CORRUPTION AND FIRM INNOVATION: EVIDENCE FROM POST-SOVIET COUNTRIES

Elchin Aghazada and Gaygysyz Ashyrov

No 129, University of Tartu - Faculty of Economics and Business Administration Working Paper Series from Faculty of Economics and Business Administration, University of Tartu (Estonia)

Abstract: In view of the missing consensus on how corruption relates to firm innovation, this paper empirically studies the relationship between petty corruption and product, process, marketing and organizational innovations in the post-Soviet region. Exploiting cross-sectional firm-level data from the fifth round of the Business Environment and Enterprise Performance Survey (BEEPS V), the paper argues that institutional context has utmost importance when approaching this link. Probit estimations for a full sample of post-Soviet countries indicate a positive link between bribes and firm innovation. Considering variations in institutional development levels, the paper distinguishes three clusters of countries within the region with respect to the quality of institutional structures based on Worldwide Governance Indicators (WGI) data from the World Bank. The results reveal that the grease-the-wheel effect of bribery on firm innovation strongly remains in countries with weak institutional quality. To explore this link further, the paper made several additional estimations and robustness checks.

Keywords: corruption; bribery; firm innovation; product innovation; process innovation; marketing innovation; organizational innovation; institutions; post-Soviet region (search for similar items in EconPapers)
Pages: 34 pages
Date: 2021
New Economics Papers: this item is included in nep-sbm
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Persistent link: https://EconPapers.repec.org/RePEc:mtk:febawb:129

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