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Effects of corruption on firm performance

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Effects of corruption on firm performance
University of Ljubljana – Faculty of Economics
Course: Corruption and Development Academic year: 2013/2014

Seminar paper at the course
CORRUPTION AND DEVELOPMENT

»The effects of corruption on firm performance«

Ljubljana, 27.5.2014

ABSTRACT
In this seminar project we are going to present some of the basics of the effects that corruption has on firm performance. At the beginning of the paper we are going to describe the spread of corruption across companies, its consequences and why it is good to avoid it in general. Examples supporting those facts will be provided. We are going to mention some concrete effects on firms, most of which are negative. The parts that follow will describe the effects that corruption has on firm productivity, firm growth (in more detail and with evidence from firms in Turkey) and firm innovations. In the end a case study from the impact of bribery on firm performance in Central and Eastern European countries will be presented.

TABLE OF CONTENTS
ABSTRACT ii
TABLE OF CONTENTS iii
INTRODUCTION 1
1. PRESENCE OF CORRUPTION 2
2. WHAT EXACTLY DOES CORRUPTION DO? 3
3. WHAT ARE THE CONSEQUENCES OF CORRUPTION? 4
4. INEFFICIENCY, LOST RESOURCES, WEAKENED DEVELOPMENT AND INCREASE OF CRIME 5
5. DIRECT IMPACT OF CORRUPTION ON FIRM PERFORMANCE 6
6. CORRUPTION AND PRODUCTIVITY 7
7. CORRUPTION AND FIRM GROWTH 7
8. THE EFFECT OF CORRUPTION ON FIRM GROWTH: EVIDENCE FROM FIRMS IN TURKEY 8
8.1 RELATIONSHIP BETWEEN CORRUPTION AND FIRM GROWTH 9
8.2 RESEARCH FINDINGS 9
9. THE IMPACT OF CORRUPTION ON FIRMS' INNOVATION IN TRANSITION ECONOMIES 10
9.1 INNOVATION AND ITS DETERMINANTS 10
9.2 CORRUPTION AND ITS ECONOMIC IMPLICATIONS 11
9.3 CORRUPTION AND INNOVATION 11
10. THE IMPACT OF BRIBERY ON FIRM PERFORMANCE IN CENTRAL AND EASTERN EUROPEAN COUNTRIES 13
10.1 SOURCES OF INFORMATION 13
10.2 EFFECTS OF BRIBERY 15
10.3 RESULTS 15
10.4 DIFFERENCE BETWEEN MANUFACTURING AND SERVICE FIRMS 16
10.5 THE IMPACT OF
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