"Heterogeneous Links Between Corruption and Innovation in a Global Economy". Preprint available on preprint.org: https://doi.org/10.20944/preprints202412.1912.v1.

This study examines the impact of corruption on innovation in businesses from a compar- ative standpoint, demonstrating that the relationship is undoubtedly heterogeneous between busi- nesses and nations. There are two primary research questions addressed: i) In the countries under inspection does corruption help or hinder the innovative activities? ii) To what degree is the insti- tutional framework and business strategy (domestic and international presence) influencing the re- lationship between corruption and innovation? We use the V and VI surveys (2012–2016 and 2018– 2019) of EBRD-World Bank Business Environment and Performance Survey, with a balanced panel with 3584 establishments across 22 countries, economies of Eastern Europe and Central Asia. The findings show two key points about the link between corruption and innovation: (1) the importance of institutional settings for the link’s strength and even direction when EU and non-EU countries are compared and (2) the diverse effects of corruption at the firm-level, when foreign and domestic ownership is considered: the “greasing” effect is particularly relevant for foreign firms in weak institutional environments but appears useless, if not sanding, for foreign firms in settings with stronger controls over corruption.