Skip to main content
Disciplines
Automotive Business IT + Informatics Construction + Real Estate Electrical Engineering + Electronics Energy + Sustainability Insurance + Risk Finance + Banking Management + Leadership Marketing + Sales Mechanical Engineering + Materials
Events
DE
EN
Books
Journals
Topic Page
Marketing
Start single access now
Access for companies
EXTENDED SEARCH
Log in
Top
Eurasian Business Review
Published in:

01-12-2016 | Original Paper

Corruption, innovation and firm growth: firm-level evidence from Egypt and Tunisia

Authors: Micheline Goedhuys, Pierre Mohnen, Tamer Taha

Published in: Eurasian Business Review | Issue 3/2016

Log in

Activate our intelligent search to find suitable subject content or patents.

search-config
loading …

Abstract

Using recently collected firm-level data from Egypt and Tunisia, this paper explores the effect of institutional obstacles and corruption on the innovative behavior of firms and their effect on firms’ employment growth. We estimate the micro-level interactions between corruption and institutional obstacles and test the hypothesis that corruption ‘greases the wheels’ of firm performance when bureaucratic procedures are more severe and hampering innovation. Accounting for endogeneity and simultaneity, the paper uses a conditional recursive mixed-process model (CMP). The results show that corruption has a direct negative effect on the likelihood that a firm is an innovator, but a positive effect when interacted with institutional obstacles. This provides support for the hypothesis that corruption serves as a mechanism to bypass the bureaucratic obstacles related to obtaining the necessary business permits and licenses for product innovation. These effects also resonate into firm growth, through their effect on product innovation.
previous article Erratum to: Factors influencing the entrepreneurial engagement of opportunity and necessity entrepreneurs
next article Entry, exit and net job creation in Tunisia: an exploratory analysis

Dont have a licence yet? Then find out more about our products and how to get one now:

Springer Professional "Wirtschaft"

Online-Abonnement

Mit Springer Professional "Wirtschaft" erhalten Sie Zugriff auf:

  • über 67.000 Bücher
  • über 340 Zeitschriften

aus folgenden Fachgebieten:

  • Bauwesen + Immobilien
  • Business IT + Informatik
  • Finance + Banking
  • Management + Führung
  • Marketing + Vertrieb
  • Versicherung + Risiko




Jetzt Wissensvorsprung sichern!

inform now

Springer Professional "Wirtschaft+Technik"

Online-Abonnement

Mit Springer Professional "Wirtschaft+Technik" erhalten Sie Zugriff auf:

  • über 102.000 Bücher
  • über 537 Zeitschriften

aus folgenden Fachgebieten:

  • Automobil + Motoren
  • Bauwesen + Immobilien
  • Business IT + Informatik
  • Elektrotechnik + Elektronik
  • Energie + Nachhaltigkeit
  • Finance + Banking
  • Management + Führung
  • Marketing + Vertrieb
  • Maschinenbau + Werkstoffe
  • Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

inform now
Appendix
Available only for authorised users
Footnotes
1
This study uses the term “MENA region” to describe the following countries: Djibouti, Egypt, Palestine, Israel, Jordan, Morocco, Lebanon, Tunisia, and Yemen. The choice of countries is dictated by data availability and in accordance to the World Bank’s regional grouping.
 
2
A country’s score indicates the perceived level of public sector corruption on a scale of 0–100, where 0 means that a country is perceived as highly corrupt and a 100 means that a country is perceived as very clean.
 
3
Out of these firms, 25.2 % have experienced at least one bribery payment request to accelerate the bureaucratic processes, compared to respectively 34 and 17 % worldwide Enterprise Surveys (http://​www.​enterprisesurvey​s.​org), The World Bank.
 
4
From a micro perspective, firms from MENA have the least performance in innovative activities. The region has an average capacity utilization of 62.7 %, a net decrease of labour productivity of 10.5 % and only 5.4 % of firms are using a technology licensed from a foreign company, compared respectively to 72.2, 2.9 and 14.8 % for the worldwide average. Source: Enterprise Surveys (ibid).
 
