Corruption and corporate innovation

Jesse Ellis, Jared Smith, Roger White

Research output: Contribution to journalArticle

Abstract

We examine whether political corruption impedes innovation. Using a comprehensive sample of US 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 two 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 languageEnglish (US)
JournalJournal of Financial and Quantitative Analysis
DOIs
StateAccepted/In press - Jan 1 2019

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Corporate innovation
Corruption
Innovation
Causality
Ethnic diversity
Social welfare
Fixed effects

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

Cite this

Corruption and corporate innovation. / Ellis, Jesse; Smith, Jared; White, Roger.

In: Journal of Financial and Quantitative Analysis, 01.01.2019.

Research output: Contribution to journalArticle

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