Innovation and Corruption in Turkey

Abstract

In this chapter, one of the important financial crimes and its effect on the innovation success of firms has been investigated for Turkey. The business environment and enterprise performance survey is used to examine how the business perceives informal payments for the period between 2013-2014. The main concern of the chapter is that when corruption is the case, either “sand the wheels” or “grease the wheels” is the result of being unproductive or (even worse) destructive entrepreneurs. Moreover, different corruption levels are estimated and tested by using a PROBIT model. It is suggested that while the “sand the wheels” effect is strong, financial resources should be transferred to the innovation investments rather than corrupt activities. Even though corruption does not show a hindering effect on innovation, the time spent by the managers is the “grease the wheels” effect for innovation.