CEU Electronic Theses and Dissertations, 2014
| Author | Krastanova, Petya Mihaylova |
|---|---|
| Title | Greasing the Wheels of Innovation: How Corruption and Informal Practices of Firms Impact the Level of Innovation in Bulgaria? |
| Summary | The 2013 Union Innovation Scoreboard ranked Bulgaria as the least innovative country in the European Union. This ranking is worrisome since innovation is recognized as one of the main drivers of economic growth. Moreover, the World Bank Enterprise Survey shows that firms consider practices of informal competitors and corruption among the biggest obstacles for their operations. Therefore, in this paper I examine the impact of firm informality (corruption, informal competition, and informal practices of the firms themselves) on innovation in Bulgaria. To analyze this relation, I used an unbalanced panel dataset for 2009 and 2013 from the Business Environment and Enterprise Performance Survey. I instrumented for the primary explanatory variables of interest using sector-region averages to address the issues of endogeneity and measurement errors and then I ran a number of probit regressions. The results of the conducted econometric estimations indicate that the bribes that firms pay to government officials are positively and significantly correlated to their radical innovation activities. Moreover, the ability to corrupt a government official facilitates not only the introduction of new products or services by reducing the bureaucratic burden for the innovating firm, but it also eases the processes of incremental innovation. However, my analysis did not find any statistically significant impact of the practices of informal competitors and the informal practices of the firms themselves on firms’ innovativeness. My findings suggest that when it comes to firms’ inclination to engage in innovations, corruption is not the biggest obstacle that needs to be tackled. Reducing the red tape, defining an innovation policy, and improving the monitoring should come first in the government agenda, if Bulgaria wants to improve its ranking in the Union Innovation Scoreboard. |
| Supervisor | Miklos Koren |
| Department | Economics MA |
| Full text | https://www.etd.ceu.edu/2014/krastanova_petya.pdf |
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