Hostname: page-component-78c5997874-s2hrs Total loading time: 0 Render date: 2024-11-16T07:26:16.837Z Has data issue: false hasContentIssue false
  • English
  • Français

Innovation and Perceived Corruption: A Firm-Level Analysis for India

Published online by Cambridge University Press:  19 January 2022

Nabamita Dutta Open the ORCID record for Nabamita Dutta [Opens in a new window] ,
Saibal Kar  and
Hamid Beladi
Nabamita Dutta*
Affiliation:
Department of Economics, College of Business Administration, 1725 State Street, University of Wisconsin-La Crosse, La Crosse, Wisconsin, 54601 USA
Saibal Kar
Affiliation:
Centre for Studies in Social Sciences, Calcutta and IZA, Bonn. R 1, B.P. Township, Kolkata 700 094, West Bengal, India
Hamid Beladi
Affiliation:
University of Texas at San Antonio, San Antonio, Texas, USA
*
*Corresponding author: Nabamita Dutta, Email: [email protected]
Get access Rights & Permissions [Opens in a new window]

Abstract

Do perceived obstacles about corruption matter for Indian firms when it comes to their probability to innovate? Using World Bank Enterprise Survey firm-level data, we show that a unit rise in corruption perception of firms in India lowers innovation rate by about 1 percent. The result is important in terms of policy implementation because recent studies have shown that perceived obstacles can affect firms’ probability to innovate. Such analysis is missing in the Indian context where both big and petty corruption is rampant. Our results further show that perceptions about financial barriers matter only when firms also view corruption to be bad. Perceived difficulty in accessing credit in conjunction with corruption perception lowers probability of innovation by 4 percent. This is also true for nonfinancial perceived obstacles of firms. The results remain robust to alternate identification strategies.

Keywords

innovationentrepreneurshipinformationcorruption perceptionsperceived obstaclesaccess to creditIndia
Type
Research Article
Information
Business and Politics , Volume 24 , Issue 2 , June 2022 , pp. 151 - 170
Copyright
Copyright © The Author(s), 2022. Published by Cambridge University Press on behalf of V.K. Aggarwal

