Does Corruption Affects Business Innovation? Insights From Emerging Countries

Abstract

There are very different outcomes in the literature regarding the influences of corruption on business innovation and also arguments for both "sanding the wheels" and "greasing the wheels" approaches. The main goal pursued in this paper is to broaden the understanding of the corruption influence on business innovation, considering seven representative dimensions of corruption at governmental structures and institutions' level and also four relevant dimensions of business innovation, less approached so far. The originality and relevance of this paper are based on that these seven different dimensions of corruption are targeting three characteristic features of it, as bribery's prevalence, the bribery's spread and the companies' propensity to offer gifts for overcoming the bureaucratic pressures. Moreover, the four different new dimensions of business innovation are targeting the company's propensity for innovating and strengthening its image and the way of connecting with business partners in a changing business environment. Considering an extensive data set for 110 emergent countries from four continents for the period between 2002 and 2014 and using the generalized linear model framework, this research study is emphasizing that corruption at governmental structures and institutional level has a significant negative impact on business innovation, adversely affecting innovation perspectives.

Corruption and innovation: the importance of competition

“…Innovative firms have higher growth rates and are more profitable than non-innovators (Kalyar et al , 2020). Thus, higher corruption by bureaucrats to exploit these firms may hinder innovation (Awdeh and Hamadi, 2019; Pirtea et al , 2019; Xie et al , 2019; Ayyagari et al , 2014) [2]. On the other hand, if corruption allows firms to overcome red tape and other bureaucratic impediments, then such firms could innovate more (Panibratov and Michailova, 2019; Krammer and Jimenez, 2019; Krammer, 2019; Nyugen et al , 2016; Goedhuys et al , 2016).…”

The Influence of Regional Cultural Factor s on Corporate Behavior

“…In the opinion of most of them, the very existence of corruption has seriously destroyed the development and innovation of economic entities. In an unstable environment, business innovation is a prerequisite for sustainable business improvement [2]. A survey of companies in 20 emerging countries found that the database results for the period 2006-2013 show that corruption has the most negative impact on business development and innovation, especially in emerging countries [3].…”

“…Especially in some backward countries, proper bribery can lead to lower government requirements for business development, which can lead to a rapid rise in the region's economy and more opportunities for local businesses to do business. Officials who receive benefits have increased power over the progress of projects, so some people believe that corruption can overcome bureaucratic obstacles and rigid legal frameworks [2].…”

“…One study on the causes of corruption shows that corruption is prevalent in economically weakened countries in 64 transition economies of Eastern Europe and the Middle East, and North Africa [2]. Corruption is most likely an obstacle to the establishment of capitalist economies in emerging countries, as excessive government intervention in local businesses will create a vicious cycle of corruption, human capital and poverty [2]. Similarly, within a country, the level of corruption varies accordingly from region to region.…”

Data mining and bifurcation analysis of the risk of money laundering with the involvement of financial institutions

“…Castillo (2018) studies corruption in state-owned enterprises; Saputra (2019) analyses the relationship between corruption and trade in developed and developing countries; Dheera-aumpon (2017) identifies peculiar features of corruption in the process of obtaining a bank loan; Nguedie (2018) focuses on the relationship between corruption and investment inflow and outflow. Corruption also affects innovative activities, where its effect is interpreted in different ways, however, noting that, eventually, it is a very negative phenomenon (Pirtea et al, 2019).…”