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Effect of corruption on firm level innovation: Evidence from Pakistan

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  • Syed Muhammad Imran
  • Hafeez Ur Rehman
  • Rana Ejaz Ali Khan

Abstract

Corruption is a widespread phenomenon in majority of the developing countries. However, literature evident both positive and negative impact of corruption in economises at macro level. At the micro level the studies rarely exist explaining this phenomenon. This paper empirically investigates the micro level impact of corruption on firms’ innovation. For the purpose, we use “percent of firms expected to give gifts to public officials (to get things done)†as a proxy for corruption, and innovation is measured by “firms that introduce new or significantly improved products or services over the last three years†. The results explain that corruption augments firms’ innovation, that is, “grease the wheels†exists in the case of Pakistan.

Suggested Citation

  • Syed Muhammad Imran & Hafeez Ur Rehman & Rana Ejaz Ali Khan, 2020. "Effect of corruption on firm level innovation: Evidence from Pakistan," Economics and Business Letters, Oviedo University Press, vol. 9(1), pages 41-47.
    • Handle: RePEc:ove:journl:aid:13836
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    3. Vivek F. Farias & Andrew A. Li & Tianyi Peng, 2021. "Learning Treatment Effects in Panels with General Intervention Patterns," Papers 2106.02780, arXiv.org, revised Mar 2023.
    4. Hung Quang Doan & Nam Hoang Vu & Binh Tran-Nam & Ngoc-Anh Nguyen, 2022. "Effects of tax administration corruption on innovation inputs and outputs: evidence from small and medium sized enterprises in Vietnam," Empirical Economics, Springer, vol. 62(4), pages 1773-1800, April.
    5. Rahmouni, Mohieddine, 2023. "Corruption and corporate innovation in Tunisia during an economic downturn," Structural Change and Economic Dynamics, Elsevier, vol. 66(C), pages 314-326.

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