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Ahlin, Christian, and Pang, J.. 2008. “Are Financial Development and Corruption Control Substitutes in Promoting Growth?” Journal of Development Economics 86 (2): 414–33.CrossRefGoogle Scholar
Anokhin, S., and Schulze, W. S.. 2009. “Entrepreneurship, Innovation, and Corruption.” Journal of Business Venturing 24 (5): 465–76.CrossRefGoogle Scholar
Ayyagari, M., Demirguc-Kunt, A., and Maksimovic, V., 2014. “Who Creates Jobs in Developing Countries?” Small Business Economics 43 (1): 75–99.CrossRefGoogle Scholar
Baldwin, J., and Lin, Z.. 2002. “Impediments to Advanced Technology Adoption for Canadian Manufacturers.” Research Policy 1 (1): 1–18.CrossRefGoogle Scholar
Bentzen, J.S. 2012. “How Bad Is Corruption? Cross-Country Evidence of the Impact of Corruption on Economic Prosperity.” Review of Development Economics 16 (1): 167–84.CrossRefGoogle Scholar
Berry, D.W., Golder, M., and Milton, D.. 2012. “Improving Tests of Theories Positing Interaction.” The Journal of Politics 74 (3): 653–671.CrossRefGoogle Scholar
Bertoni, F., and Tykvová, T.. 2015. “Does Governmental Venture Capital Spur Invention and Innovation? Evidence from Young European Biotech Companies.” Research Policy 44 (4): 925–35.CrossRefGoogle Scholar
Blanchard, P., Huiban, J.-P., Musolesi, A., and Sevestre, P.. 2013. “Where There Is aWill, There Is a Way? Assessing the Impact of Obstacles to Innovation.” Industrial and Corporate Change 22 (3): 679–710.CrossRefGoogle Scholar
Borin, A., and Mancini, M.. 2016. “Foreign Direct Investment and Firm Performance: An Empirical Analysis of Italian Firms.” Review of World Economics (Weltwirtschaftliches Archiv) 152 (4): 705–32.Google Scholar
Brambor, T., Clark, W., and Golder, M.. 2006. “Understanding Interaction Models: Improving Empirical Analyses.” Political Analysis 14 (1): 63–82.CrossRefGoogle Scholar
Braumoeller, B. 2004. “Hypothesis Testing and Multiplicative Interaction Terms.” International Organization 58 (4): 807–20.CrossRefGoogle Scholar
Bresnahan, T. F., Brynjolfsson, E., and Hitt, L. M.. 2002. “Information Technology, Workplace Organization, and the Demand for Skilled Labor: Firm-Level Evidence.” The Quarterly Journal of Economics 117 (1): 339–76.CrossRefGoogle Scholar
Canepa, A., and Stoneman, P.. 2008. “Financial Constraints to Innovation in the UK: Evidence from CIS2 and CIS3.” Oxford Economic Papers 60 (4): 711–30.CrossRefGoogle Scholar
Cefis, E., and Marsili, O.. 2005. “A Matter of Life and Death: Innovation and Firm Survival.” Industrial and Corporate Change 14(6): 1–26.CrossRefGoogle Scholar
Cohen, W.M., and Klepper, S.. 1996. “A Reprise of Size and R&D.” The Economic Journal 106 (437): 925–51.CrossRefGoogle Scholar
Delavallade, C. 2006. “Corruption and Distribution of Public Spending in Developing Countries.” Journal of Economics and Finance 30: 222–39.CrossRefGoogle Scholar
D'Este, P., Iammarino, S., Savona, M., and Von Tunzelmann, N.. 2012. “What Hampers Innovation? Revealed Barriers Versus Deterring Barriers.” Research Policy 41 (2): 482–88.CrossRefGoogle Scholar
de Waldemar, F. S. 2012. “New Products and Corruption: Evidence from Indian Firms.” The Developing Economies 50 (3): 268–84.CrossRefGoogle Scholar
Dutta, N., and Sobel, R. S.. 2016. “Does Corruption Ever Help Entrepreneurship?” Small Business Economics 47 (1): 179–99.CrossRefGoogle Scholar
Dutta, N., and Sobel, R. S.. 2021. “Entrepreneurship, Fear of Failure, and Economic Policy.” European Journal of Political Economy 66. https://doi.org/10.1016/j.ejpoleco.2020.101954.CrossRefGoogle Scholar
Dutta, N, Kar, S, and Sobel, R.S.. 2021. “What influences entrepreneurship among skilled immigrants in the USA? Evidence from micro-data.” Business Economics 56: 146–154.CrossRefGoogle Scholar
