Empirical study of the impact of corruption on entrepreneurship in transition economies

Details

Supervisors

Janssen, Frank

Faculty

Louvain School of Management

Degree label

Master [120] en sciences de gestion

Abstract

In this study, we attempt to understand the current level of corruption and the development of entrepreneurship in transition economies. Based on that knowledge, we strike to develop concrete empirical results revealing the impacts of corruption on entrepreneurship in these special economies. After that, recommendations to address the issues are proposed. In particular, we focus on promoting structural and institutional reforms emphasizing on the importance of the privatization process. Our interest in this topic and a review of existing literature help to formulate the research questions and propose related hypotheses. Indeed, existing literature pays much attention to the issues of corruption and entrepreneurship individually and separately in transition economies but less on the interaction between these two factors. Finding the relationship between corruption and entrepreneurship in transition economies may contribute to the fight against corruption and the development of entrepreneurship in these countries. The main objective to shed light on possible impacts of corruption on entrepreneurship in transition economy based on empirical study. Throughout the study, some hypotheses are placed and examined: Factors which have considerable impact on entrepreneurship are the level of corruption, GDP per capita, literacy rate, unemployment rate, competitiveness of the economy or the freedom to trade internationally, government size, effectiveness of the legal system, and comprehensiveness of regulations of a country; Corruption has negative impact on entrepreneurship in transition economies; Macroeconomic factors such as GDP per capita and literacy rate and unemployment rate have positive impacts on entrepreneurship; Among social factors, while the competitiveness of the economy, the effectiveness of the legal system and the appropriateness of the implemented regulation have positive on entrepreneurship, the government size is expected to have negative impact. Finally, from the interpretation of the results several recommendations are proposed. The most suggested proposal is to endorse fundamental institutional and structural reforms with privatization process being encouraged and fastened (Abed & Davoodi, 2000) and (Kaufmann & Siegelbaum, 1996). Solutions to downsize the government spending and intervention and to improve the competitiveness of the economy with legal systems being strengthened and regulation implementation procedure being improved should be stimulated.