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Corruption as an Obstacle for Doing Business in the Western Balkans: A Business Sector Perspective

Author

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  • Jelena Budak

    (The Institute of Economics, Zagreb)

  • Edo Rajh

    (The Institute of Economics, Zagreb)

Abstract

This paper investigates business people’s perceptions of corruption as an obstacle for doing business and their attitudes towards corruption. It is based on a survey conducted on the sample of over 1800 business owners and managers in the Western Balkans region. Using the original survey data collected in 2010 for seven countries – Albania, Bosnia and Herzegovina, Croatia, Kosovo, FYR Macedonia, Montenegro and Serbia – the paper explores business people’s views on the ways in which the business sector is dealing with corruption as well as on the perceived role of private and government agents in curbing corruption. The factor analysis produced three distinct factors: (1) Understanding corruption as “grease in the wheels”; (2) Individual action can contribute to the curbing of corruption; (3) Corruption is a government-related issue. The main research question was whether the respondents’ attitudes towards corruption are related to the following variables: country of origin, their own corruption experience, perceptions of corruption as an obstacle for doing business and the general corruption prevalence trends. The results of the analysis of variance show that the country of origin strongly determines business people’s attitudes on corruption. Respondents with corruption experience tend to justify corruption as “grease in the wheels” more than “clean” respondents. Business people who believe that corruption is on the rise or that it poses a big obstacle for their business put greater emphasis on the government dealing with the issue of corruption than on individual or private anti-corruption initiatives. The findings provide useful policy recommendations for countries in the Western Balkans region to design a more entrepreneurship-friendly environment.

Suggested Citation

  • Jelena Budak & Edo Rajh, 2011. "Corruption as an Obstacle for Doing Business in the Western Balkans: A Business Sector Perspective," Working Papers 1104, The Institute of Economics, Zagreb.
    • Handle: RePEc:iez:wpaper:1104
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    References listed on IDEAS

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    1. Shang-Jin Wei, 2000. "Does Corruption Relieve Foreign Investors of the Burden of Taxes and Capital Controls?," NBER Chapters, in: International Taxation and Multinational Activity, pages 73-88, National Bureau of Economic Research, Inc.
    2. Kaufman, Daniel & Shang-Jin Wei, 1999. "Does"grease money"speed up the wheels of commerce?," Policy Research Working Paper Series 2254, The World Bank.
    3. Pierre-Guillaume Méon & Khalid Sekkat, 2005. "Does corruption grease or sand the wheels of growth?," Public Choice, Springer, vol. 122(1), pages 69-97, January.
    4. Axel Dreher & Martin Gassebner, 2007. "Greasing the Wheels of Entrepreneurship? The Impact of Regulations and Corruption on Firm Entry," KOF Working papers 07-166, KOF Swiss Economic Institute, ETH Zurich.
    5. Vito Tanzi, 1998. "Corruption Around the World: Causes, Consequences, Scope, and Cures," IMF Staff Papers, Palgrave Macmillan, vol. 45(4), pages 559-594, December.
    6. Paolo Mauro, 1995. "Corruption and Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(3), pages 681-712.
    7. Mr. Vito Tanzi, 1998. "Corruption Around the World: Causes, Consequences, Scope, and Cures," IMF Working Papers 1998/063, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Williams Nick & Radevic Dragana & Gherhes Cristian & Vorley Tim, 2017. "The nature of corruption affecting entrepreneurship in transition economies: Some lessons from Montenegro," South East European Journal of Economics and Business, Sciendo, vol. 12(2), pages 20-34, December.
    2. Traikova, Diana & Manolova, Tatiana S. & Möllers, Judith & Buchenrieder, Gertrud, 2017. "Corruption perceptions and entrepreneurial intentions in a transitional context - The case of rural Bulgaria," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 22(03), pages 1-21.
    3. Jorge MONGAY, 2017. "Market Economies Potentialities and Cultural Clusters. A Global and Longitudinal Study," Expert Journal of Economics, Sprint Investify, vol. 5(1), pages 1-13.
    4. Valerija Botrić & Ljiljana Božić, 2015. "Innovators' vs Non-innovators' perceptions of corruption in European post-transition economies," International Journal of Business and Economic Sciences Applied Research (IJBESAR), International Hellenic University (IHU), Kavala Campus, Greece (formerly Eastern Macedonia and Thrace Institute of Technology - EMaTTech), vol. 8(3), pages 47-58, December.
    5. Rajeev K. Goel & Jelena Budak & Edo Rajh, 2015. "Private sector bribery and effectiveness of anti-corruption policies," Applied Economics Letters, Taylor & Francis Journals, vol. 22(10), pages 759-766, July.
    6. Fadil Sahiti, 2021. "Institutions and entrepreneurial activity: a comparative analysis of Kosovo and other economies," Journal of Entrepreneurship and Public Policy, Emerald Group Publishing Limited, vol. 10(1), pages 98-119, February.

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    More about this item

    Keywords

    corruption; business sector; attitudes and perceptions; corruption experience; Western Balkans;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption

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