Dutta, N., Kar, S. and Roy, S.. 2013. “Corruption and Persistent Informality: An Empirical Investigation for India.” International Review of Economics & Finance 27 (C): 357–73.CrossRefGoogle Scholar
Ericson, R., and Pakes, A.. 1995. “Markov-Perfect Industry Dynamics: A Framework for Empirical Work.” Review of Economic Studies 62 (1): 53–82.CrossRefGoogle Scholar
Fernandez-Val, I. 2009. “Fixed effects estimation of structural parameters and marginal effects in panel probit models.” Journal of Econometrics 150 (1): 71–85.CrossRefGoogle Scholar
Galende, J., and De la Fuente, J. M.. 2003. “Internal Factors Determining a Firm's Innovative Behaviour.” Research Policy 32 (5): 715–36.CrossRefGoogle Scholar
Galia, F., and Legros, D.. 2004. “Complementarities between Obstacles to Innovation: Evidence from France.” Research Policy 33 (8): 1185–99.CrossRefGoogle Scholar
Glaeser, E., and Saks, R.. 2006. “Corruption in America.” Journal of Public Economics 90: 1053–72.CrossRefGoogle Scholar
Griffith, R., Redding, S., and Van Reenen, J.. 2004. “Mapping the Two Faces of R&D: Productivity Growth in a Panel of OECD Industries.” The Review of Economics and Statistics 86 (4): 883–95.CrossRefGoogle Scholar
Griffith, R., Huergo, E. Mairesse, J., and Peters, B.. 2006. “Innovation and Productivity across Four European Countries.” Oxford Review of Economic Policy 22 (4): 483–98.CrossRefGoogle Scholar
Gupta, S., Davoodi, H., and Alonso-Terme, R.. 2002. “Does Corruption Affect Income Inequality and Poverty?” Economics of Governance 3: 23–45.CrossRefGoogle Scholar
Hall, B. H. 1987. “The Relationship between Firm Size and Firm Growth in the US Manufacturing Sector.” The Journal of Industrial Economics 35 (4): 583–606.CrossRefGoogle Scholar
Heston, A., and Kumar, V. 2008. “Institutional Flaws and Corruption Incentives in India.” Journal of Development Studies 44 (9): 1243–61.CrossRefGoogle Scholar
Holmstrom, B. 1989. “Agency Costs and Innovation.” Journal of Economic Behavior and Organization 12 (3): 305–27.CrossRefGoogle Scholar
Hölzl, W. 2009. “Is the R&D Behaviour of Fast-Growing SMEs Different? Evidence from CIS III Data for 16 Countries.” Small Business Economics 33 (1): 59–75.CrossRefGoogle Scholar
Hottenrott, H., and B, Peters. 2011. “Innovative Capability and Financing Constraints for Innovation: More Money, More Innovation?” Review of Economics and Statistics 94 (4): 1126–42.CrossRefGoogle Scholar
Iammarino, S., Sanna-Randaccio, R., and Savona, M.. 2009. “The Perception of Obstacles to Innovation: Foreign Multinationals and Domestic Firms in Italy.” Revued’économie industrielle 125 (1): 75–104.Google Scholar
Johnson, N. D., LaFountain, C. L., and Yamarik, S.. 2011. “Corruption Is Bad for Growth (Even in the United States).” Public Choice 147: 377–93.CrossRefGoogle Scholar
Klepper, S. 1996. “Entry, Exit, Groxwth, and Innovation over the Product Life Cycle.” American Economic Review 86 (3): 562–83.Google Scholar
Krueger, Anne O. 1974. “The Political Economy of the Rent-Seeking Society.” American Economic Review, June 1974, 64 (3): 291–303.Google Scholar
Mairesse, J., and Mohnen, P.. 2002. “Accounting for Innovation and Measuring Innovativeness: An Illustrative Framework and an Application.” American Economic Review 92 (2): 226–30.CrossRefGoogle Scholar
Mairesse, J., and Mohnen, P.. 2010. “Using Innovation Surveys for Econometric Analysis.” NBER Working Paper 15857.CrossRefGoogle Scholar
Mallick, S., and Yang, Y.. 2013. “Productivity Performance of Export Market Entry and Exit: Evidence from Indian Firms.” Review of International Economics 21 (4): 809–24.CrossRefGoogle Scholar
Mancusi, M.L., and Vezzulli, A.. 2014. “R&D and Credit Rationing in SMEs.” Economic Inquiry 52 (3): 1153–72.CrossRefGoogle Scholar
