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Corruption and Innovation

In: Money and Ideas

Author

Listed:
  • Prashanth Mahagaonkar

    (Max Planck Institute of Economics)

Abstract

While one strand of research views corruption as a boost to economic growth (e.g., Leff, 1964), the other views it as a hindrance (e.g., Mauro, 1995). Most of the “hindrance” literature relies on the linkage of corruption to growth through its affect on investment.Méon and Sekkat (2005) find that corruption affects growth independently from its impact on investment in economies where there are weak governance structures. There is a need therefore in this context to study channels of economic growth that are affected by corruption. This paper deals with one such channel, namely innovative activity. This paper is the first in a way that it tries to merge two distinct fields of economics of innovation and public choice. Innovation is considered crucial for economic growth (mainly from the technology-gap approach, see Fagerberg, 1994). Innovative activities might get affected by corruption due to lack of resources or lack of trust in institutions. A related view is suggested by Shleifer and Vishny (1993) that corrupt firms would often report having advanced technologies, even though they are not needed necessarily. This would mean that the amount of innovative activity seems large only due to the presence of corruption. This issue is of utmost importance in the context of less developed countries (LDCs) that have to cope with socio-political-economic instabilities and bureaucratic pressures and yet at the same time have to keep up with economic growth.

Suggested Citation

  • Prashanth Mahagaonkar, 2010. "Corruption and Innovation," International Studies in Entrepreneurship, in: Money and Ideas, chapter 0, pages 81-97, Springer.
    • Handle: RePEc:spr:inschp:978-1-4419-1228-2_5
    DOI: 10.1007/978-1-4419-1228-2_5
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    Citations

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    Cited by:

    1. Chei Bukari & Emm anuel Atta Anaman, 2021. "Corruption and firm innovation: a grease or sand in the wheels of commerce? Evidence from lower-middle and upper-middle income economies," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 11(2), pages 267-302, June.
    2. Hanen Sdiri & Mohamed Ayadi, 2022. "Does Innovation Foster or Mitigate the Corruption Obstacle? Firm-Level Evidence from Tunisia," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 13(1), pages 367-386, March.
    3. Dokas, Ioannis & Panagiotidis, Minas & Papadamou, Stephanos & Spyromitros, Eleftherios, 2023. "Does innovation affect the impact of corruption on economic growth? International evidence," Economic Analysis and Policy, Elsevier, vol. 77(C), pages 1030-1054.
    4. Nirosha Wellalage & Sujani Thrikawala, 2021. "Does bribery sand or grease the wheels of firm level innovation: evidence from Latin American countries," Journal of Evolutionary Economics, Springer, vol. 31(3), pages 891-929, July.
    5. Wellalage, Nirosha Hewa & Fernandez, Viviana, 2019. "Innovation and SME finance: Evidence from developing countries," International Review of Financial Analysis, Elsevier, vol. 66(C).

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