The Perceived Impact of Public Sector Corruption on Economic Performance of Micro, Small, and Medium Enterprises in a Developing Country

Abstract

Micro, small, and medium enterprises (MSMEs) contribute to the economic development of most developing countries. However, the economic performance of the MSMEs is often restricted by several obstacles. This paper reports on a study of the impacts of public sector corruption on employment growth in MSMEs, as perceived by their managers/owners. The data originated from a nationwide survey that involved MSMEs managers/owners in Papua New Guinea (PNG) that were selected by a stratified random sampling technic. The data was analyzed using a two-stage least squares (2SLS) regression model. The results show that MSME managers/owners perceive that corruption in the public sector is generally linked to an increase in employment growth in their firms. Medium-size enterprises benefit most from corruption in the public sector, whereas small-size firms appear not to benefit. The findings indicate that other than corruption, there might be failures in the public institutions that are hampering the competitiveness, innovations and efficiency in MSMEs. Corrupt practices can precipitate the loss of revenue that would have accrued to the government from tax that could be used to provide facilities required by the public institutions. Corruption in the public institutions of developing countries such as PNG can be tackled by implementing strategies that promote zero-tolerance for corruption. These include promoting public awareness of the cost of corruption to the country’s economy, improvement in the quality of governance, and expanding the capacity of government agencies for effective and efficient service delivery. Increasing the penalty for engaging in corrupt practices could also be considered, while people who engage in practices that discourage corruption should be rewarded. The findings contribute to a potential strategy that could be used to promote ease of doing business in a country by considering the obstacles that MSMEs face.

The Effects of Financial Literacy on Sustainable Entrepreneurship

“…Micro, small and medium-sized enterprises (MSMEs) represent the large majority of firms worldwide, fostering the growth and the development of sustainable economic systems, and increasing the financial stability of every country [46]. The long-term development and growth of MSMEs depend on a variety of different factors both related to the demand and the supply side; in recent years, one of the key drivers impacting the success of the firms, a factor that in the past has always been underestimated, is the level of financial literacy of entrepreneurs, as the OECD, in particular, has mentioned in several papers [47][48][49].…”

Improving the governance of Papua New Guinea’s State Owned Enterprise in the Mining and Petroleum Sector

“…Increasing the penalty for engaging in corrupt practices could also be considered, while people who engage in practices that discourage corruption should be rewarded. 121 The Government in PNG has recently passed the enabling legislation for the Independent Commission Against Corruption (ICAC). The countries parliament voted unanimously 96-0 to pass an ICAC bill that has been several years in the making.…”

Foreign Direct Investment, Public Sector Venality and Entrepreneurship Development in Developing Countries

“…Corruption thrives in countries with no accountability for those involved in such acts (Bitterhout and Simo-Kengne, 2020). The worst part is that corruption is often normalized in some countries, making it difficult to deal with (Fleming et al, 2022).…”

“…Due to the rent-seeking behaviour of some public office officials (Lekubu and Sibanda, 2021), corruption may end up depriving entrepreneurs of essential resources meant to aid them in growing their businesses. Another view is that public sector corruption can discourage potential investors interested in investing in high-growth entrepreneurial companies (Ezebilo et al, 2019). This affects entrepreneurs because they require funds to expand their businesses (Alsagr and van Hemmen, 2021).…”

“…The argument is that public administration officers are the custodian of funds meant for any form of development in the country (Williams and Martinez-Perez, 2016). Nevertheless, several developing countries continue to battle issues of corruption where public funds are misused (Ezebilo et al, 2019). The public officials are often involved in initiating bribes (Puiu, 2015), misusing the public office for their gains, and state capture, among others (Lekubu and Sibanda, 2021).…”