5
An innovation is the introduction of products, production processes, marketing and organizational methods that are new to the firm, irrespective of whether they are new to the firm’s competitors, its market or the world. Conceptually this definition follows the OECD (2005) Oslo Manual and is a measure of diffusion of technology and knowledge.
 
6
Proxied by the bribes from foreign-owned companies to government officials in host countries.
 
7
De Rosa et al. (2010) define corruption as the occurrence of informal payment request from governmental officials to perform an official task.
 
8
The estimation uses the Conditional Mixed Process program developed by Roodman (2011).
 
9
A continuous measure of product innovation is the percentage of annual sales accounted for by new or significantly improved products.
 
10
The choice of obstacles was based on the availability of a sufficient number of observations. The 11 obstacles to operations are: electricity; transport; access to land; crime, theft and disorder; finance; tax rates; tax administrations; political instability; labor regulations; workforce education and corruption.
 
11
The minimum level of bureaucracy (0) would indicate that the firm has found that the obstacle of getting a business license or permit is the least important relative to the other 11 business obstacles in the dataset.
 
12
Results are available upon request.
 
13
Estimated at 25 % of the GDP (Jütting and Laiglesia 2009).
 
Literature
Acemoglu, D., & Verdier, T. (1998). Property rights, corruption and the allocation of talent: A general equilibrium approach. The Economic Journal, 108, 1381–1403.CrossRef
Altenburg, T. (2008). Building inclusive innovation systems in developing countries—why it is necessary to rethink the policy agenda. In IV Globelics Conference at Mexico City (pp. 1–17). September 22–24, 2008.
Amit, R., & Schoemaker, P. J. H. (1993). Strategic assets and organizational rent. Strategic Management Journal, 14(1), 33–46.CrossRef
Andvig, J. C., & Fjeldstad, O. (2000). Research on corruption: A policy oriented survey. Oslo: NORAD.
Anokhin, S., & Schulze, W. S. (2009). Entrepreneurship, innovation, and corruption. Journal of Business Venturing, 24(5), 465–476.CrossRef
Atiyas, I. (2011). Firm-level data in the Mena region: Research questions, data requirements and possibilities. Middle East Development Journal, 3(2), 159–190.CrossRef
Baumol, W. J. (1990). Entrepreneurship: Productive, unproductive, and destructive. Journal of Political Economy, 98(5), 893–921.CrossRef
Bogliacino, F., et al. (2012). Innovation and development: The evidence from innovation surveys. Latin American Business Review, 13(3), 219–261.CrossRef
Brown, M., Jappelli, T., & Pagano, M. (2009). Information sharing and credit: Firm-level evidence from transition countries. Journal of Financial Intermediation, 18(2), 151–172.CrossRef
Coad, A., & Rao, R. (2008). Innovation and firm growth in high-tech sectors: A quantile regression approach. Research Policy, 37(4), 633–648.CrossRef
Cornell University, INSEAD, & WIPO. (2015). Global innovation index 2015: Effective innovation policies for development. Fontainebleau, Ithaca, and Geneva.
D’Estea, P., Rentocchinib, F. & Jurado, J. M. V. (2010). Lowering barriers to engage in innovation: evidence from the Spanish innovation survey. In 8th International Triple Helix Conference (pp. 1–14).
Damanpor, F. (1996). Bureaucracy and innovation revisited: Effects of contingency factors, industrial sectors, and innovation characteristics. The Journal of High Technology Management Research, 7(2), 149–173.CrossRef
De Rosa, D., Gooroochurn, N., & Gorg, H. (2010). Corruption and productivity: Firm-level evidence from the BEEPS survey. Policy Research Working Paper Series no. 5348. Washington D.C.: The World Bank.
