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Purpose: While common sense suggests that corruption will likely have a negative impact on the economy as it raises the cost of doing business, research on the topic showed inconsistent results (positive, negative and neutral). This paper aims to verify whether corruption has a "grease" or "sand effect on the wheels" of entrepreneurial rates and under which conditions corruption will have stronger or weaker effects.
Advances in business strategy and competitive advantage book series, 2015
There is a consensus that corruption may result in high societal costs. A growing body of research reveals the negative effects of corruption on a variety of economic indicators. This chapter presents a literature review on the impact of corruption on entrepreneurship. It allows us to suggest that one of the transition channels through which corruption has impacted growth is entrepreneurship. The main channels in which corruption impacts entrepreneurship is through reduced incentives for entrepreneurial activity and reduced trust within the system. The authors present evidence that the negative impact of an incremental increase in the level of corruption on entrepreneurship is more harmful in developed countries than in developing countries. Thus, they stress the need for more research in this area with the aim of establishing appropriate frameworks for the fight of corruption in both developing and developed countries and suggest significant gains from anti-corruption efforts, especially in developed countries.
This paper analyses the impact of political discretion and corruption on firm creation rates, distinguishing between formal and informal entrepreneurship. The results show that political discretion discourages the creation of formal enterprises as fewer restrictions on the government's opportunistic behaviour increases uncertainty and risks for entrepreneurial activities. Corruption also has a negative influence on formal entrepreneurship, as it increases the costs of the procedures required to create and manage the company with no assurance that the other party will fulfill the agreement. Regarding informal entrepreneurship, our results show that the negative impact of corruption also applies to non-formalised firms.
This paper examines how corruption and regulatory environments in doing business influences entrepreneurial opportunity across a wide range of countries. We hypothesize that corruption has both facilitating and detrimental effects on the entrepreneurial opportunity, and that such relationship is contingent on different levels of regulatory conditions for ease of doing business. Facilitating effects can be seen in countries with poor regulatory procedures and the opposite is true for the countries with well-established regulatory procedures. Drawing from institutional theory (North, 1991), this study employs multiple data from Transparency International’s Corruption Perception Index (CPI), World Bank’s “Ease of Doing Business” ranking, and data from Global Entrepreneur Monitor (GEM), focusing on 88 countries for the period 2008-2012. The findings provide additional insight to the complex influences of corruption and business regulations on entrepreneurship, specifically on the opport...
2011
The article focuses on the impact of corruption on "productive" entrepreneurship following Baumol (1990) seminal work. In order to do so we used a unique dataset on international levels of entrepreneu
We applied an institutional perspective lens to examining the relationship between corruption and entrepreneurship. Our results suggest that corruption plays an informal but legitimate institutional channel in facilitating entrepreneurship in sub-national regions with underdeveloped formal institutions. However, we also find the positive relationship between corruption and entrepreneurship is limited, and that high levels of corruption have a negative effect on entrepreneurship. Examining a longitudinal nationwide individual-level survey from China, we find an inverted U relationship between corruption and entrepreneurship; i.e., sub-national corruption at low levels is positively associated with focal regions' prevalence of entrepreneurship, but prevalence of entrepreneurship is negatively correlated with high levels of corruption.
2012
The paper investigates whether the impact of regulations on entrepreneurship depends on corruption. We first test whether regulations robustly deter firm entry into the markets. Our results show that some regulations are indeed important determinants of entrepreneurial activity. Specifically, more procedures required to start a business and larger minimum capital requirements are detrimental to entrepreneurship. Second, we test whether corruption reduces the negative impact of regulations on entrepreneurship in highly regulated economies. Our empirical analysis for a maximum of 43 countries over the period [2003][2004][2005] shows that corruption is beneficial in highly regulated economies. At the maximum level of regulation among our sample of countries, corruption significantly increases entrepreneurial activity. Our results thus provide support for the 'grease the wheels' hypothesis.
2016
This paper’s aim is to analyze the relationship between entrepreneurship and corruption in the Brazilian states. A theorist approach and empirical evidence are used. Although many authors emphasize the importance of entrepreneurship for the long-run economic growth, there are few works that consider the corruption effect as a reducer of economic growth by diminishing incentives to entrepreneurship. In order to achieve that, we use an instrumental variable as a way to overcome the endogeneity problem presented by the nature of our variables of interest. Based on the political economy literature, the chosen instrument was the margin of victory for regional elections, as a proxy for political competition. However, the results show no relation between corruption and entrepreneurship whatsoever. Other dependent variables are also tested and the evidence seems to show us that corruption influences on the number of workers in the public sector. Keywords: Entrepreneurship; corruption; panel...
Journal of Business Venturing, 2009
a r t i c l e i n f o a b s t r a c t Efforts to control corruption increase levels of trust in the ability of the state and market institutions to reliably and impartially enforce law and the rules of trade. Such trust facilitates the development of arms-length trade and the coordination of complex economic activities. We posit that better control of corruption will also be associated with rising levels of innovation and entrepreneurship. Absent such trust, however, monitoring and other transactions cost should restrict the scale and scope of trade and thus, hamper productivity and investment in innovation and entrepreneurship. Longitudinal data from 64 nations lends support to our propositions, thus helping unpack the puzzling relationship between entrepreneurship, innovation, and corruption. (W.S. Schulze). 1 Tel.: +1 801 983 7446. 2 Authors contributed equally and are listed in alphabetical order. 0883-9026/$see front matter
Entrepreneurship Theory and Practice, 2010
This article explores the determinants of corruption in transition economies of the post-Soviet Union, Central-Eastern Europe, and Western industrialized states. We look in-depth at the East–West gap in corruption, and why entrepreneurs and small business owners become engaged in corrupt deals. Part of the answers lie in the country-specific formal and informal institutional make-up. The likelihood of engaging in corruption is influenced by the lower efficiency of financial and legal institutions and the lack of their enforcements. Also, viewing illegal business activities as a widespread business practice provides the rationale for entrepreneurs to justify their own corrupt activities. Moreover, closed social networks with family, friends, and national bureaucrats reduce the opportunism of the contracting party of the corrupt deal, thus providing breeding grounds for corruption.
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