Corruption and innovation: a case study of small and medium- sized enterprises in Vietnam

Abstract

Corruption's effects on firm innovation are intricate and still not fully understood, with existing theoretical and empirical evidence remaining inconclusive. This research utilizes econometric methods to analyze data from small and medium-sized manufacturing enterprises in Vietnam, aiming to evaluate how access to illicit funds affects firm innovation. The findings partially support the notion that corruption can grease the wheels of innovation. Specifically, the study reveals that access money encourages innovation outputs, although it does not appear to affect innovation inputs. Given Vietnam's economic landscape, characterized by crony capitalism and interest groups, the role of access money in fostering innovation activities is not entirely surprising, albeit its operational mechanism remains largely enigmatic.