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Corruption and Entrepreneurship in Emerging Markets

Author

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  • Jiaqi Liu
  • Mingzhi Hu
  • Huan Zhang
  • Jon Carrick

Abstract

We applied an institutional perspective lens to examining the relationship between corruption and entrepreneurship. Our results suggest that corruption plays an informal but legitimate institutional channel in facilitating entrepreneurship in sub-national regions with underdeveloped formal institutions. However, we also find the positive relationship between corruption and entrepreneurship is limited, and that high levels of corruption have a negative effect on entrepreneurship. Examining a longitudinal nationwide individual-level survey from China, we find an inverted U relationship between corruption and entrepreneurship; i.e., sub-national corruption at low levels is positively associated with focal regions’ prevalence of entrepreneurship, but prevalence of entrepreneurship is negatively correlated with high levels of corruption. Additionally, we find that sub-national regions with stronger marketization level (e.g., pro-market resource allocation and lower market entry barriers) can offset the diminishing positive effect of corruption. This study theoretically advances the puzzle of mixed findings on the corruption–entrepreneurship relationship by considering the sub-national region differences. We also enrich the understanding of the role of informal institutions on entrepreneurship activities in emerging markets.

Suggested Citation

  • Jiaqi Liu & Mingzhi Hu & Huan Zhang & Jon Carrick, 2019. "Corruption and Entrepreneurship in Emerging Markets," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 55(5), pages 1051-1068, April.
    • Handle: RePEc:mes:emfitr:v:55:y:2019:i:5:p:1051-1068
    DOI: 10.1080/1540496X.2018.1531242
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    Cited by:

    1. Alice Medioli & Pier Luigi Marchini & Tatiana Mazza, 2024. "The impact of corruption and public governance quality on family firm business strategy," Business Strategy and the Environment, Wiley Blackwell, vol. 33(1), pages 55-69, January.
    2. Pier Luigi Marchini & Tatiana Mazza & Alice Medioli, 2020. "Corruption and sustainable development: The impact on income shifting in European international groups," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 27(2), pages 717-730, March.
    3. Guney, Yilmaz & Karpuz, Ahmet & Komba, Gabriel, 2020. "The effects of board structure on corporate performance: Evidence from East African frontier markets," Research in International Business and Finance, Elsevier, vol. 53(C).
    4. Sanja Tišma & Sanja Maleković & Daniela Angelina Jelinčić & Mira Mileusnić Škrtić & Ivana Keser, 2022. "From Science to Policy: How to Support Social Entrepreneurship in Croatia," JRFM, MDPI, vol. 15(1), pages 1-19, January.
    5. Hajilee, Massomeh & Stringer, Donna Y. & Hayes, Linda A., 2021. "On the link between the shadow economy and stock market development: An asymmetry analysis," The Quarterly Review of Economics and Finance, Elsevier, vol. 80(C), pages 303-316.
    6. Das, Khanindra Ch. & Mahalik, Mantu Kumar, 2020. "International subsidiary performance of Indian multinationals in the extractive sector: The role of institutional quality, corruption and investment regime," Resources Policy, Elsevier, vol. 67(C).
    7. Hu, Mingzhi & Su, Yinxin & Ye, Wenping, 2019. "Promoting or inhibiting: The role of housing price in entrepreneurship," Technological Forecasting and Social Change, Elsevier, vol. 148(C).

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