The influence of internationalization and formal institutions on corruption and firm innovation in emerging markets

Abstract

Corruption is most common in emerging markets, whereas small medium enterprises are at the largest danger of becoming involved in corruptive practices. At this point, prior researchers were unable to establish a sufficient agreement about the effects of corruption, institutional quality and internationalization on SMEs’ firm innovation in emerging markets. Applying the World Bank database, which encompasses 8153 SMEs in eight different emerging markets countries led through a logistic regression analysis to intriguing outcomes. Namely, this thesis found that corruption can definitely enhance SMEs’ firm innovation as a non-market strategy to overcome bureaucratic obstacles. Interestingly, this thesis demonstrated that high-quality institution decreases SMEs firm innovation and that high-quality institutions strengthen the effect of corruption on firm innovation in emerging markets. In contrary to other results, internationalization indicated to enhance SMEs’ firm innovation and also seems to reduce the degree to which corruption is used while undertaking internationalization activities.