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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]
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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

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