IDEAS home Printed from https://ideas.repec.org/a/kap/sbusec/v47y2016i1d10.1007_s11187-016-9728-7.html
   My bibliography  Save this article

Does corruption ever help entrepreneurship?

Author

Listed:
  • Nabamita Dutta

    (University of Wisconsin)

  • Russell Sobel

    (The Citadel)

Abstract

The current literature contains mixed results regarding the impact of corruption on entrepreneurship and economic growth. In this paper, we examine a much larger set of countries and time periods to attempt to gain insights into this relationship. In particular, the central question is whether corruption can compensate for a bad business climate. Our results are clear; corruption hurts entrepreneurship. The impact is smaller, but remains negative, when business climates are bad. This is in contrast to previous literature that suggests corruption may increase entrepreneurship under a bad business climate. We find corruption never improves entrepreneurship; it simply hurts less when business climates are not conducive to growth in the first place.

Suggested Citation

  • Nabamita Dutta & Russell Sobel, 2016. "Does corruption ever help entrepreneurship?," Small Business Economics, Springer, vol. 47(1), pages 179-199, June.
    • Handle: RePEc:kap:sbusec:v:47:y:2016:i:1:d:10.1007_s11187-016-9728-7
    DOI: 10.1007/s11187-016-9728-7
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s11187-016-9728-7
    File Function: Abstract
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s11187-016-9728-7?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Du Rietz, Anita & Henrekson, Magnus, 2000. "Testing the Female Underperformance Hypothesis," Small Business Economics, Springer, vol. 14(1), pages 1-10, February.
    2. Philippe Aghion & Robin Burgess & Stephen J. Redding & Fabrizio Zilibotti, 2008. "The Unequal Effects of Liberalization: Evidence from Dismantling the License Raj in India," American Economic Review, American Economic Association, vol. 98(4), pages 1397-1412, September.
    3. Miriam Bruhn, 2011. "License to Sell: The Effect of Business Registration Reform on Entrepreneurial Activity in Mexico," The Review of Economics and Statistics, MIT Press, vol. 93(1), pages 382-386, February.
    4. Torsten Persson & Guido Tabellini, 2006. "Democracy and Development: The Devil in the Details," American Economic Review, American Economic Association, vol. 96(2), pages 319-324, May.
    5. David B. Audretsch & Max Keilbach, 2007. "The localisation of entrepreneurship capital: Evidence from Germany," Papers in Regional Science, Wiley Blackwell, vol. 86(3), pages 351-365, August.
    6. Milo Bianchi, 2012. "Financial Development, Entrepreneurship, and Job Satisfaction," The Review of Economics and Statistics, MIT Press, vol. 94(1), pages 273-286, February.
    7. La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert, 1999. "The Quality of Government," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 15(1), pages 222-279, April.
    8. Asiedu, Elizabeth & Lien, Donald, 2011. "Democracy, foreign direct investment and natural resources," Journal of International Economics, Elsevier, vol. 84(1), pages 99-111, May.
    9. Daron Acemoglu & Simon Johnson & James A. Robinson & Pierre Yared, 2008. "Income and Democracy," American Economic Review, American Economic Association, vol. 98(3), pages 808-842, June.
    10. Acs,Zoltan J. & Desai,Sameeksha Vishvanath & Klapper,Leora & Acs,Zoltan J. & Desai,Sameeksha Vishvanath & Klapper, Leora F, 2008. "What does"entrepreneurship"data really show ? a comparison of the global entrepreneurship monitor and World Bank group datasets," Policy Research Working Paper Series 4667, The World Bank.
    11. Klapper, Leora & Laeven, Luc & Rajan, Raghuram, 2006. "Entry regulation as a barrier to entrepreneurship," Journal of Financial Economics, Elsevier, vol. 82(3), pages 591-629, December.
    12. Ingrid Verheul & André Van Stel & Roy Thurik, 2006. "Explaining female and male entrepreneurship at the country level," Entrepreneurship & Regional Development, Taylor & Francis Journals, vol. 18(2), pages 151-183, March.
