and perseverance are the values that are the foundation of the Ericsson
culture, guiding us in our daily work how we relate to people and how we do business
(Ericsson, Our Vision).
Teliasonera is a major telecom operator in the Nordic countries and the fifth largest in
Europe. Its net sales in 2011 were SEK 105 billion (USD 16 billion). The firm has about
28,000 employees and 180 million subscriptions and it is organised in three international
business areas: Mobility Services, Broadband Services and Eurasia. The firm is the result
of a merger in 2002 between two Nordic telecom companies, Telia (from Sweden) and
Sonera (from Finland) but the history dates back to 1853 when Telia (at that time Kongl.
Elecktriska Telegraf-Werket) was founded. Both companies were state-owned for a long
time, and the Swedish state is still the largest shareholder, controlling 37%, while the
Finnish state owns 11%. In its mission and vision statement it said: TeliaSonera is a
world-class service company, recognized as an industry leader. We are proud pioneers of
the telecom industry, a position we have gained by being innovative, reliable and
customer friendly. Wherever we operate, we act in a responsible way, based on a firm set
of values and business principles.
The information presented in this study is based on both primary and secondary data.
In the Ericsson case, interviews were held with Swedish managers and politicians in the
EU organisation as well as with intermediary organisations, both public (like Euro Info
Center) and private (commercial consulting companies). Moreover, interviews were also
held with hybrid organisations such as the Swedish Trade Council whose function is to
provide information about political decisions. Beside these, other interviews were
conducted with Swedish managers in Sweden and also with Swedish representatives in
the EU. The secondary data concerning Ericsson were collected from a variety of
sources, like brochures, articles in newspapers and published information provided by the
EU. These sources provided general information about the EU and the different units
political tasks in the decision process.
The second case concerns Teliasoneras expansion in Uzbekistan. This case has
recently attained considerable publicity due to allegations of corruption. The sensitivity
of the issue has not allowed for interviews with managers within the company, so
secondary sources have been used. Teliasoneras website has been scrutinised for
information about the company with focus on its expansion in Eurasia. During 2012, the
Swedish Television programme Mission investigation put the focus on bribes and
wrongdoing when entering Uzbekistan and newspapers have given this affair much
 Multinational firms and political actors 291

attention. We have followed how it has been reported in the two largest Swedish daily
newspapers, Dagens Nyheter and Svenska Dagbladet, as well as in the business daily
Dagens Industri. We have also followed the reports in the Financial Times as well as
Reuters. The Swedish Prosecution Authority has launched an investigation, and
documents from the prosecutors have been studied. Direct information from the actors in
Uzbekistan has not been available, nor have we been able to follow the Uzbec press.
Information from Uzbekistan is obtained through reports in the Western press.

3.2 Ericsson in the European Union

At the end of 1990, with the increasing political role of the EU in the telecommunications
market, Ericsson established a unit in Brussels. Its main task was to gain knowledge and
to influence strategic issues of
1 liberalisation of the telecommunications (TELC) market, a process which began at
the end of the 1980s
2 rules for mergers and acquisitions for TELC companies
3 synchronisation of TELC product standards.
In the unit in Brussels, one person is responsible for political activities and has to
cooperate with ten to twenty market coordinators and experts in Sweden. When a
political issue is in focus, the manager involves those experts who have relevant technical
or market knowledge. The manager has two main types of political tasks;
1 to develop relationships with the EUs political units, which involves contact with
politicians, treatment of political issues, and supervision of political decisions in the
TELC market
2 to mobilise resources within Ericsson when a political proposal or decision is under
consideration.
The manager, together with the experts and even Ericssons chief managers, interacts
with three political units:
1 the Commission via committees and industry associations
2 the Parliament via committees and the European Council
3 Swedish representatives.
There is close cooperation between Ericsson and EU representatives before a decision
is made. For each issue the manager deals with different political sections of the
Commission: DGXIII for telecommunications, product specification, and the future
telecommunication market; DGI for the international firms; DGIII for industry in general;
and DGIV and DGXXI for competitive customs duties. When the manager has succeeded
in convincing the committee on an issue, Ericsson has the advantage of being able to
initiate further discussion in a committee and then in the Commission and Parliament.
The political members of the committees lack detailed knowledge of the TELC market
and technology and are thus dependent on Ericsson and other MNCs in this field.
Ericssons technical knowledge in intellectual property rights (IPR), for example, ensured
that the company was asked by the Commission to cooperate and give technical
292 A. Hadjikhani and C. Pahlberg