DiRienzo, C., & Das, J. (2015). Innovation and role of corruption and diversity: A cross-country study. International Journal of Cross Cultural Management, 15(1), 51–72.CrossRef
Dridi, M. (2013). Corruption and economic growth: The transmission channels. Journal of Business Studies Quarterly, 4(4), 121–152.
Duncan, R. B. (1976). The ambidextrous organization: Designing dual structures for innovation. In The management of organization design—strategies and Implementation (pp. 167–189). New York, NY: North-Holland Publications.
Edquist, C., & Jöhnson, B. (1997). Institutions and Organisations in systems of innovation. Systems of innovation: Technologies, institutions and organizations (pp. 41–60). London: Pinter Publishers/Cassel Academic.
Fagerberg, J., & Srholec, M. (2008). Technology and development: Unpacking the relationship(s). TIK Working Papers on Innovation Studies no. 20080623. Oslo: TIK.
Fisman, R., & Svensson, J. (2007). Are corruption and taxation really harmful to growth? Firm level evidence. Journal of Development Economics, 83, 63–75.CrossRef
Freeman, C. (1987). Technology, policy, and economic performance: Lessons from Japan. London: Printer.
Galia, F., & Legros, D. (2004). Complementarities between obstacles to innovation: Evidence from France. Research Policy, 33(8), 1185–1199.CrossRef
Goedhuys, M., & Sleuwaegen, L. (2000). Entrepreneurship and growth of entrepreneurial firms in Cote d’Ivoire. Journal of Development Studies, 36(3), 123.CrossRef
Goedhuys, M., & Sleuwaegen, L. (2010). High-growth entrepreneurial firms in Africa: A quantile regression approach. Small Business Economics, 34(1), 31–51.CrossRef
Grossman, G. M., & Helpman, E. (1993). Innovation and growth in the global economy. Cambridge, MA: The MIT Press.
Guetat, I. (2006). The effects of corruption on growth performance of the MENA countries. Journal of Economics and Finance, 30(2), 208–221.CrossRef
Habiyaremye, A., & Raymond, W. (2013). Transnational corruption and innovation in transition economies. UNU-MERIT Working Paper Series no. 2013-050, Maastricht.
Huntington, S. P. (1968). Political order and political decay. Political order in changing societies (pp. 1–92). New Haven: Yale University Press.
Jütting, J., & Laiglesia, J. R. (2009). Is informal normal? Towards more and better jobs in developing countries. Development Center Studies, Paris: OECD Publishing.
Krastanova, P. (2014). Greasing the wheels of innovation: How corruption and informal practices of firms impact the level of innovation in Bulgaria? Central European University.
Lambsdorff, J. (2007). The institutional economics of corruption and reform. Cambridge: Cambridge University Press.CrossRef
Leff, N. H. (1964). Economic development through bureaucratic corruption. American Behavioral Scientist, 8, 8–14.CrossRef
Leiponen, A., & Zhang, J. (2010). Capital structure and innovation in Asian emerging economies. In Druid Summer Conference “Opening Up Innovation: Strategy, Organization and Technology” (pp. 1–49).
Lui, F. T. (1985). An equilibrium queuing model of Bribery. Journal of Political Economy, 93(4), 760–781.CrossRef
Lundvall, B.-Å., Joseph, K. J., & Chaminade, C. (2009). Handbook of innovation systems and developing countries: Building domestic capabilities in a global setting. Edward Elgar Publishing.
Mahagaonkar, P. (2008). Corruption and innovation: A grease or sand relationship? Jena Economic Research Papers no. 2008-17. Jena.
Mairesse, J., & Mohnen, P. (2007). A survey of innovation surveys: Taking stock of a growing literature. Banque de France Conference on Innovation (pp. 1–16).
Mauro, P. (1995). Corruption and growth. The Quarterly Journal of Economics, 110(3), 681–712.CrossRef
Meon, P. G., & Weill, L. (2010). Is corruption an efficient grease? World Development, 38, 244–259.CrossRef