    13. Edward L. Glaeser & Claudia Goldin, 2006. "Corruption and Reform: Lessons from America's Economic History," NBER Books, National Bureau of Economic Research, Inc, number glae06-1, January.
    14. Anokhin, Sergey & Schulze, William S., 2009. "Entrepreneurship, innovation, and corruption," Journal of Business Venturing, Elsevier, vol. 24(5), pages 465-476, September.
    15. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    16. Glaeser, Edward L. & Saks, Raven E., 2006. "Corruption in America," Journal of Public Economics, Elsevier, vol. 90(6-7), pages 1053-1072, August.
    17. Anja Hülsewig, 2009. "Measuring Corruption: A Comparison between the Transparency International's Corruption Perceptions Index and the World Bank's Worldwide Governance Indicators," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 7(3), pages 42-52, October.
    18. Anh T. Le, 1999. "Empirical Studies of Self‐Employment," Journal of Economic Surveys, Wiley Blackwell, vol. 13(4), pages 381-416, September.
    19. R. G. Lipsey & Kelvin Lancaster, 1956. "The General Theory of Second Best," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 24(1), pages 11-32.
    20. Isaac Ehrlich & Francis T. Lui, 1999. "Bureaucratic Corruption and Endogenous Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 107(S6), pages 270-293, December.
    21. Estrin, Saul & Korosteleva, Julia & Mickiewicz, Tomasz, 2013. "Which institutions encourage entrepreneurial growth aspirations?," Journal of Business Venturing, Elsevier, vol. 28(4), pages 564-580.
    22. Justin Van Der Sluis & Mirjam Van Praag & Wim Vijverberg, 2008. "Education And Entrepreneurship Selection And Performance: A Review Of The Empirical Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 22(5), pages 795-841, December.
    23. Fonseca, Raquel & Lopez-Garcia, Paloma & Pissarides, Christopher A., 2001. "Entrepreneurship, start-up costs and employment," European Economic Review, Elsevier, vol. 45(4-6), pages 692-705, May.
    24. Posner, Richard A, 1975. "The Social Costs of Monopoly and Regulation," Journal of Political Economy, University of Chicago Press, vol. 83(4), pages 807-827, August.
    25. Zoltán J. Ács & Sameeksha Desai & Leora F. Klapper, 2015. "What does ‘‘entrepreneurship’’ data really show?," Chapters, in: Global Entrepreneurship, Institutions and Incentives, chapter 24, pages 464-480, Edward Elgar Publishing.
    26. David Roodman, 2009. "A Note on the Theme of Too Many Instruments," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 71(1), pages 135-158, February.
    27. Catherine Armington & Zoltan J. Acs, 2008. "The Determinants of Regional Variation in New Firm Formation," Chapters, in: Entrepreneurship, Growth and Public Policy, chapter 18, pages 224-243, Edward Elgar Publishing.
    28. Treisman, Daniel, 2000. "The causes of corruption: a cross-national study," Journal of Public Economics, Elsevier, vol. 76(3), pages 399-457, June.
    29. Spiller, Pablo T, 1990. "Politicians, Interest Groups, and Regulators: A Multiple-Principals Agency Theory of Regulation, or "Let Them Be Bribed."," Journal of Law and Economics, University of Chicago Press, vol. 33(1), pages 65-101, April.
    30. Peter T. Leeson & Russell S. Sobel, 2008. "Weathering Corruption," Journal of Law and Economics, University of Chicago Press, vol. 51(4), pages 667-681, November.
    31. Christian Bjørnskov & Nicolai Foss, 2010. "Economic Freedom and Entrepreneurial Activity: Some Cross-Country Evidence," Springer Books, in: Andreas Freytag & Roy Thurik (ed.), Entrepreneurship and Culture, chapter 0, pages 201-225, Springer.
    32. Edward L. Glaeser & Claudia Goldin, 2006. "Corruption and Reform: Introduction," NBER Chapters, in: Corruption and Reform: Lessons from America's Economic History, pages 3-22, National Bureau of Economic Research, Inc.
