Abstract/Summary

We develop a novel, sensemaking perspective on corruption in transition economies. Prior research has focused on understanding why some entrepreneurs are more likely to pay bribes than others. It typically assumes that paying bribes will lead to an intended – albeit unfair – competitive advantage. We challenge this assumption and uncover a bribery paradox: drawing upon sensemaking logic, we argue that beyond gaining an immediate benefit from bribing, entrepreneurs who frequently pay bribes may in the longer run be enacting a ‘new normal’ business environment perceived as high in obstacles, especially in transition countries. As sensemaking is grounded in identity construction and one’s social context, we argue that owners of family firms will be especially vulnerable to the dangers of perceiving greater obstacles over time and enacting an obstacle‐ridden ‘new normal’ business environment. We find empirical support for our framework on a sample of 310 privately‐held small and medium‐sized enterprises (SMEs) from 22 transition economies.