suggestions. The manager also activates relationships with the Swedish representatives in
the Commission and Parliament on behalf of a proposal. On more strategic questions,
the managing director and other highly positioned personnel from Ericsson become
active. Their purpose is to negotiate with Swedish and non-Swedish members in the
Parliament and the European Council and to convince them of the political benefits of the
proposal.
The unit collects general information from daily study of news media such as official
journals, financial newspapers, and cover reports on IT. This takes more than 15% of the
managers time. Some other duties are more specific and of a social nature. The
managers social contacts with politicians have a continuity that is aided by regular social
arrangements and meetings. His major effort from the beginning was to get to know the
politicians and to be involved in those social arrangements that engage people related to
TELC. However, the manager explained that these contacts are mainly activated when an
issue comes under consideration. One problem in maintaining continuity is the change in
political appointees. Social and official meetings take up about 50% of the time, and
phone contacts 10 to 15%. The manager described these contacts as necessities but
not determinant. The crucial factor lies in his and his colleagues technical and
market knowledge when explaining problems and suggesting solutions. Accordingly, the
manager has to gain information about questions such as the needs of customers,
competition rules, customs duties, as well as new political suggestions and decisions. The
reputation of Ericsson as a large MNC, together with established social contacts,
facilitates the initiation of an issue. The concept of global system for mobile
communication (GSM), which has more than 50% of the TELC market, and the technical
development of the mobile telephone, which is more adapted to the needs of consumers,
are well known by the political members. These elements facilitate negotiations on issues
such as technical standards for sub-contractors and the future development of products
and the market.
For each suggestion, the manager integrates the technical and law experts from
Ericsson into the committee in the commission. The manager stated that since the
committee also involves competitors from other countries, the one major factor that can
make Ericsson influence the content of a decision is its technical and market knowledge.
In negotiations with the committee members, Ericsson has to convince the committees
political members, who subsequently deliver the issue to the Commission and thereby the
Parliament, that the solution is appropriate for different groups in the market and society.
Thus, to present a cogent argument for the proposal and convince the committee or the
Commission, Ericssons manager also needs to have knowledge about the political
interdependency of all these groups.
When a political decision on the TELC market stands to benefit several companies,
they act by means of ad hoc and/or industry associations. There are for instance cases
when Ericsson and Siemens cooperate temporarily on political issues such as
liberalisation and state subsidies. They establish an ad hoc committee to present and
discuss the proposal in the committee and in the decision-making units. The case of ITA
(Transatlantic Business Dialogue), for example, which aimed to eliminate customs duties
between the USA and the EU for IT products, involved all of the competitors in Europe
working together to influence politicians for new customs rules. A committee with
30 people from different countries was established. The committee engaged political
groups, industry associations, and experts from firms such as Ericsson and Nokia. The
results were presented by representatives from DGXIII and DGI, which led to a political
 Multinational firms and political actors 293

decision between the USA and the EU for synchronisation of the customs rules for IT
products. The manager in Ericsson believed that this new rule benefits Ericsson. He
explained that Ericssons high technology and low production costs can improve its
market activities not only in the USA, but also in countries within the EU which had
stricter customs rules for firms from outside the country.

