How does Corruption Affect Innovation? - New Evidence from Macro-level Data

This article explores the connection between a country’s corruption-related risk exposures and innovations. For this purpose, I performed two fixed-effects panel-data regression models by utilizing Research and Development (R&D) expenditure as a dependent variable and absolute corruption scores & degree of corruption-related risks exposures as independent variables in the presence of five control variables for 2019–2021. The corruption scores & degree of corruption-related risk exposures were collected from the Risk Indexes database. Data related to other variables, such as R&D expenditure, Industry structure, Energy Prices, and Urbanization levels, were fetched from the website of World Bank indicators. Further, the Population data were obtained from the worldmeters database. Consistent with the Sand-the-wheels theory, this research found that the country’s high corruption-related risk exposures negatively influence innovations. On the other hand, the lower degree of corruption-related risks boosts innovations in an economy. This study provides policymakers with significant implications of the country’s corruption-related risk exposures in the best interests of the world’s stakeholders.