What drives bribing in informal firms? Strain theory suggests that firms are more likely to commit misconduct when their performance is poor or when their capabilities are limited. However, this view ignores that, in anomic contexts, the more capable informal firms may benefit more from bribing than their less capable counterparts. This study examines paradoxical role of management practices, a critical capability, and bribery in informal firms. Specifically, we theorize that structured management practices raise performance expectations, increasing strain and prompting bribing. We also explore moderators in the link between management practices and bribing. We anticipate that features of owners that increase sensitivity to social norms will reduce the effect of management practices on bribery. In contrast, local context factors that increase expectations should enhance the positive effect of practices on bribing. We test this hypothesis using the World Bank Enterprise Surveys of the Informal Sector (ESIS) data collected in 2022 in urban India. Results from 8,047 informal firms provide robust support for our expectations. By incorporating the role of management practices in deviant strategic decisions, this study contributes to the stream of research on organizational misconduct. Our findings suggest that addressing the issue of organizational misconduct requires not only a focus on external factors but also on internal factors such as management practices. Our study also sheds light on the importance of owner characteristics and contextual factors in shaping the relationship between management practices and bribery.
