Corruption, gender diversity, and firm innovation

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Innovation is key to the survival of firms in emerging markets, increasing the importance of examining issues that are common in these countries. Corruption and an underrepresentation of women in firms are such issues. This study therefore examines the effects of corruption and gender diversity on firm innovation as well as the moderating effects of formal and informal institutions. First, I hypothesise that corruption has a positive effect on firm innovation. I furthermore argue that this relationship is negatively influenced when the quality of formal and informal institutions increases. Second, gender diversity in the ownership structure, gender of the top manager, and gender diversity in the workforce are hypothesised to have a positive effect on firm innovation. These relationships were additionally argued to be positively influenced by the quality of formal institutions. A binary logistic regression was conducted using data primarily collected by the World Bank Enterprise Survey from over 14,000 firms in 24 emerging markets. The results support most of this study’s hypotheses. This study demonstrates that corruption has a negative effect on innovation, although this effect is weakened by strong informal institutional quality. Having a female owner, a female top manager, and more gender diversity in the workforce furthermore positively influence the likelihood of introducing an innovation. Additionally, when the quality of formal institutions improves, the positive effects of having a female owner increase.
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