Perceptions of Unreported Economic Activities in Baltic Firms: Individualistic and Non-individualistic Motives

Abstract

Purpose — The chapter assesses the linkages between unreported economic activities and different individualistic and non-individualistic motives as perceived by firm management.Design/methodology/approach — The empirical research is based on a survey of the management of firms operating in the Baltic States. The survey contains information on the perceived extent of unreported activities and on a large number of firm-, sector-, and country-specific factors. A principal component analysis identifies clusters of motives for unreported activity. Regression analyses ascertain the importance of motives individually and as principal components on the extent of unreported activities.Findings — Both individualistic and non-individualistic motives are important for the prevalence of unreported activities. The individualist motives refer to the management being solely profit-oriented and self-interested. Among possible non-individualist motives, measures of government performance and perceptions of reciprocity towards the government appear to play important roles for the extent of unreported activities, but broader societal norms may also play a role.Research limitations/implications — The study considers the perceptions that managers have of unreported activities and other features. These perceptions are subjective and subject to substantial uncertainty. All results should be interpreted in light of the subjective nature of the survey answers.Social implications — Taken literally, the results suggest that stronger government performance is associated with a reduction in unreported activities, at least as perceived by the management. Broader societal developments may also be of importance.Originality/value — The inclusion of variables capturing individualistic as well as non-individualistic motives gives a comprehensive picture of factors behind unreported activities. We employ principal component analysis which allows us to cluster individual survey answers and to produce composite measures of different explanatory factors.

Citation

Meriküll, J., Rõõm, T. and Staehr, K. (2013), "Perceptions of Unreported Economic Activities in Baltic Firms: Individualistic and Non-individualistic Motives", Vissak, T. and Vadi, M. (Ed.) (Dis)Honesty in Management (Advanced Series in Management, Vol. 10), Emerald Group Publishing Limited, Leeds, pp. 85-125. https://doi.org/10.1108/S1877-6361(2013)0000010009