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The impact of corruption and local content policy in on firm performance: Evidence from Kazakhstan

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  • Kalyuzhnova, Yelena
  • Belitski, Maksim

Abstract

Many governments of both resource-rich and resource-poor countries have recently started to use local content policies as a tool in their industrial policies. However, careless implementation of local content policies can lead to corrupt practices and threaten firm performance. Using the World Bank Enterprise Survey of 933 Kazakhstani firms in 2009 and 2013, we study the effect of corruption on employment and sales growth and the role that explicit local content policy plays in this relationship. Our findings demonstrate that corruption has “a greasing the wheels effects”, facilitating employment growth and sales growth in Kazakhstani firms. In case of securing a government contract, corruption will have a larger effect on sales growth than on job growth. This study provides insights and implications for contract law and industrial policy in Kazakhstan.

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  • Kalyuzhnova, Yelena & Belitski, Maksim, 2019. "The impact of corruption and local content policy in on firm performance: Evidence from Kazakhstan," Resources Policy, Elsevier, vol. 61(C), pages 67-76.
    • Handle: RePEc:eee:jrpoli:v:61:y:2019:i:c:p:67-76
    DOI: 10.1016/j.resourpol.2019.01.016
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    Cited by:

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    2. Gbadago, Frank Yao & Enu-Kwesi, Francis & Agyei, Samuel Kwaku & Garchie, John Gatsi, 2024. "Effects of operators’ strategic approach to local content and in-country spending requirements on financial performance of upstream petroleum sector firms, Ghana," Resources Policy, Elsevier, vol. 93(C).
    3. Issabayev, Murat & Pelzman, Joseph, 2019. "A model of FDI spillover in a natural resource rich LDC," Resources Policy, Elsevier, vol. 64(C).
    4. Medase, S. Kehinde & Ahali, Aaron Yaw & Belitski, Maksim, 2023. "Natural resources, quality of institutions and entrepreneurship activity," Resources Policy, Elsevier, vol. 83(C).
    5. Boyer, Marcel & El Moussaoui, Hicham & Petkantchin, Valentin, 2024. "Le microentrepreneuriat et l'accès à l'eau potable dans les quartiers précaires d'Abidjan (Côte d'Ivoire)," TSE Working Papers 24-1584, Toulouse School of Economics (TSE).
    6. Marcel Boyer & Hicham El Moussaoui & Valentin Petkantchin, 2024. "Le microentrepreneuriat et l’accès à l’eau potable dans les quartiers précaires d’Abidjan (Côte d’Ivoire)," CIRANO Working Papers 2024s-05, CIRANO.
    7. Malkina, M. & Ovchinnikov, V., 2020. "Influence of regulatory burden and involvement of business in corruption on revenue: Grease vs sand effect," Journal of the New Economic Association, New Economic Association, vol. 47(3), pages 40-65.
    8. Douglas Barrios & Nikita Taniparti & Ricardo Hausmann & Clement Brenot & Can Soylu & Roukaya El Houda & Ekaterina Vashkinskaya & Felicia Belostecinic & Sophia Henn, 2023. "A Growth Diagnostic of Kazakhstan," CID Working Papers 427, Center for International Development at Harvard University.
    9. Grant, J. Andrew & Wilhelm, Cindy, 2022. "A flash in the pan? Agential constructivist perspectives on local content, governance, and the large-scale mining–artisanal and small-scale mining interface in West Africa," Resources Policy, Elsevier, vol. 77(C).
    10. Lee, Jeoung Yul & Jiménez, Alfredo & Choi, Seong-jin & Choi, Yun Hyeong, 2022. "Ideological polarization and corporate lobbying activity: The contingent impact of corruption distance," Journal of Business Research, Elsevier, vol. 141(C), pages 448-461.
    11. Emanuel Wittberg & Gissur Ó. Erlingsson & Karl Wennberg, 2024. "Does local government corruption inhibit entrepreneurship?," Small Business Economics, Springer, vol. 62(2), pages 775-806, February.
    12. Arena, Marika & Azzone, Giovanni & Dell’Agostino, Laura & Scotti, Francesco, 2022. "Precision policies and local content targets in resource-rich developing countries: The case of the oil and gas sector in Mozambique," Resources Policy, Elsevier, vol. 76(C).
    13. Audretsch, David B. & Belitski, Maksim & Chowdhury, Farzana & Desai, Sameeksha, 2024. "Regulating entrepreneurship quality and quantity," Research Policy, Elsevier, vol. 53(2).
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    More about this item

    Keywords

    Corruption; Local content; Firm performance; Policy; Kazakhstan;
    All these keywords.

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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