Skip to main content

Advertisement

SpringerLink
Log in

Does corruption matter for international entrepreneurship?

  • Published:
International Entrepreneurship and Management Journal Aims and scope Submit manuscript

An Erratum to this article was published on 12 October 2015

Abstract

This study asks how key regulations influence nascent international entrepreneurship in countries with varying levels of corruption. Using regulatory capture theory and institutional theory, we hypothesize and test the effects of tax, export regulations, and corruption, on international entrepreneurship. We consider direct effects of these regulations as well as a possible moderating effect of corruption on nascent international entrepreneurship. Our findings indicate that the effect of regulations on international nascent entrepreneurship vary depending on types of regulation. Interestingly, we find that corruption plays a dual role, serving as both grease and sand for nascent international entrepreneurship. Corruption worsens the burden of regulations which have financial costs element. Another interesting finding is that corporate tax is not a significant deterrent factor for IE when corruption is low.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1
Fig. 2
Fig. 3
Fig. 4
Fig. 5

Similar content being viewed by others

Notes

  1. We define nascent IE as an entrepreneur who from the early stage of the venture is engaged in international ventures. We acknowledge that IE literature (Jones et al. 2011; Lopez et al. 2009; Aspelund and Moen, 2005; Rialp et al., 2005) distinguishes between ‘International New Ventures (INV)’ (Oviatt and McDougall, 1994) and ‘Born Global’ (Rennie, 1993). We use IE and nascent IE interchangeably.

  2. Alm (2011) defines tax evasion as reducing one’s tax liability through illegal means while tax avoidance is underreporting income through legal means.

References

  • Ackerman, S. (Ed.). (2007). International handbook on the economics of corruption. Edward Elgar Publishing.

  • Acs, Z. J., Autio, E., & Szerb, L. (2014). National systems of entrepreneurship: measurement issues and policy implications. Research Policy, 43, 476–494.

    Article  Google Scholar 

  • Aidis, R., Estrin, S., & Mickiewicz, T. (2010). Institutions, finance and the level of development: the impact on entrepreneurship in transition. Review of Economics and Institutions, 1, 1–26.

    Google Scholar 

  • Alm, J., & Torgler, B. (2011). Do ethics matter? Tax compliance and morality. Journal of Business Ethics, 101(4), 635–651.

  • Andreoni, J., Erard, B., & Feinstein, J. (1998). Tax compliance. Journal of Economic Literature, XXXVI, 818–860.

    Google Scholar 

  • Anokhin, S., & Schulze, W. S. (2009). Entrepreneurship, innovation, and corruption. Journal of Business Venturing, 24(5), 465–476.

    Article  Google Scholar 

  • Aspelund, A., & Moen, Ø. (2005). Small international firms: typology, performance and implications. MIR: Management International Review, 45, 37–57.

  • Baumol, W. J. (1990). Entrepreneurship: productive, unproductive, and destructive. Journal of Political Economy, 98, 893–921.

    Article  Google Scholar 

  • Bosma, N., Levie, J. (2009). Global Report. Global Entrepreneurship Monitor.

  • Bruton, G. D., Ahlstrom, D., & Puky, T. (2009). Institutional differences and the development of entrepreneurial ventures: a comparison of the venture capital industries in Latin America and Asia. Journal of International Business Studies, 40(5), 762–778.

    Article  Google Scholar 

  • Busenitz, L. W., Gómez, C., & Spence, J. W. (2000). Country institutional profiles: unlocking entrepreneurial phenomena. The Academy of Management Journal, 43(5), 994–1003.

    Article  Google Scholar 

  • Carree, M., Van Stel, A., Thurik, R., Wennekers, S. (2002). Economic development and business ownership: an analysis using data of 23 OECD countries in the period 1976–1996. Small business economics 19(3), 271–290.

  • Dabla-Norris, E., Gradstein, M., & Inchauste, G. (2008). What Causes Firms to Hide Output? The Determinants of Informality. Journal of Development Economics 85, 1–27.

  • Davidsson, P., & Henrekson, M. (2002). Determinants of the prevalence of start-ups and high-growth firms. Small Business Economics, 19, 81–104.

    Article  Google Scholar 

  • Davidsson, P., & Honig, B. (2003). The role of social and human capital among nascent entrepreneurs. Journal of business venturing, 18(3), 301–331.

