The impact of institutions on SMEs' innovation in transition economies

Albulena Kadriu, Besnik Krasniqi () and Cristina Boari

International Journal of Entrepreneurship and Innovation Management, 2019, vol. 23, issue 4, 399-424

Abstract: This study aims to investigate the institutional impact on innovation of firms across 30 transition economies in Central Asia and Eastern Europe. Building on the institutional theory literature, we hypothesise on the direct influence of formal and informal institutions on innovation, also taking into consideration the interaction effects between them, where the latter plays the role of moderator variable, and third, we examine the European Union (EU) membership as control variable. The study uses structural equation modelling (SEM) and data from Business Environment and Enterprise Performance Surveys (BEEPSs) conducted by the World Bank/European Bank for Reconstruction and Development (EBRD) in 2012-2014 to understand the impact of institutional factors on innovation of SMEs in transition economies. Findings suggest that the perceived institutional obstacles to innovation are overcome by the use of bribery to compensate for government ineffectiveness, bureaucracy and inflexible legislation that inhibits smooth economic activities.

Keywords: structural equation modelling; SMEs; BEEPS; bribes; corruption; political instability; courts; informal sector; tax administration; tax rates; business license; customs. (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:ids:ijeima:v:23:y:2019:i:4:p:399-424

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