The effect of corruption in steering the business-government relationship: evidence from 13 African countries.

Abstract

Abstract A strong Business-government relationship is one method of rent-seeking. We study the response behavior of 7733 firms from 13 African countries to their government policy and regulations. Using two novel proxies of political connectivity from the World Bank Enterprise Survey (WBES), we find that, policies and business regulations trigger the inevitable alliance introspects of a firm’s strategic choices. Our results using the robust Tobit and Probit model indicate that corruption level is among the fundamental factors that drive the relations exponentially. Thus, witnessing strong alliances in more corrupt countries. Moreover, the impact of corruption exacerbates when the firm is bigger. This study provides some empirical contribution to the study of the business-government relationship, and, at the same time provides insightful implications for policymakers to amend their business policies and regulations as it activates the illicit business-government relationship.