  • Desai, S., Acs, Z. J. (2007). A theory of destructive entrepreneurship. Jena Economic Research Paper, (2007-085). Jena: Max Planck Institute

  • Djankov, S., La Rafael, P., Florencio, L.-d.-S., & Andrei, S. (2002). The regulation of entry. Quarterly Journal of Economics, 117(1), 1–37.

    Article  Google Scholar 

  • DiMaggio, P., Powell, W. W. (1983). The iron cage revisited: Collective rationality and institutional isomorphism in organizational fields. American Sociological Review 48(2), 147–60.

  • Domar, E. D., & Musgrave, R. A. (1944). Proportional income taxation and risk-taking. The Quarterly Journal of Economics, 58(3), 388–422.

    Article  Google Scholar 

  • Ehrlich, I., Lui, F. T. (1999). Bureaucratic corruption and endogenous economic growth. Journal of Political Economy, 107(S6), S270–S293.

  • Estrin, S., Korosteleva, J., & Mickiewicz, T. (2013). Which institutions encourage entrepreneurial growth aspirations? Journal of Business Venturing, 28, 564–580.

    Article  Google Scholar 

  • Faccio, M. (2006). Politically connected firms. American Economic Review, 96(1), 369–386.

    Article  Google Scholar 

  • Feige, E. L. (1996). Overseas holdings of US currency and the underground economy. Exploring the Underground Economy. Kalamazoo, Michigan, 5–62.

  • Fletcher, K. (2002). Tax incentives in Cambodia, Lao PDR, and Vietnam. Hanoi: IMF Conference on FDI: Opportunities and Challenges for Cambodia, Lao PDR, and Vietnam.

  • Fukuyama, F. (1996). Trust: The social virtues and the creation of prosperity (Vol. 457). New York: Free press.

  • Gentry, W. M., & Hubbard, R. G. (2000). Tax policy and entrepreneurial entry. The American Economic Review, 90(2), 283–287.

    Article  Google Scholar 

  • Glaeser, E. L., Goldin, C. (Eds.). (2007). Corruption and Reform: Lessons from America's Economic History. University of Chicago Press.

  • Glaeser, E. L., Saks, R. E. (2006). Corruption in America. Journal of Public Economics, 90(6), 1053–1072.

  • Grilo, I., & Thurik, R. (2005). Latent and actual entrepreneurship in Europe and the U.S: some recent developments. International Entrepreneurship and Management Journal, 1(4), 441–459.

    Article  Google Scholar 

  • Hall, B. H. (1996). The private and social returns to research and development. Technology, Research and Development, and the Economy, 140, 162.

    ADS  Google Scholar 

  • Helmke, G., & Levitsky, S. (2004). Informal institutions and comparative politics: a research agenda. Perspectives on Politics, 2(4), 725–740.

    Article  Google Scholar 

  • Jain, A. K. (2001). Corruption: a review. Journal of Economic Surveys, 15(1), 71–121.

    Article  Google Scholar 

  • Jones, M. V., Coviello, N., & Tang, Y. K. (2011). International entrepreneurship research (1989–2009): a domain ontology and thematic analysis. Journal of business venturing, 26(6), 632–659.

  • Kaufmann, D., Kraay, A., & Mastruzzi, M. (2007). Governance matters VI: governance indicators for 1996-2006. World Bank policy research working paper, (4280).

  • Kaufmann, D., Kraay, A., & Mastruzzi, M. (2009). Governance Matters VIII: Aggregate and Individual Governance Indicators 1996–2008. Washington, DC: World Bank Policy Research Working Papers.

    Book  Google Scholar 

  • Keupp, M., & Gassmann, O. (2009). The past and the future of international entrepreneurship: a review and suggestions for developing the field. Journal of Management, 35(3), 600–633.

    Article  Google Scholar 

  • Kiss, A. N., Danis, W. M., Cavusgil, S. T. 2012. International entrepreneurship research in emerging economies: A critical review and research agenda. Journal of Business Venturing 27(2), 266–290.

  • Knack, S., & Keefer, P. (1997). Does social capital have an economic payoff? A cross country investigation. The Quarterly journal of economics, 112, 1251–1288.

  • Knudsen, C. (1995). Theories of the firm, strategic management, and leadership. In C. A. Montgomery (Ed.), Resource-based and Evolutionary Theories of the Firm: Toward A Synthesis (pp. 179–217). Boston: Kluwer.

    Chapter  Google Scholar 

  • Kostova, T, (1999). Transnational transfer of strategic organizational practices: A contextual perspective. Academy of Management Review 24, 308–324.

