Does corruption grease or sand the wheels of investment or innovation? Different effects in advanced and emerging economies

Yuna Heo, Fangfang Hou and Seongkyu (Gilbert) Park

Applied Economics, 2021, vol. 53, issue 1, 35-60

Abstract: We assess different effects of corruption on corporate activities depending on whether a firm operates in an advanced or emerging economy. In emerging economies, greater corruption is related to greater capital expenditures. In advanced economies, greater corruption is positively related to innovation. Further, we find the relationship between corruption and capital exp20enditure (innovation) is moderated by diversification. Our findings suggest that corruption leads firms to take more action in the areas that the economy has a competitive edge in.

Date: 2021
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DOI: 10.1080/00036846.2020.1791313

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