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Corruption and Innovation: The Case of EECA Countries

Year 2017, Volume: 6 Issue: 2, 51 - 71, 01.12.2017

Fatma Nur Karaman Kabadurmuş

Abstract

Although the effect of corruption on country-level investment is studied widely in literature, only a limited number of research has sought to understand how corruption affects firm-level innovation. Using firm-level data for twenty seven Eastern European and Central Asian countries, we empirically investigate how corruption affects innovation. We find that corruption has a positive effect on the rate of innovation. This finding is robust to alternative measurement proxies.

Keywords

Innovation Corruption EECA

References

  • Ahn, Sanghoon, (2002), Competition, Innovation and Productivity Growth: A Review of Theory and Evidence, OECD Economics Department Working Papers 317.
  • Anokhin, S., and William S. Schulze, (2009), Entrepreneurship, innovation, and corruption. Journal of business venturing, 24(5), 465-476.
  • Asiedu, E., & James Freeman, (2009), The effect of corruption on investment growth: Evidence from firms in Latin America, Sub‐Saharan Africa, and transition countries. Review of Development Economics, 13(2), 200-214.
  • Ayyagari, M., Asli Demirgüç-Kunt, Vojislav Maksimovic, (2014), Bribe Payments and Innovation in Developing Countries: Are Innovating Firms Disproportionately Affected?, Journal of Financial and Quantitative Analysis, 49(1), 51-75.
  • Azfar, O., and Peter Murrell, (2009), Identifying reticent respondents: assessing the quality of survey data on corruption and values, Economic Development and Cultural Change, 57(2), 387-411.
  • Bassetti, T., Lorenzo Dal Maso, & Nicola Lattanzi, (2015), Family businesses in Eastern European countries: How informal payments affect exports, Journal of Family Business Strategy, 6(4), 219-233.
  • Beck, T., Asli Demirguc-Kunt, and Vojislav Maksimovic (2005), Financial and Legal Constraints to Firm Growth: Does Firm Size Matter? Journal of Finance, 60(1), 137-177.
  • Blackburn, K., & Forgues-Puccio, G. F. (2009), Why is corruption less harmful in some countries than in others?. Journal of Economic Behavior & Organization, 72(3), 797-810.
  • Ben Ali, M.S., Shrabani Saha, S., (2016), Corruption and economic development. In: Ben Ali, M.S. (Ed.), Economic Development in the Middle East and North Africa. In: Challenges and Prospects, New York: Palgrave Macmillan, pp. 133–154.
  • Clarke, G. R. G., (2011), How petty is petty corruption? Evidence from firm surveys in Africa, World Development, 39(7), 1122-1132.
  • Correa, P. G., Ana M. Fernandes, Chris J. Uregian, (2010), Technology adoption and the investment climate: firm-level evidence for Eastern Europe and Central Asia. The World Bank Economic Review, 24(1), 121-147.
  • Diaby, A., & Kevin Sylwester, (2014), Bureaucratic competition and public corruption: Evidence from transition countries. European Journal of Political Economy, 35, 75-87.
  • Dreher, Axel, and Martin Gassebner, (2013), Greasing the wheels? The impact of regulations and corruption on firm entry. Public Choice, 1-20.
  • Fisman, R. and Jakob Svensson, (2007), Are Corruption and Taxation Really Harmful to Growth? Firm Level Evidence, Journal of Development Economics, 83(1), 63-75.
  • Goedhuys-Degelin, M., Pierre Mohnen, and Tamer Taha (2016), Corruption, Innovation and Firm Growth: Firm-level Evidence from Egypt and Tunisia, Eurasian Business Review, 6(3), 299-302.
  • Gorodnichenko, Y., and Monika Schnitzer, (2013), Financial constraints and innovation: Why poor countries don’t catch up, Journal of the European Economic Association, 11(5), 1115-1152.
  • Green, William H. (2008), Econometric Analysis, New Persey: Pearson Prentice Hall.
  • Habiyaremye, A., and Wladimir Raymond, (2013), Transnational corruption and innovation in transition economies, UNU-MERIT Working Papers, 2013(50), Maastricht, The Netherlands.
  • Karaman, F. N., & Sajal Lahiri, (2014), Competition and Innovation in Product Quality: Theory and Evidence from Eastern Europe and Central Asia, The BE Journal of Economic Analysis & Policy, 14(3), 979-1014.
  • Leff, Nathaniel H. (1964), Economic development through bureaucratic corruption. American behavioral scientist, 8(3), 8-14.
  • Leys, C. (1965), What is the Problem about Corruption?, The Journal of Modern African Studies, 3(2), 215-230.
  • Mahagaonkar, P. (2008), Corruption and innovation: A grease or sand relationship. Jena: Jena Economic Research Papers, 2008(17).
  • Mauro, P. (1995), Corruption and growth, The quarterly journal of economics, 110(3), 681-712.
  • Mo, Pak Hung, (2001), Corruption and economic growth, Journal of Comparative Economics (29), 66–97.
  • Noutcheva, G., and Senem Aydin-Düzgit, (2012), Lost in Europeanisation: The Western Balkans and Turkey, West European Politics, 35(1), 59-78.
  • Nguyen, N. A., Quang Hung Doan, Ngoc Minh Nguyen, and Binh Tran-Nam. (2016), The impact of petty corruption on firm innovation in Vietnam, Crime, Law and Social Change 65(4-5), 377-394.
  • Paul, Paksha B. (2010), Does corruption foster growth in Bangladesh?, International Journal of Development Issues, 9(3), 246-262.
  • Reinikka, R., and Jakob Svensson, (2005), Fighting corruption to improve schooling: Evidence from a newspaper campaign in Uganda, Journal of the European economic association, 3(2-3), 259-267.
  • Rodríguez-Pose, A., and Marco Di Cataldo, (2015), Quality of government and innovative performance in the regions of Europe, Journal of Economic Geography, 15(4), 673-706.
  • Saha, S., Rukmani Gounder, (2013), Corruption and economic development nexus: variations across income levels in a non-linear framework. Economic Modelling, (31), 70–79.
  • Shleifer, A., and Robert W. Vishny, (1993), Corruption, The quarterly journal of economics, 108(3), 599-617.
  • The World Bank, (1997), Helping Countries Combat Corruption: The Role of the World Bank, http://www1.worldbank.org/publicsector/anticorrupt/corruptn/coridx. htm, (Access: 7.7.2017)
  • Transparency International (2017), https://www.transparency.org/what-iscorruption/#define, (Access: 7.7.2017)
  • Transparency International Corruption Perceptions Index (2016), https:// www.transparency.org/news/feature/corruption_perceptions_index_2016 , (Access: 7.7.2017)
  • Veracierto, M., (2008), Corruption and innovation, Economic Perspectives, 32(1), Federal Reserve Bank of Chicago.
  • Wang, Y., and Jing You, (2012), Corruption and firm growth: Evidence from China, China Economic Review, 23(2), 415-433.
  • Zhao, Minyuan (2006), Conducting R&D in countries with weak intellectual property rights protection, Management Science, 52(8), 1185-1199.