3.3 Teliasonera in Uzbekistan

Teliasonera operates in the Nordic and the Baltic countries, in Spain as well as in many
emerging markets in Eurasia. The expansion eastwards has in recent years been very
profitable, and Teliasonera has in their annual reports pointed to the rapid and successful
growth. For instance, in 2008 they said that their acquisitions in Uzbekistan and
Tadzjikistan have turned out as very positive the sales more than doubled in Uzbekistan
during Q4 2008. It can be noted that Teliasoneras record profits (more than SEK 36
billion in 2012) to a large extent are built on business in the former Soviet republics.
Officially the firm wants to show a picture of how they are supporting democratic
development through their technology.
However, in the last year, Teliasonera has been heavily criticised for its activities
in Uzbekistan. It started with a Swedish television programme, The black boxes
how Teliasonera sells to dictatorships, where it was revealed that numerous
Teliasonera customers in Uzbekistan, (and also in Azerbaijan and Belarus), among
them opposition politicians and journalists, had had their human rights abused by
the police or security services. According to the programme, Teliasonera gave
the authorities access to the mobile phone traffic. Shortly thereafter, claims of corruption
hit the company. The case below illustrates the development of Teliasonera in
Uzbekistan, and how the success has turned into a severe crisis for the firm and its
reputation.
Since 2007, Teliasonera has owned the firm Ucell in Uzbekistan. At the time of the
purchase, Ucell had a 2G but no 3G licence and Teliasonera agreed with the firm Takilant
to pay 2.2 billion SEK (320 million USD) to obtain a 3G licence in the country. Takilant
also received 26% of the shares in Ucell. According to Teliasonera, Takilant informed the
authorities about the deal, they returned their licence and a new licence was issued to
Teliasonera. In 2010, Takilant sold 20% of its shares in Ucell to Teliasonera for about
1.5 billion SEK (USD 225 million).
However, when the Swedish bank SHB investigated the affair, they found no
evidence that Takilant had ever had a licence. The same result was found by Comnews,
who follow the telecom industry in the former Soviet republics. According to them,
neither the authorities for communication nor the state commission for radiofrequencies
in Uzbekistan knew about Takilant (ibid.). So what kind of company is Takilant? It turns
out that it is registered in Gibraltar, and that the director and is a young woman, Gayane
Avakyan. It is also revealed that she is a close friend of Gulnara Karimova, the daughter
of the dictator in Uzbekistan, Islam Karimov. When it comes to the money paid for the
licence, Swedish journalists found that Takilant has no records of the USD 320 million in
the past three years financial statements. In 2011, Takilant had opened an account with
the Swedish bank Nordea. To this account, money has been transferred from the Swiss
bank Lombard Odier Darier Hentsch and Cie. In Switzerland, a money laundering
investigation is going on concerning Takilant and this has resulted in the freezing of
294 A. Hadjikhani and C. Pahlberg

millions of francs in several bank accounts. In October 2012, a Swedish court froze
Takilants assets in Sweden.
The anti-corruption unit of the Swedish Prosecuting Authority initiated a preliminary
investigation in September 2012 concerning bribery and corruption. The suspects
are Gayane Avakyan, as well as two Uzbec citizens, Bekzod Achmedov and Alisher
Ergashev. Two managers within Teliasonera have also been suspected of crimes. The
chief executive of Teliasonera, Lars Nyberg, says in an interview I am convinced that
Teliasonera did not bribe anyone or take part in any money laundering and he insists
that Takilant has been the legitimate owner of the licence that Teliasonera acquired.
Teliasonera has also launched an external review into the allegations.
When the affair started, Teliasonera at first said that they had very limited
knowledge about who were behind Takilant. However, e-mail conversations later
revealed that the management had substantial knowledge. In a mail to one of the top
managers in Teliasonera in May 2007, it is stated: Here is information about the partner
Gulnara Karimova.
The Swedish government has reacted strongly and financial markets minister, Peter
Norman states in a written comment to Reuters that this is very serious. He is also
worried about the risk of further loss in confidence in Teliasonera. Within Teliasonera,
the negative attention resulted in discussions about the management of the firm and
the company has been forced to find a new chairman of the board and new board
members as well as a new chief executive. The Swedish government has also stressed the
importance of having a specialist in CSR issues on the board to improve ethics and
anti-corruption work. A complication is that it has recently been revealed that the crown
prince in Teliasonera, Tero Kivisaari, is one of the suspects of corruption. He is the head
of the business areas Mobility Services and Eurasia and in the investigation it has been
shown that as early as 2007 he received e-mails showing that Teliasonera had knowledge
about the involvement of the Karimov family contrary to what the firm has previously
said.
In addition to the Swedish government, other influential stakeholders/owners are
upset and demand that Teliasonera shows more openness. Total transparency is the only
thing that counts says Peder Hasslev, Chief Investment Officer, AMF, one of Swedens
leading pension companies. According to the Financial Times (8 October 2012), the most
important consequence of the allegations is not the financial aspect but the knock-on
effects of how the company is perceived. The paper also refers to a business strategy
expert who stresses the importance of local knowledge. Our experience running
companies in western countries can almost be a distraction. It is not just a language
problem; it is a completely different way of looking at things.
In Uzbekistan, authorities have reacted to the allegations in Sweden. Two diplomatic
notes have been sent to the Swedish Ministry for Foreign Affairs where they protest
against the Swedish Prosecuting Authoritys investigation and also against the Swedish
media which they consider to be offensive and provocative.
At present, we do not know how this story will end. Takilant still owns 6% of Ucell
in Uzbekistan and in the initial deal in 2007, Teliasonera had promised to buy these
shares for at least half a billion SEK. If Teliasonera decides to follow the deal, they risk
further allegations in Sweden, if they do not, they risk destroying their relationships and
their business in Uzbekistan.
 Multinational firms and political actors 295