Mauro, P. 1995. “Corruption and Growth.” Quarterly Journal of Economics 110 (3): 681–712.CrossRefGoogle Scholar
Mohnen, P., and Röller, L.-H., 2005. “Complementarities in Innovation Policy.” European Economic Review 49 (6): 1431–50.CrossRefGoogle Scholar
Mohnen, P., Mairesse, J., and Dagenais, M.. 2006. “Innovatively: A Comparison across Seven European Countries.” Economics of Innovation and New Technology 15 (4–5): 391–413.CrossRefGoogle Scholar
Muravyev, A., Talavera, O., and Schäfer, D.. 2009. “Entrepreneurs'Gender and Financial Constraints: Evidence from International Data.” Journal of Comparative Economics 37 (2): 270–86.CrossRefGoogle Scholar
Murphy, K., Shleifer, A., and Vishny, R.. 1993. “Why Is Rent-Seeking So Costly to Growth?” American Economic Review 83: 409–17.Google Scholar
Narula, R., and Zanfei, A.. 2003. “The International Dimension of Innovation.” In The Oxford Handbook of Innovation, edited by Fagerberg, J., Mowery, D. C., and Nelson, R. R., 318–345. Oxford University Press.Google Scholar
Paunov, C. 2016. “Corruption's Asymmetric Impacts on Firm Innovation.” Journal of Development Economics 118: 216–31.CrossRefGoogle Scholar
Pellegrino, G., and Savona, M.. 2017. “No Money, No Honey? Financial Versus Knowledge and Demand Constraints on Innovation.” Research Policy 46: 510–21.CrossRefGoogle Scholar
Pérez, S.E., Llopis, A.S., and Llopis, J. A. S.. 2004. “The Determinants of Survival of Spanish Manufacturing Firms.” Review of Industrial Organization 25: 251–73.CrossRefGoogle Scholar
Piva, M., and Vivarelli, M.. 2009. “The Role of Skills as a Major Driver of Corporate R&D.” International Journal of Manpower 30: 835–52.CrossRefGoogle Scholar
Savignac, F. 2008. “Impact of Financial Constraints on Innovation: What Can Be Learned from a Direct Measure?” Economics of Innovation and New Technology 17 (6): 553–69.CrossRefGoogle Scholar
Schumpeter, J. 1942. Capitalism, Socialism, and Democracy. New York: Harper and Bros.Google Scholar
Segarra-Blasco, A., Garcia-Quevedo, J., and Teruel-Carrizosa, M.. 2008. “Barriers to Innovation and Public Policy in Catalonia.” International Entrepreneurship and Management Journal 4 (4): 431–45.CrossRefGoogle Scholar
Sharma, C., and Mitra, A.. 2015. “Corruption, Governance and Firm Performance: Evidence from Indian Enterprises.” Journal of Policy Modelling 37 (5): 835–51.CrossRefGoogle Scholar
Song, J., Almeida, P., and Wu, G.. 2003. “Learning-by-Hiring: When Is Mobility More Likely to Facilitate Interfirm Knowledge Transfer?” Management Science 49 (4): 351–65.CrossRefGoogle Scholar
Swamy, A., Knack, S., Lee, Y., and Azfa, O.. 2001. “Gender and Corruption.” Journal of Development Economics 64 (1): 25–55.CrossRefGoogle Scholar
Tiwari, A., Mohnen, P., Palm, F., and Schim van der Loeff, S.. 2008. “Financial Constraint and R&D Investment: Evidence from CIS.” In Determinants of Innovative Behaviours: A Firm's Internal Practice and Its External Environments. Edited by Beers, Cees van, Kleinknecht, Alfred, Ortt, Roland, and Verburg, Robert, 217–42. Palgrave Macmillan.CrossRefGoogle Scholar
Tourigny, D., and Le, C. D.. 2004. “Impediments to Innovation Faced by Canadian Manufacturing Firms.” Economics of Innovation and New Technology 13 (3): 217–50.CrossRefGoogle Scholar
Treisman, D. 2000. “The Causes of Corruption: A Cross-National Study.” Journal of Public Economics 76 (3): 399–457.CrossRefGoogle Scholar
Webster, A., and Piesse, J.. 2018. “Are Foreign-Owned Firms More Likely to Pay Bribes Than Domestic Ones? Evidence from Emerging Markets.” World Development 102: 142–61.CrossRefGoogle Scholar
Xu, G., and Yano, G.. 2017. “How Does Anti-Corruption Affect Corporate Innovation? Evidence from Recent Anti-corruption Efforts in China.” Journal of Comparative Economics 45 (3): 498–519.CrossRefGoogle Scholar