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Corruption's impact on innovation

NSF Award:

Collaborative: Tax Evasion and Corruption Around the World? Are firms victims or perpetrators?  (University of Maryland College Park)

Collaborative: Tax evasion and Corruption across the world: Are firms victims or perpetrators?  (George Washington University)

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Innovation and entrepreneurship are recognized as the engines of economic growth. However, after investigating thousands of company records from 57 different nations, NSF-funded researchers concluded that corruption can act as a tax against firms striving to innovate in developing countries.

By explaining how corruption interrupts innovation, Vojislav Maksimovic of the University of Maryland and colleagues have provided crucial insight into the intricacies of economic growth and development around the world.

For their study, the researchers investigated the rates of corruption (particularly bribery of government officials and tax evasion) across 25,000 firms in 57 countries. Their findings suggest that innovating firms are more likely to pay bribes than their noninnovating counterparts, but that those bribes do not lead to better services.  

Furthermore, though many companies recoup the cost of paying bribes by evading taxes, innovating firms generally do not. Taken together, these findings suggest that innovating firms, compared to noninnovating firms, are more likely to be victims of corruption and less likely to be perpetrators of tax evasion. 

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  • cash in hand
Corruption can act as a tax against innovation.
Stuart Miles, freedigitalphotos.net

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