Mo, P. H. (2001). Corruption and economic growth. Journal of Comparative Economics, 29(1), 66–79.CrossRef
Mohnen, P., & Rosa, J. (2001). Les obstacles à l’innovation dans les industries de services au Canada. L’Actualité Economique, 77(2), 231–254.
Murphy, K., Shleifer, A., & Vishny, R. (1993). Why is rent-seeking so costly to growth? The American Economic Review, 83(2), 409–414.
North, D. C. (1990). Institutions, institutional change and economic performance. Cambridge: Cambridge University Press.CrossRef
OECD. (1999). Boosting innovation. Paris: OECD Publishing.
OECD. (2005). Oslo manual: Guidelines for collecting and interpreting innovation data (3rd ed., p. 162). Paris: OECD.
Qian, Y., & Xu, C. (1998). Innovation and bureaucracy under soft and hard budget constraints. Review of Economic Studies, 65(1), 151–164.CrossRef
Rodriguez, P., et al. (2006). Three lenses on the multinational enterprise: politics, corruption, and corporate social responsibility. Journal of International Business Studies, 37, 733–746.CrossRef
Romer, P. M. (1990). Endogenous technological change. Journal of Political Economy, 98, S71.CrossRef
Roodman, D. (2011). Estimating fully observed recursive. Mixed-process models with Cmp. Stata Journal, 11(2), 159–206.
Savignac, F. (2006). The impact of financial constraints on innovation: evidence from French manufacturing firms. Cahiers de la Maison des Sciences Economiques, 2006, 42.
Svensson, J., & Reinikka, R. (2002). Measuring and understanding corruption at the micro level. Corrupt exchanges: Empirical themes in the politics and political economy of corruption (pp. 134–146). Frankfurt: Nomos Verlag.
Tirole, J. (1996). A theory of collective reputations (with applications to the persistence of corruption and to firm quality). The Review of Economic Studies, 63(1), 1–22.CrossRef
Ugur, M., & Dasgupta, N. (2011). Corruption and economic growth: A meta-analysis of the evidence on low-income countries and beyond. MPRA working paper no. 31226.
Waldemar, F. S. (2012). New products and corruption: Evidence from Indian firms. The Developing Economies, 50(3), 268–284.CrossRef
Williams, R. (2012). Using the margins command to estimate and interpret adjusted predictions and marginal effects. Stata Journal, 12, 308–331.
World Bank. (2013). Transforming Arab economies: Traveling the knowledge and innovation road. The World Bank Group: Washington D.C.
Wziatek-kubiak, A., & Peczkowski, M. (2010). Complementarities between barriers to innovation: Data evidence from Poland. MICRO-DYN Working Paper no. 42/10.
Zhou, J. Q., & Peng, M. W. (2012). Does Bribery help or hurt firm growth around the world? Asia Pacific Journal of Management, 29(4), 907–921.CrossRef
Metadata
Title
Corruption, innovation and firm growth: firm-level evidence from Egypt and Tunisia
Authors
Micheline Goedhuys
Pierre Mohnen
Tamer Taha
Publication date
01-12-2016
Publisher
Springer International Publishing
Published in
Eurasian Business Review / Issue 3/2016
Print ISSN: 1309-4297
Electronic ISSN: 2147-4281
DOI
https://doi.org/10.1007/s40821-016-0062-4

Other articles of this Issue 3/2016

Erratum to: Factors influencing the entrepreneurial engagement of opportunity and necessity entrepreneurs

  • Publisher's Erratum

Entrepreneurial traits and firm innovation

  • Original Paper

Editorial note

  • Editorial Note

Entry, exit and net job creation in Tunisia: an exploratory analysis

  • Original Paper

Consumer’s comparison between local and imported organic products: a hedonic analysis of the Japanese table wine market

  • Original Paper

Financial constraints and productivity growth across the size spectrum: microeconomic evidence from Morocco

  • Original Paper

Premium Partner

    Image Credits