The effect of corruption on entrepreneurship in developed vs non-developed countries

The purpose of this paper is to focus on the relationship between corruption and productive entrepreneurship in general and whether it depends on countries’ specific characteristics in particular.

The authors used a unique data set of entrepreneurial activity within 176 countries, collected from the professional networking site LinkedIn. The authors used OLS regression to estimate the level of entrepreneurship. The main independent variable was the CPI score (Transparency International). In addition, two sub-samples were used, 70 less-developed countries and 34 OECD countries, and numerous control variables.

The paper makes three important contributions to the field. First, it proposes worldwide empirical evidence that countries with high levels of corruption usually face low levels of productive entrepreneurship. Second, the paper suggests that the negative effect is much more significant in developed countries than in developing countries. Third, the paper explores whether the negative effect of corruption depends on country-specific economic characteristics.

While there is significant value in using LinkedIn data in entrepreneurship research, there are limitations to this database. Therefore, significant robustness tests were employed and further research, for instance using longitudinal LinkedIn data, could be valuable. Moreover, using different entrepreneurs’ data sets might increase the validation of the results. Finally, further examination of the influence of corruption on different types of entrepreneurial activities and their interaction with different characteristics of the country is still required.

The results stress the need to fight corruption not only in developing countries and suggests significant gains from anti-corruption efforts even and maybe especially in the western developed world.