To Dance Under the Table? Corruption and Entrepreneurship in a Resource Dependence Perspective

Abstract

Extant literature has been characterized by conflicting views on the effect of corruption on entrepreneurship. Drawing from resource dependence theory and the corruption literature, we suggest individuals' assessment of entrepreneurial choice under corruption is driven by two simultaneously operating forces: perceived government misappropriation risks and the perceived attractiveness of expected returns. The two forces vary with the level of corruption and jointly shape individuals' entrepreneurial choices in a U-shaped fashion. We further suggest power distance, welfare socialism, and the rule of law will weaken the U-shaped relationship. Using large cross-national data, our hypotheses receive strong support. Our study sheds new light on the literature on entrepreneurship and international business and generates policy implications for countries across the globe to manage corruption.

Keywords: corruption, Entrepreneurship, resource dependency theory, multilevel analysis