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Does firm growth increase corruption? Evidence from an instrumental variable approach

Small business economics, 2020-06, Vol.55 (1), p.237-256 [Peer Reviewed Journal]

Springer Science+Business Media, LLC, part of Springer Nature 2019 ;Springer Science+Business Media, LLC, part of Springer Nature 2019. ;ISSN: 0921-898X ;EISSN: 1573-0913 ;DOI: 10.1007/s11187-019-00160-x

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  • Title:
    Does firm growth increase corruption? Evidence from an instrumental variable approach
  • Author: Nguyen, Thuy Dieu
  • Subjects: Bribery ; Bureaucracy ; Business and Management ; Business growth ; Causality ; Corruption ; Deviation ; Economic models ; Entrepreneurship ; Industrial Organization ; Management ; Microeconomics ; Public officials ; Regression analysis ; Sales ; Size of enterprise ; Standard deviation
  • Is Part Of: Small business economics, 2020-06, Vol.55 (1), p.237-256
  • Description: Prior literature on the role that firm heterogeneity plays in corruption finds that larger firms pay smaller bribes and are less likely to pay bribes than smaller firms. These studies, however, often overlook the plausible reverse causality between firm growth or firm size and corruption. Utilizing an innovative identification strategy that accounts for this source of endogeneity, this study finds that increased firm size actually causes greater corruption and bureaucratic burdens on a typical firm and provides evidence against the argument for a uniform corruption burden regardless of size. It was determined that a one standard deviation increase in sales leads to 0.33 standard deviation increase in bribes, and to 0.36 standard deviation increase in management time spent dealing with public officials. Moreover, although corruption burden increases with increasing firm size, we find that this relationship is non-linear and diminishes in magnitude as firm size approaches to medium and large. We conclude with implications and policy considerations.
  • Publisher: New York: Springer Science + Business Media
  • Language: English
  • Identifier: ISSN: 0921-898X
    EISSN: 1573-0913
    DOI: 10.1007/s11187-019-00160-x
  • Source: ProQuest Central
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