The Corruption–Innovation Nexus: Evidence from Developing Economies

Trung-Hieu Nguyen () and Hoang Van-Anh Thi
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Trung-Hieu Nguyen: University of Amsterdam
Hoang Van-Anh Thi: Moscow Aviation Institute

Chapter Chapter 23 in Global Changes and Sustainable Development in Asian Emerging Market Economies: Volume 1, 2024, pp 387-400 from Springer

Abstract: Abstract For the majority of developing economies, corruption is a widespread phenomenon because of weak institutional settings. Corruption has been widely recognized as unfavorable for economic growth as it exploits resources and inhibits foreign investment. On the other hand, developing economies advocate firms’ innovative behaviors as a significant driver for economic growth. As such, it is of great concern to study the relationship between corruption and innovation. Economic theories have been divided regarding this nexus. Some argue for a “grease-the-wheels” hypothesis: corruption helps reduce the uncertainty associated with an innovative decision. In contrast, others argue for a “sand-the-wheels” hypothesis when corruption hampers firm innovation with higher costs. This chapter explores the effect of petty corruption on firms’ innovative behaviors in developing Asian economies using the data from the World Bank Enterprise Survey. An empirical strategy of regression analysis and instrumental variables technique is employed to account for endogeneity. The model also considers the effect of other factors such as training activities or holding internationally recognized standards. This chapter contributes both in academic and practical terms when it presents empirical evidence to the current debate and reminds policymakers to consider more factors regarding economic policies.

Keywords: Corruption; Innovation; Developing Asian economies (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-031-68838-6_23

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DOI: 10.1007/978-3-031-68838-6_23

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