Corruption, firm growth and export propensity in Kenya

This paper draws from research that sought to explore the structure of corruption in Kenya and its implications on the performance of firms.

The research takes the form of descriptive and econometrics analyses of Investment Climate Assessment data sets.

Kenyan manufacturers spent significant proportions of their annual sales on unofficial payments including kick‐backs on government contracts. There is also evidence of co‐movement between such unofficial payments and red‐tape, suggesting that corruption does not play any greasing function. Not only does corruption undermine firm growth but also reduces the propensity to export. The findings uphold others that demonstrate the deleterious consequences of corruption.

Further work is needed in tidying up the methods of collecting corruption data. Although a battery of strategies was used to reduce potential response biases common in corruption data, the information leans towards perceptions so that the findings remain tentative.

The results should be of interest to policy makers and researchers and should put the fight against corruption on a firmer footing.

The paper establishes that corruption undermines the performance of firms.