  • Kostova, T., & Roth, K. (2002). Adoption of an organizational practice by subsidiaries of multinational corporations: institutional and relational effect. Academy of Management Journal, 45(1), 215–233.

    Article  Google Scholar 

  • Kutner, M. H., Nachtsheim, C., & Neter, J. (2004). Applied linear regression models. McGraw-Hill/Irwin.

  • Lambsdorff, J. G. (2003). How corruption affects persistent capital flows. Economics of Governance 4(3), 229–243.

  • La Porta, R., Lopez-de-Silanes, F., Shleifer, A., Vishny, R. (1999). The quality of government. Journal of Law, Economics, and organization 15(1), 222–279.

  • Lawton, T. C., Doh, J. P., Rajwani, T. (2013). Aligning for Advantage: Competitive Strategies for the Political and Social Arenas. Oxford University Press.

  • Levi, M. (1998). A State of Trust. In V. Braithwaite & M. Levi (Eds.), Trust and Governance. New York: Russell Sage.

    Google Scholar 

  • Li, H., & Zhang, Y. (2007). The role of managers’ political networking and functional experience in new venture performance: evidence from China’s transition economy. Strategic Management Journal, 28, 791–804.

    Article  Google Scholar 

  • Lopez, L. E., Kundu, S. K., Ciravegna, L. (2009). Born global or born regional? Evidence from an exploratory study in the Costa Rican software industry. Journal of International Business Studies 40(7), 1228–1238.

  • Mauro, P. (1995). Corruption and growth. The Quarterly Journal of Economics, 681–712.

  • McMullen, J. S., Bagby, D., Palich, L. E. (2008). Economic freedom and the motivation to engage in entrepreneurial action. Entrepreneurship Theory and Practice, 32(5), 875–895.

  • Méon, P. G., & Sekkat, K. (2005). Does corruption grease or sand the wheels of growth? Public Choice, 122(1–2), 69–97.

    Article  Google Scholar 

  • Minniti, M., Bygrave, W. D., and Autio, E. (2006). GEM Global Entrepreneurship Monitor: 2005 Executive Report. London Bussiness School.

  • Myrdal, G. (1968). Asian drama: An enquiry into the poverty of nations, vol 2. New York: The Twentieth Century Fund. Reprint in A.J. Heidenheimer, M. Johnston and V.T. LeVine (Eds.), Political corruption: A handbook, 953–961, 1989. Oxford: Transaction Books.

  • North, D. (1990). Institutions, institutional change and economic performance. New York: Cambridge University Press.

    Book  Google Scholar 

  • OECD. (2002). Regulatory policies in OECD countries: From interventionism to regulatory governance. Paris: OECD.

    Book  Google Scholar 

  • Oviatt, B. M., & McDougall, P. P. (1994). Towards a theory of international new ventures. Journal of International Business Studies 25(1), 45–64.

  • Oviatt, B. M., & McDougall, P. P. (2005). Defining international entrepreneurship and modeling the speed of internationalization. Entrepreneurship: Theory and Practice, 29(5), 537–553.

    Google Scholar 

  • Parker, S. (2007). Law and the economics of entrepreneurship. Comparative Labor Law and Policy Journal, 28, 695–716.

  • Peng, M. W. (2003). Institutional transitions and strategic choices. Academy of Management Review, 28, 297–317.

    Google Scholar 

  • Rennie, M.W. (1993). Global competitiveness: born global. The McKinsey Quarterly 4(4), 45–52.

  • Reynolds, P. D., Bygrave, B., & Hay, M. (2003). Global Entrepreneurship Monitor Report. Kansas City: E.M. Kauffmann Foundation.

    Google Scholar 

  • Rialp, A., Rialp, J., Urbano, D., Vaillant, Y. (2005). The born-global phenomenon: a comparative case study research. Journal of International Entrepreneurship 3(2), 133–171.

  • Rose-Ackerman, S. (1999). Corruption and government: Causes, consequences, and reform. Cambridge university press.

  • Rothstein, B., & Uslaner, E.M. (2005). All for All: Equality and Social Trust. Paper presented at the European Consortium for Political Research Joint Session of Work-shops, Grenada, Spain, April 14–19.

  • Shleifer, A., & Vishny, R. W. (1993). Corruption. Quarterly Journal of Economics, 109, 995–1025.

    Article  Google Scholar 

  • Stenholm, P., Acs, Z. J., & Wuebker, R. (2013). Exploring country-level institutional arrangements on the rate and type of entrepreneurial activity. Journal of Business Venturing, 28(1), 176–193.

