Corruption research in economics has a long history and seminal early articles. On the one side recent comparison of empirical results on causes and consequences of corruption show contrasting recent with older findings and newer development which have not been measured empirically yet. On the other side, there is a general consensus on the negative effect of corruption on a country but its implications for firms’ strategies are still insufficiently understood. In particular the link between corruption and innovating activities suffers of the “grease and sand” multiple results, at both country and firm level. This paper examines the corruption-innovation link in emerging countries. In these markets corruption remains an ubiquitous feature of doing business, frequently reported in press, and surely Central Asia and Eastern Europe exhibit substantial heterogeneity in bribing practices, institutional quality and innovative potential. The paper shows that, when the selection effect is considered, different firms’ strategies arise. In particular, the treatment effect of corruption on innovation is positive for corrupt firms and negative for non corrupt firms. Corrupt firms appear rational because paying bribes increases their innovation activities. Even non-corrupt firms appear rational because in presence of bribes their innovating activities would be lower. Corrupt firms pay bribes because they are capable to exploit the advantages of corruption on innovation. Non-corrupt firms do not pay bribes because there is no effect of corruption on innovation activities. In the first case, corruption greases the wheels of innovation, in the second case it sands the wheels of innovation. Only when the selection effect is adequately considered, they may actually coexist, depending on the level of the analysis and whether or not selection processes play a role. Building on this result, future research can reexamine the well established economic outcomes such as the productivity or the economic performance impact of corruption, in presence (absence) of selection processes.
"Corruption, innovation and firms’ heterogeneous reactions in emerging countries", paper presentato alla 35ma National Conference of Labour Economics (AIEL), 17-18 settmbre 2020 e alla 61ma Conferenza Nazionale della Società Italiana degli Economisti, 20-23 ottobre 2020
Iorio, Roberto;
2020-01-01
Abstract
Corruption research in economics has a long history and seminal early articles. On the one side recent comparison of empirical results on causes and consequences of corruption show contrasting recent with older findings and newer development which have not been measured empirically yet. On the other side, there is a general consensus on the negative effect of corruption on a country but its implications for firms’ strategies are still insufficiently understood. In particular the link between corruption and innovating activities suffers of the “grease and sand” multiple results, at both country and firm level. This paper examines the corruption-innovation link in emerging countries. In these markets corruption remains an ubiquitous feature of doing business, frequently reported in press, and surely Central Asia and Eastern Europe exhibit substantial heterogeneity in bribing practices, institutional quality and innovative potential. The paper shows that, when the selection effect is considered, different firms’ strategies arise. In particular, the treatment effect of corruption on innovation is positive for corrupt firms and negative for non corrupt firms. Corrupt firms appear rational because paying bribes increases their innovation activities. Even non-corrupt firms appear rational because in presence of bribes their innovating activities would be lower. Corrupt firms pay bribes because they are capable to exploit the advantages of corruption on innovation. Non-corrupt firms do not pay bribes because there is no effect of corruption on innovation activities. In the first case, corruption greases the wheels of innovation, in the second case it sands the wheels of innovation. Only when the selection effect is adequately considered, they may actually coexist, depending on the level of the analysis and whether or not selection processes play a role. Building on this result, future research can reexamine the well established economic outcomes such as the productivity or the economic performance impact of corruption, in presence (absence) of selection processes.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.
