Corruption and innovation: the importance of competition

Abstract

PurposeThe purpose of this study is to examine how corruption affects the prevalence of product and process innovation by firms.Design/methodology/approachThis study uses firm-level data from the 2012–2016 Business Environment Enterprise Performance Surveys and utilizes a conditional mixed process model to address endogeneity concerns, taking bribery as a measure of corruption.FindingsThe study shows that measures of bribery are positively and robustly associated with innovation but mainly for firms reporting many competitors. The results are stronger for firms reporting more obstacles. Both findings support the inference that bribes facilitate innovation by allowing firms to evade regulatory obstacles.Originality/valueThe current research on corruption's effect on innovation restricts the association to be uniform across the sample, but this study shows that the impact depends on the degree of competition faced by a firm. In addition, the data used in this study cover 30 economies in Eastern Europe and Central Asia, and thus contributes to determining the effects of anticorruption practices in emerging countries.

The influence of institutional conditions on firms’ process innovation – evidence from firms based on a multi-country analysis

“…The present study confirms that corruption impedes process innovation in organizations (Goel and Nelson, 2018). The impact of corruption ( H3 ) on companies operating in higher GDP countries, found in this study, may fit the explanation offered by Karaman Kabadurmus and Sylwester (2022) who argue that in more competitive environments, corruption can help organizations to get around costly regulations.…”

“…Chowdhury et al ’s (2018) findings, using a sample of emerging international start-ups, suggest that corruption plays a “greasing” role when indirect taxes are high, and a “sanding” role when documenting requirements for export, cost of export and corporate tax are high. Notwithstanding the findings listed before, research on the link between corruption and innovation is comparatively underdeveloped (Karaman Kabadurmus and Sylwester, 2022).…”

From traditional innovation to green innovation: How an occurrence of natural disasters influences sustainable development?

“…We observe in column 2 of Table 9 that the coefficient of the cross‐product term between Death and Corruption is −0.035, which is significantly negative at the 1% level, suggesting that increased government efforts to control corruption instead slow down the contribution of natural disasters to the greening of innovation type. Kabadurmus and Sylwester (2022) showed that corruption promotes innovation by allowing firms to evade regulatory barriers. We reach a similar conclusion.…”

Corruption, imported innovation, and growth: Evidence using the panel smooth transition regression approach for developing countries

“…The findings indicate that compared to their male counterparts, on average, women receive a greater payoff from bribery. Karaman Kabadurmus and Sylwester (2020) investigated the role of competition in the corruption–innovation relationship using firm‐level data from the 2012–2016 business environment enterprise performance surveys. Their results show that all measures of bribery are positively associated with innovation especially for firms reporting many competitors and obstacles.…”