Does Corruption Grease or Sand the Wheels of Investment or Innovation? Different Effects in Advanced and Emerging Economies
49 Pages Posted: 5 Apr 2019 Last revised: 8 Feb 2021
Date Written: February 20, 2019
We assess different effects of corruption on corporate activities depending on whether a firm operates in an advanced or emerging economy. In emerging economies, greater corruption is related to greater capital expenditures. In advanced economies, greater corruption is positively related to innovation. However, we do not find significant results regarding investment for advanced economies or regarding innovation for emerging economies. Our findings suggest that corruption leads firms to take more action in the areas that the economy has a competitive edge in.
Keywords: corruption; corporate investment; innovation; emerging markets; advanced economies
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