Corruption and Innovation: The Case of EECA Countries

Year 2017, Volume: 6 Issue: 2, 51 - 71, 01.12.2017

Fatma Nur Karaman Kabadurmuş

Abstract

References

  • Ahn, Sanghoon, (2002), Competition, Innovation and Productivity Growth: A Review of Theory and Evidence, OECD Economics Department Working Papers 317.
  • Anokhin, S., and William S. Schulze, (2009), Entrepreneurship, innovation, and corruption. Journal of business venturing, 24(5), 465-476.
  • Asiedu, E., & James Freeman, (2009), The effect of corruption on investment growth: Evidence from firms in Latin America, Sub‐Saharan Africa, and transition countries. Review of Development Economics, 13(2), 200-214.
  • Ayyagari, M., Asli Demirgüç-Kunt, Vojislav Maksimovic, (2014), Bribe Payments and Innovation in Developing Countries: Are Innovating Firms Disproportionately Affected?, Journal of Financial and Quantitative Analysis, 49(1), 51-75.
  • Azfar, O., and Peter Murrell, (2009), Identifying reticent respondents: assessing the quality of survey data on corruption and values, Economic Development and Cultural Change, 57(2), 387-411.
  • Bassetti, T., Lorenzo Dal Maso, & Nicola Lattanzi, (2015), Family businesses in Eastern European countries: How informal payments affect exports, Journal of Family Business Strategy, 6(4), 219-233.
  • Beck, T., Asli Demirguc-Kunt, and Vojislav Maksimovic (2005), Financial and Legal Constraints to Firm Growth: Does Firm Size Matter? Journal of Finance, 60(1), 137-177.
  • Blackburn, K., & Forgues-Puccio, G. F. (2009), Why is corruption less harmful in some countries than in others?. Journal of Economic Behavior & Organization, 72(3), 797-810.
  • Ben Ali, M.S., Shrabani Saha, S., (2016), Corruption and economic development. In: Ben Ali, M.S. (Ed.), Economic Development in the Middle East and North Africa. In: Challenges and Prospects, New York: Palgrave Macmillan, pp. 133–154.
  • Clarke, G. R. G., (2011), How petty is petty corruption? Evidence from firm surveys in Africa, World Development, 39(7), 1122-1132.
  • Correa, P. G., Ana M. Fernandes, Chris J. Uregian, (2010), Technology adoption and the investment climate: firm-level evidence for Eastern Europe and Central Asia. The World Bank Economic Review, 24(1), 121-147.
  • Diaby, A., & Kevin Sylwester, (2014), Bureaucratic competition and public corruption: Evidence from transition countries. European Journal of Political Economy, 35, 75-87.
  • Dreher, Axel, and Martin Gassebner, (2013), Greasing the wheels? The impact of regulations and corruption on firm entry. Public Choice, 1-20.
  • Fisman, R. and Jakob Svensson, (2007), Are Corruption and Taxation Really Harmful to Growth? Firm Level Evidence, Journal of Development Economics, 83(1), 63-75.
  • Goedhuys-Degelin, M., Pierre Mohnen, and Tamer Taha (2016), Corruption, Innovation and Firm Growth: Firm-level Evidence from Egypt and Tunisia, Eurasian Business Review, 6(3), 299-302.
  • Gorodnichenko, Y., and Monika Schnitzer, (2013), Financial constraints and innovation: Why poor countries don’t catch up, Journal of the European Economic Association, 11(5), 1115-1152.
  • Green, William H. (2008), Econometric Analysis, New Persey: Pearson Prentice Hall.
