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  • Print publication year: 2016
  • Online publication date: July 2017

7 - Corruption in Innovation: Effect of Innovation on Performance



Corruption is a barrier to innovation; for science and technology to fulfill the potential good governance is a prerequisite (Mungiu-Pippidi, 2015). For sustenance of economic growth and for recovery of the economy from major crises innovation is essential as noted by economists, scientists and political leaders. Enhanced competition is said to promote productivity because for firms to survive in the face of greater competition they have to take recourse to innovative activities which in turn result in higher total factor productivity growth. Otherwise higher growth attained through greater utilization of resources does not enable firms to reduce prices and earn an edge over their competitors. In the European Union (EU), Mungiu-Pippidi (2015) observed that the private sector's capacity for innovation strongly correlates with control of corruption, quality of national scientific research institutions and with gross domestic expenditure on research and development. The author observes that in European nations with poor governance, judged in terms of WGI, research spending and innovation are also low as the phenomenon of brain drain is serious. Neither the lack of talent or prevalence of poverty suppresses innovation. The use of merit as a criterion for advancement results in prosperity while with favouritism and preferential social allocation, science and research get marginalized because the mediocrity in power fears that talent may. Habiyremye and Raymond (2013) show that the involvement of foreign firms in corruption practices reduces the propensity of firms in host countries to invest in research and development and harms their ability to improve their existing products and services.

In this chapter we turn to manipulative practices that firms often pursue in the name of innovation. R&D expenditure of the Indian firms, which is generally taken to represent innovation expenditure seems to be a black box. First of all it does not necessarily mean technology creation. Funds are shown under R&D expenditure to derive tax benefits though actually these funds are spent on completely different activities not even remotely connected to innovation. After acquiring most parts of the technology from abroad firms have a tendency to show them as their own innovations.

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