Country governance, corruption, and the likelihood of firms’ innovation

Chien Chiang Lee, Chih Wei Wang, Shan Ju Ho

Research output: Contribution to journalArticlepeer-review

31 Scopus citations

Abstract

Using a sample of firms from the World Bank Enterprise Survey for the period 2006–2016 in emerging and developing countries, we find that corruption has a negative impact on the likelihood of innovations, thus supporting the “sanding-the-wheels” hypothesis. Our empirical results also show that corruption at the firm level, in the manufacturing industry, and in regions with the worst governance or that are more corrupt has a significant negative effect on innovation. In addition, country governance plays a particularly important role in innovative activity for corrupt firms. The policy implication is that the government or authority should strengthen the positive role of government effectiveness, rule of law, regulatory quality, and control of corruption in order to improve firms’ innovation within an environment of corruption.

Original languageEnglish
Pages (from-to)326-338
Number of pages13
JournalEconomic Modelling
Volume92
DOIs
StatePublished - Nov 2020

Keywords

  • Corruption
  • Government governance
  • Innovation
  • Patents
  • Quality certificates

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