  • Habiyaremye, A., and Wladimir Raymond, (2013), Transnational corruption and innovation in transition economies, UNU-MERIT Working Papers, 2013(50), Maastricht, The Netherlands.
  • Karaman, F. N., & Sajal Lahiri, (2014), Competition and Innovation in Product Quality: Theory and Evidence from Eastern Europe and Central Asia, The BE Journal of Economic Analysis & Policy, 14(3), 979-1014.
  • Leff, Nathaniel H. (1964), Economic development through bureaucratic corruption. American behavioral scientist, 8(3), 8-14.
  • Leys, C. (1965), What is the Problem about Corruption?, The Journal of Modern African Studies, 3(2), 215-230.
  • Mahagaonkar, P. (2008), Corruption and innovation: A grease or sand relationship. Jena: Jena Economic Research Papers, 2008(17).
  • Mauro, P. (1995), Corruption and growth, The quarterly journal of economics, 110(3), 681-712.
  • Mo, Pak Hung, (2001), Corruption and economic growth, Journal of Comparative Economics (29), 66–97.
  • Noutcheva, G., and Senem Aydin-Düzgit, (2012), Lost in Europeanisation: The Western Balkans and Turkey, West European Politics, 35(1), 59-78.
  • Nguyen, N. A., Quang Hung Doan, Ngoc Minh Nguyen, and Binh Tran-Nam. (2016), The impact of petty corruption on firm innovation in Vietnam, Crime, Law and Social Change 65(4-5), 377-394.
  • Paul, Paksha B. (2010), Does corruption foster growth in Bangladesh?, International Journal of Development Issues, 9(3), 246-262.
  • Reinikka, R., and Jakob Svensson, (2005), Fighting corruption to improve schooling: Evidence from a newspaper campaign in Uganda, Journal of the European economic association, 3(2-3), 259-267.
  • Rodríguez-Pose, A., and Marco Di Cataldo, (2015), Quality of government and innovative performance in the regions of Europe, Journal of Economic Geography, 15(4), 673-706.
  • Saha, S., Rukmani Gounder, (2013), Corruption and economic development nexus: variations across income levels in a non-linear framework. Economic Modelling, (31), 70–79.
  • Shleifer, A., and Robert W. Vishny, (1993), Corruption, The quarterly journal of economics, 108(3), 599-617.
  • The World Bank, (1997), Helping Countries Combat Corruption: The Role of the World Bank, http://www1.worldbank.org/publicsector/anticorrupt/corruptn/coridx. htm, (Access: 7.7.2017)
  • Transparency International (2017), https://www.transparency.org/what-iscorruption/#define, (Access: 7.7.2017)
  • Transparency International Corruption Perceptions Index (2016), https:// www.transparency.org/news/feature/corruption_perceptions_index_2016 , (Access: 7.7.2017)
  • Veracierto, M., (2008), Corruption and innovation, Economic Perspectives, 32(1), Federal Reserve Bank of Chicago.
  • Wang, Y., and Jing You, (2012), Corruption and firm growth: Evidence from China, China Economic Review, 23(2), 415-433.
  • Zhao, Minyuan (2006), Conducting R&D in countries with weak intellectual property rights protection, Management Science, 52(8), 1185-1199.
There are 37 citations in total.

Details

Primary Language English
Journal Section Research Article
Authors

Fatma Nur Karaman Kabadurmuş This is me

Publication Date December 1, 2017
Published in Issue Year 2017 Volume: 6 Issue: 2

Cite

APA Karaman Kabadurmuş, F. N. (2017). Corruption and Innovation: The Case of EECA Countries. Journal of Entrepreneurship and Innovation Management, 6(2), 51-71.