    33. Uhlaner, L.M. & Thurik, A.R. & Hutjes, J., 2002. "Post-Materialism as a Cultural Factor Influencing Entrepreneurial Activity across Nations," ERIM Report Series Research in Management ERS-2002-62-STR, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    34. Tideman, T Nicolaus & Tullock, Gordon, 1976. "A New and Superior Process for Making Social Choices," Journal of Political Economy, University of Chicago Press, vol. 84(6), pages 1145-1159, December.
    35. Asiedu, Elizabeth & Jin, Yi & Nandwa, Boaz, 2009. "Does foreign aid mitigate the adverse effect of expropriation risk on foreign direct investment?," Journal of International Economics, Elsevier, vol. 78(2), pages 268-275, July.
    36. Axel Dreher & Martin Gassebner, 2013. "Greasing the wheels? The impact of regulations and corruption on firm entry," Public Choice, Springer, vol. 155(3), pages 413-432, June.
    37. Karaivanov, Alexander, 2012. "Financial constraints and occupational choice in Thai villages," Journal of Development Economics, Elsevier, vol. 97(2), pages 201-220.
    38. Christine Tamásy & Richard Le Heron, 2008. "The Geography Of Firm Formation In New Zealand," Tijdschrift voor Economische en Sociale Geografie, Royal Dutch Geographical Society KNAG, vol. 99(1), pages 37-52, February.
    39. Vartuhí Tonoyan & Robert Strohmeyer & Mohsin Habib & Manfred Perlitz, 2010. "Corruption and Entrepreneurship: How Formal and Informal Institutions Shape Small Firm Behavior in Transition and Mature Market Economies," Entrepreneurship Theory and Practice, , vol. 34(5), pages 803-832, September.
    40. Nabamita Dutta & Peter T. Leeson & Claudia R. Williamson, 2013. "The Amplification Effect: Foreign Aid's Impact on Political Institutions," Kyklos, Wiley Blackwell, vol. 66(2), pages 208-228, May.
    41. Paul D. Reynolds & Nancy M. Carter & William B. Gartner & Patricia G. Greene, 2004. "The Prevalence of Nascent Entrepreneurs in the United States: Evidence from the Panel Study of Entrepreneurial Dynamics," Small Business Economics, Springer, vol. 23(4), pages 263-284, November.
    42. Tomi Ovaska & Russell S. Sobel, 2005. "Entrepreneurship in Post-Socialist Economies," Journal of Private Enterprise, The Association of Private Enterprise Education, vol. 21(Fall 2005), pages 8-28.
    43. Sachs, Jeffrey D & Warner, Andrew M, 1997. "Fundamental Sources of Long-Run Growth," American Economic Review, American Economic Association, vol. 87(2), pages 184-188, May.
    44. Ruta Aidis & Saul Estrin & Tomasz Mickiewicz, 2012. "Size matters: entrepreneurial entry and government," Small Business Economics, Springer, vol. 39(1), pages 119-139, July.
    45. Frederic Delmar & Per Davidsson, 2000. "Where do they come from? Prevalence and characteristics of nascent entrepreneurs," Entrepreneurship & Regional Development, Taylor & Francis Journals, vol. 12(1), pages 1-23, January.
    46. repec:dau:papers:123456789/5067 is not listed on IDEAS
    47. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(2), pages 277-297.
    48. Paolo Mauro, 1995. "Corruption and Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(3), pages 681-712.
    49. World Bank, 2013. "World Development Indicators 2013," World Bank Publications - Books, The World Bank Group, number 13191.
    50. Reynolds, Paul D & Miller, Brenda & Maki, Wilbur R, 1995. "Explaining Regional Variation in Business Births and Deaths: U.S. 1976-88," Small Business Economics, Springer, vol. 7(5), pages 389-407, October.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Marcus Box & Karl Gratzer & Xiang Lin, 2023. "Self-employment, corruption, and property rights: a comparative analysis of European and CEE economies," SN Business & Economics, Springer, vol. 3(1), pages 1-29, January.
    2. Dutta, Nabamita & Roy, Sanjukta, 2016. "The interactive impact of press freedom and media reach on corruption," Economic Modelling, Elsevier, vol. 58(C), pages 227-236.
    3. Ratan J. S. Dheer, 2017. "Cross-national differences in entrepreneurial activity: role of culture and institutional factors," Small Business Economics, Springer, vol. 48(4), pages 813-842, April.