4 Discussion

The political behaviour of the firms in the two cases is quite different and each firm had
their own specific strategy. Ericsson with its transparent resource commitment was able
to gain or strengthen a legitimate position. When the firm aimed to penetrate into the
market, the resource commitment and trust building were directed not only towards the
political actors but also towards other actors in the network. The behaviour of Teliasonera
was completely different. Until 2012, the information about the bribery was not disclosed
but when it was revealed, the firm faced a number of business and political problems that
affected the firms business performance. This study analyses the behaviour of these two
firms under the themes of;
a heterogeneity in the business-political relationship
b commitment, knowledge and legitimacy dimensions.
For the first aspect, the two case studies present a completely different picture. Firms
political relationships are specific and therefore the relationships have a heterogeneous
nature. In the case of Ericsson, the activities were transparent and designed to gain
specific support but this did not relate to a specific foreign country. In the case of
Teliasonera, the aim was to gain specific support and influence but the firm seems to
have taken commitment actions which did not followed the prevailing rules in the home
country. Interestingly, heterogeneity even concerns the values given to legitimate and
illegitimate actions in the home compared to the foreign country. The case of Teliasonera
indicates that although the government and other political and social actors in Sweden
identify a firms commitment as illegitimate, the government and the social actors in
Uzbekistan recognise it as normal business.
In their relationships with political actors, actions in both firms were aimed at
influencing the decisions before they were actually made. In their relationships, the firms
had a specific concern in using negotiation and cooperation tactics, but while the first
case illustrates transparent behaviour, the other was directed towards corruption. In the
cases, the specificity relates particularly to the firms resource commitment and trust
building behaviour in the foreign markets, which was connected to the firms business
strategy. In their relationships with business, political and other actors in society, the
firms in these cases managed their relationships differently.
The analytical view in this article relies on the proposition that there are two types of
business and socio-political networks. The cases manifest interdependency between the
two networks and that the actions in one have an impact on the other. These two
networks are interdependent but have to keep their own legitimacy since they belong to
completely different types of actors with different relationship grounds. In the first case,
the firm and political actors kept their legitimate position as their relationships were
transparent. Politicians in the EU act for the welfare of the society and Ericsson acted to
improve its market position. They cooperated but kept their legitimate position with
preservation of their own values. In the second case, business-political relationships had
an illegitimate ground. Political actors were acting as business actors with the aim of
gaining financial rewards. Corruption in this case was based on the loss of legitimacy in
the network they belonged to.
296 A. Hadjikhani and C. Pahlberg

