Understanding the role of technology in reducing corruption: a transaction cost approach

Prior research suggests that computerization of government services can help reduce corruption involved in government transactions, but there is no clear understanding of the process through which computer‐mediated transactions reduce corruption. We attempt to fill this gap by using a transaction cost economics framework, and argue that uncertainty and asset specificity associated with government transactions allow bureaucrats to act opportunistically and demand bribes. Therefore, those computerization initiatives that reduce uncertainty and asset specificity of government services lead to lowered perceptions of corruption. Our findings, based on a survey of 101 managers of domestic and multinational enterprises in India, support our hypotheses. We also compare the websites of Indian government organizations with European government websites on the dimensions of transparency and interactivity, and find that the Indian websites do not provide as much interactivity as the European websites. Our multi‐method study offers important theoretical and practical insights on effectively using technology to reduce corruption. Copyright © 2015 John Wiley & Sons, Ltd.