Corruption and corporate innovation

Jesse Ellis; Jared Smith; Roger White

doi:10.1017/S0022109019000735

Corruption and corporate innovation

Jesse Ellis, Jared Smith, Roger White

Accountancy, School of

Research output: Contribution to journal › Article › peer-review

70 Scopus citations

Abstract

We examine whether political corruption impedes innovation. Using a comprehensive sample of U.S. firms, we find that corruption has a substantial, negative relation with the quantity and quality of innovation. These results are robust to using various fixed effects, proxies for corruption and innovation, and subsamples. To establish causality, we employ 2 instruments for corruption: local ethnic diversity and the corruption of the state a firm's founder grew up in. Corruption appears to reduce innovation output both on average and for the most innovative firms. Overall, this evidence is consistent with the notion that corruption reduces social welfare by impeding innovation.

Original language	English (US)
Pages (from-to)	2124-2149
Number of pages	26
Journal	Journal of Financial and Quantitative Analysis
Volume	55
Issue number	7
DOIs	https://doi.org/10.1017/S0022109019000735
State	Published - Nov 1 2020

ASJC Scopus subject areas

Accounting
Finance
Economics and Econometrics

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Corruption and corporate innovation

Abstract

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