    Article  Google Scholar 

  • Stigler, G. J. (1971). The economic theory of regulation. Bell Journal of Economics, 2(1), 3–21.

    Article  Google Scholar 

  • Szerb, L., Acs, Z., Autio, E., Ortega-Argiles, R., Komlosi, E. (2013). REDI: The Regional Entrepreneurship and Development Index – Measuring regional entrepreneurship. Final Report. European Commission, Directorate-General for Regional and Urban policy. REGIO DG 02 - Communication

  • Tanzi, V. (1982). The Underground Economy in the US and Abroad. Lexington, Mass.: Lexington Books.

  • Tarrow, S. (1996). Making social science work across space and time: a critical reflection on Robert Putnam’s making democracy work. American Political Science Review, 90(3), 389–397.

    Article  Google Scholar 

  • Terjesen, S., Hessels, J., Li, D. (2013). Comparative International Entrepreneurship A Review and Research Agenda. Journal of Management. doi:10.1177/0149206313486259

  • Torgler, B. (2003). Tax morale, rule governed behaviour and trust. Constitutional Political Economy, 14, 119–140.

    Article  Google Scholar 

  • Torrini, R. (2005). Cross-country differences in self-employment rates: The role of institutions. Labour Economics, 12(5), 661–683.

  • Treisman, D. (2000). The causes of corruption: a cross-national study. Journal of public economics 76(3), 399–457.

  • UNCTAD. (2000). Tax Incentives and Foreign Direct Investment: A Global Survey. ASIT Advisory studies, N1 16. Geneva: UN.

    Google Scholar 

  • Uslaner, E. M. (2002). The Moral Foundations of Trust. Cambridge: Cambridge University Press.

    Google Scholar 

  • Uslaner, E. (2008). Corruption, Inequality, and Trust: The Bulging Pocket Makes the Easy Life. Cambridge, UK: Cambridge University Press.

  • Veciana, J. M., & Urbano, D. (2008). The institutional approach to entrepreneurship research. Introduction. International Entrepreneurship and Management Journal, 4(4), 365–379.

    Article  Google Scholar 

  • Webb, J. W., Tihanyi, L., Ireland, R. D., & Sirmon, D. G. (2009). You say illegal, I say legitimate: entrepreneurship in the informal economy. Academy of Management Review, 34, 492–510.

    Article  Google Scholar 

  • Wennekers, A. R. M., & Thurik, A. R. (1999). Linking entrepreneur ship and economic growth. Small Business Economics, 13(1), 27–55.

    Article  Google Scholar 

  • Whitley, R. (1999). Firms, institutions and management control: the comparative analysis of coordination and control systems. Accounting, organizations and society, 24(5), 507–524.

  • Woolcock, M. (1998). Social capital and economic development: Toward a theoretical synthesis and policy framework. Theory and society, 27(2), 151–208.

  • World Bank Development report. (2004). Washington, DC.

  • World Bank Development report. (2007). Washington, DC.

  • Wright, M., Westhead, P., Ucbasaran, D. (2007). Internationalization of small and medium-sized enterprises (SMEs) and international entrepreneurship: A critique and policy implications. Regional Studies 41(7), 1013–1030.

  • Zahra, S. A., & George, G. (2002). International entrepreneurship: the current status of the field and future research agenda. In: Strategic entrepreneurship: Creating a new mindset (pp. 255–288).

  • Zhou, W. (2013). Political connections and entrepreneurial investment: evidence from China’s transition economy. Journal of Business Venturing, 28, 299–315.

    Article  Google Scholar 

Download references

Acknowledgments

We would like to thank you Patricia McDougall and Siri Terjesen for their comments on the earlier version of the paper.

Author information

Authors and Affiliations

  1. Indiana University, Bloomington, IN, USA

    Farzana Chowdhury & David B. Audretsch

  2. Henley Business School, University of Reading, Reading, UK

    Maksim Belitski

Authors
  1. Farzana Chowdhury
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. David B. Audretsch
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Maksim Belitski
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Farzana Chowdhury.

Appendix

Appendix

Table 6 List of countries included in the article
Full size table

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Chowdhury, F., Audretsch, D.B. & Belitski, M. Does corruption matter for international entrepreneurship?. Int Entrep Manag J 11, 959–980 (2015). https://doi.org/10.1007/s11365-015-0372-5

Download citation

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s11365-015-0372-5

Keywords

Search

Navigation