Expected corruption and business formation
Journal of Entrepreneurship and Public Policy
ISSN: 2045-2101
Article publication date: 14 October 2014
Abstract
Purpose
The purpose of this paper is to investigate whether public corruption influences entrepreneurial activity in the USA. Because the true underlying level of corruption is inherently unobservable, it cannot be factored into business venturing decisions. The authors hypothesize, therefore, that new business venturing should be related to the expected corruption level.
Design/methodology/approach
The authors follow Cordis (2009) to calculate the expected rate of public corruption given observed levels of public corruption. The authors embed the expected level of corruption in a relatively standard model of business venturing, which the authors estimate using a cross section of the US states covering the period of 1986-2009.
Findings
Using a relatively standard model of business venturing that accounts for variation in predicted corruption levels, the authors find that entrepreneurs launch more businesses in states with higher predicted corruption.
Originality/value
To the knowledge, no one has previously tested the impact of expected corruption on entrepreneurial activity.
Keywords
Citation
Campbell, N. and S. Cordis, A. (2014), "Expected corruption and business formation", Journal of Entrepreneurship and Public Policy, Vol. 3 No. 2, pp. 292-305. https://doi.org/10.1108/JEPP-06-2013-0026
Publisher
:Emerald Group Publishing Limited
Copyright © 2014, Emerald Group Publishing Limited