The result of their actions towards trust/distrust transfers from the socio-political
relationship to the business relationship and vice versa. In other words, actions have side
effects because of the interdependency between the relationships in the two networks.
The two cases epitomise the specificity and varieties in the trust relationship. While some
are concerned with social trust/distrust, which embodies the trust/distrust of the public,
others relate to the political trust connected to political actors. The case of Teliasonera
also manifests that while the government and public in Uzbekistan recognised the firm as
trustful and actions were transparent, the government and public in Sweden distrusted the
firm and presented the case as corruption and everyone condemned the behaviour. In this
vein, the firms legitimacy is an accumulation of the firms business, social and political
legitimate behaviour. In the Ericsson case, the firms legitimacy and relationship trust
contained a more general nature. The firm, for example, beside its transparent activities,
strengthened its trust by referring to its reputation in business and also developed trust in
the relationship with political actors and intermediaries which affected the firms
legitimacy. In contrast, Teliasonera weakened its trustful relationship and legitimate
position with actors in Sweden, but has so far kept these in the foreign country.

5 Conclusions

The study has extended the perceived boundary of the business network and presented a
theoretical tool to understand the interaction of political and business actors in a new
context. An interesting conclusion concerns the actors belonging to interconnected
networks. This belonging results in business and political actors having relationships but
also preserving their own legitimate grounds. As far as actors keep their legitimate
position and act accordingly, the release of information is not harmful. But when an actor
leaves its ground and act illegitimately to gain a favour, the relationship becomes corrupt.
Hence, the issue of legitimacy in interaction between actors belonging to different
networks is important to consider.
Focusing on relationship management, the study introduced an analytical view for a
further understanding of transparency and corruption. The two case studies were analysed
by the two relationship elements of knowledge and commitment and the suggestion was
put forward that corruption and transparency have a continuum from high transparency to
high corruption. This continuum is subjective depending on values existing in different
countries and it also varies in different periods of time. In spite of the limitations of
having only two case studies or weak connections to theories other than business
network, the results contribute towards theory development in this field.
The study provides a number of theoretical and empirical contributions. A note on the
theoretical contribution concerns the concept of trust when studying transparent/corrupt
behaviour. It can be concluded that as far as information about activities is not disclosed,
trust in the relationship and the connected actors is inactive but it is there. When new
information is exposed, the element of trust becomes active and diffuses among network
members and this either strengthens or weakens it. This makes the role of trust vital in
studying transparency/corruption. The question of transparency/corruption as Kirby
(2012) states is connected to trust. Hence, the relationship elements of trust, commitment
and knowledge in relationship (Hadjikhani et al., 2008) together with legitimacy can
increase the ability to explain the situation. The connection between trust/distrust,
legitimacy/illegitimacy, and commitment can encourage deeper studies of the varieties in
 Multinational firms and political actors 297

the transparent/corrupt behaviour. These relationship elements may open new doors when
studying transparent and corrupt behaviours.
An interesting conclusion concerns the heterogeneity in values and legitimacy in
different countries. While a transparent action is recognised as ethical and legitimate in a
foreign country, the same action can become known as unethical and corrupt in another
country. This heterogeneity may vary depending on the nature of the foreign countries,
for example whether they belong to developed countries or new emerging countries.
While recognition of transparency and corruption is more similar when firms are acting
in developed countries, it becomes different when interaction concerns an MNC from a
developed country acting in new emerging countries.
As shown in this article, both MNCs committed resources to influence the authorities
and gain specific support. Hence, the strategy of the MNCs is to convert the coercive
behaviour of the political actors or to trim down the competition by exerting influence.
The influence is not only to gain favour for financial support or political rules, it is also
for affecting others in the network. While transparent negotiation and cooperation to
improve the MNCs market position or to weaken competitors position follows the
legitimate routes, corrupt negotiation and cooperation with the aim of gaining specific
favour or weakening competitors holds unethical commitment like bribery. Finally, it can
also be noted that transparent or corruptive actions involve a wider network of actors
such as intermediaries like media, agents, pressure groups and lobbyists affecting the
MNCs relationships with political actors.

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