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How does anti-corruption affect corporate innovation? Evidence from recent anti-corruption efforts in China

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  • Xu, Gang
  • Yano, Go

Abstract

This paper investigates the effect of anti-corruption on the financing of and investing in innovation by using a detailed data set of Chinese listed companies from 2009 to 2015. We find that stronger anti-corruption efforts make firms more likely to acquire external funds, mainly the long-term debt. Moreover, we show that firms located in provinces with stronger anti-corruption efforts invest significantly more of their newly acquired funds in R&D and generate more patents. Further empirical tests suggest this positive and statistically significant effect almost comes entirely from the current massive anti-corruption campaign launched by President Xi Jinping since 2013. We further test two mechanisms regarding the corruption-innovation nexus: the expropriation hypothesis and the rent-seeking hypothesis. The results show that only firms without political connections, non-state owned enterprises (non-SOEs), firms operating in non-regulated industries and younger firms benefit from the stronger anti-corruption efforts, all supportive of the former mechanism.

Suggested Citation

  • Xu, Gang & Yano, Go, 2017. "How does anti-corruption affect corporate innovation? Evidence from recent anti-corruption efforts in China," Journal of Comparative Economics, Elsevier, vol. 45(3), pages 498-519.
    • Handle: RePEc:eee:jcecon:v:45:y:2017:i:3:p:498-519
    DOI: 10.1016/j.jce.2016.10.001
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    More about this item

    Keywords

    Anti-corruption; Corruption; Innovation; Corporate R&D; China;
    All these keywords.

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy

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