How does anti-corruption affect corporate innovation? Evidence from recent anti-corruption efforts in China
Gang Xu and
Journal of Comparative Economics, 2017, vol. 45, issue 3, 498-519
This paper investigates the effect of anti-corruption on the financing of and investing in innovation by using a detailed data set of Chinese listed companies from 2009 to 2015. We find that stronger anti-corruption efforts make firms more likely to acquire external funds, mainly the long-term debt. Moreover, we show that firms located in provinces with stronger anti-corruption efforts invest significantly more of their newly acquired funds in R&D and generate more patents. Further empirical tests suggest this positive and statistically significant effect almost comes entirely from the current massive anti-corruption campaign launched by President Xi Jinping since 2013. We further test two mechanisms regarding the corruption-innovation nexus: the expropriation hypothesis and the rent-seeking hypothesis. The results show that only firms without political connections, non-state owned enterprises (non-SOEs), firms operating in non-regulated industries and younger firms benefit from the stronger anti-corruption efforts, all supportive of the former mechanism.
Keywords: Anti-corruption; Corruption; Innovation; Corporate R&D; China (search for similar items in EconPapers)
JEL-codes: D73 O38 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jcecon:v:45:y:2017:i:3:p:498-519
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