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Bribe Payments and Innovation in Developing Countries: Are Innovating Firms Disproportionately Affected?

Published online by Cambridge University Press:  13 May 2014

Meghana Ayyagari ,
Asli Demirgüç-Kunt  and
Vojislav Maksimovic
Meghana Ayyagari
Affiliation:
[email protected], School of Business, George Washington University, 2201 G St NW, Washington, DC 20052
Asli Demirgüç-Kunt
Affiliation:
[email protected], Development Research Group, World Bank, 1818 H St NW, Washington, DC 20433
Vojislav Maksimovic
Affiliation:
[email protected], Smith School of Business, University of Maryland, 4417 Van Munching Hall, College Park, MD 20742.
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Abstract

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Innovating firms pay more bribes than noninnovators across 25,000 firms in 57 countries. The difference is larger in countries with more bureaucratic regulation and weaker governance. Innovators that pay bribes do not receive better services and do not have greater propensity to engage in other illegal activities such as tax evasion. Thus, innovators are more likely to be victims of corruption than perpetrators. Our findings point to the challenges facing entrepreneurs in developing countries and are consistent with the view that rent seeking by government officials unlike private criminal activity is more likely to target innovators.

Type
Research Articles
Information
Journal of Financial and Quantitative Analysis , Volume 49 , Issue 1 , February 2014 , pp. 51 - 75
Copyright
Copyright © Michael G. Foster School of Business, University of Washington 2014 

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