    4. Dutta, Nabamita & Sobel, Russell S., 2018. "Entrepreneurship and human capital: The role of financial development," International Review of Economics & Finance, Elsevier, vol. 57(C), pages 319-332.
    5. Roberto Ganau & Andrés Rodríguez‐Pose, 2019. "Do high‐quality local institutions shape labour productivity in Western European manufacturing firms?," Papers in Regional Science, Wiley Blackwell, vol. 98(4), pages 1633-1666, August.
    6. Filipe R. Campante & Davin Chor & Quoc‐Anh Do, 2009. "Instability And The Incentives For Corruption," Economics and Politics, Wiley Blackwell, vol. 21(1), pages 42-92, March.
    7. Arusha Cooray & Nabamita Dutta & Sushanta Mallick, 2016. "Does female human capital formation matter for the income effect of remittances? Evidence from developing countries," Oxford Development Studies, Taylor & Francis Journals, vol. 44(4), pages 458-478, October.
    8. Abd Rashid, Suliza & Masron, Tajul Ariffin & Malim, Nurhafiza Abdul Kader, 2023. "The effect of corruption on entrepreneurship in the presence of weak regulatory quality: Evidence from developing countries," Socio-Economic Planning Sciences, Elsevier, vol. 86(C).
    9. Deepraj Mukherjee, 2018. "Corruption in International Business: Does Economic Globalization Help?," Global Business Review, International Management Institute, vol. 19(3), pages 623-634, June.
    10. repec:hal:spmain:info:hdl:2441/o45fqtltm960r11iq437ski90 is not listed on IDEAS
    11. Orkhan Nadirov & Bruce Dehning, 2020. "Tax Progressivity and Entrepreneurial Dynamics," Sustainability, MDPI, vol. 12(9), pages 1-21, April.
    12. Maurizio Lisciandra & Emanuele Millemaci, 2017. "The economic effect of corruption in Italy: a regional panel analysis," Regional Studies, Taylor & Francis Journals, vol. 51(9), pages 1387-1398, September.
    13. Kunieda, Takuma & Okada, Keisuke & Shibata, Akihisa, 2011. "Corruption, Globalization, and Economic Growth: Theory and Evidence," MPRA Paper 35355, University Library of Munich, Germany.
    14. Piergiuseppe Fortunato & Ugo Panizza, 2015. "Democracy, education and the quality of government," Journal of Economic Growth, Springer, vol. 20(4), pages 333-363, December.
    15. Mukherjee, Deepraj & Dutta, Nabamita, 2018. "What determines governance across nations: Do economic and social globalization play a role?," Economic Modelling, Elsevier, vol. 69(C), pages 103-113.
    16. repec:spo:wpmain:info:hdl:2441/o45fqtltm960r11iq437ski90 is not listed on IDEAS
    17. Theodora Bermpei & Antonios Nikolaos Kalyvas & Lorenzo Neri & Antonella Russo, 2019. "Will Strangers Help you Enter? The Effect of Foreign Bank Presence on New Firm Entry," Journal of Financial Services Research, Springer;Western Finance Association, vol. 56(1), pages 1-38, August.
    18. Maksim Belitski & Farzana Chowdhury & Sameeksha Desai, 2016. "Taxes, corruption, and entry," Small Business Economics, Springer, vol. 47(1), pages 201-216, June.
    19. Anselm Komla Abotsi & Tongyai Iyavarakul, 2015. "Tolerable Level of Corruption for Foreign Direct Investment in Africa," Contemporary Economics, University of Economics and Human Sciences in Warsaw., vol. 9(3), September.
    20. Marcus Dejardin & Hélène Laurent, 2024. "Entry-regulation and corruption: grease or sand in the wheels of entrepreneurship? Fresh evidence according to entrepreneurial motives," Small Business Economics, Springer, vol. 62(3), pages 1223-1272, March.
    21. Mthanti, Thanti & Ojah, Kalu, 2017. "Institutions, Human Capital and Entrepreneurial Orientation (EO): Implications for Growth Strategy," MPRA Paper 89551, University Library of Munich, Germany.
    22. Kotera, Go & Okada, Keisuke & Samreth, Sovannroeun, 2012. "Government size, democracy, and corruption: An empirical investigation," Economic Modelling, Elsevier, vol. 29(6), pages 2340-2348.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:sbusec:v:47:y:2016:i:1:d:10.1007_s11187-016-9728-7. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.