Greasing the bottom of the pyramid? The role of bribery, informality, and financial access for African innovators

Abstract

The relationship between informal institutions and innovation remains poorly understood. In this study, I focus on bribery, a pervasive informal practice in many emerging markets and argue that in the African context, it exerts a positive (greasing) influence on firms' ability to introduce new product innovations. Furthermore, I propose two essential contingencies (i.e., informal competition and access to finance) that can affect this greasing effect in contrasting ways. These theoretical conjectures are tested using data on more than 10,000 firms across 37 African countries during the period 2011 to 2021. The empirical results reveal that bribery facilitates the introduction of new product innovations, with informal competition moderating negatively this relationship. Although financial accessibility stimulates directly firm innovation, it does not weaken the association between bribery and new product introductions. These findings provide novel insights into the dynamics of bribery and innovation, as well as their contextual contingencies in African markets.

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ORCID for Sorin Krammer: orcid.org/0000-0002-5773-9514

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