INNOVATION AND CORRUPTION: DISSECTING CAUSAL LINKAGE USING PATENT APPLICATION INFORMATION FROM INDIA

Prashant Poddar and Sanjay Singh
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Prashant Poddar: Indian Institute of Management Lucknow, IIM Road, Prabandh Nagar, Lucknow 226013, Uttar Pradesh, India

The Singapore Economic Review (SER), 2022, vol. 67, issue 03, 1147-1173

Abstract: Using World Bank Enterprise Survey data on bribery and patent applications, we try to study the causal linkage between firm level innovation and corruption in India. Specifically, we try to understand if corruption impacts innovation at the firm level. Since we find that innovation and corruption are jointly determined, we propose instrumental variables regression approach to identify this causal effect. We instrument bribery by exogenously determined external audit parameter and then use a recursive bivariate probit model combined with industry-fixed effects to reach our results. Our findings suggest that bribery has an adverse impact on innovation. The results of our study are much in contrast to the existing literature, which largely supports a positive relationship between innovation and corruption.

Keywords: bribery; corruption; innovation; instrument variable; patent application (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1142/S0217590820450046

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