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Paper long abstract:

The corruption impact studies in the economies in transition have become relatively popular since the collapse of the Soviet Bloc in 1990s. After more than seventy years of autocratic and totalitarian regime of the Soviet Union, Kazakhstan has received its independence in 1991. The country had to go through major institutional transitions from the planned to market economy. After the collapse of the USSR, the public sector reforms in Kazakhstan have been carried out by public officials coming from the old, soviet school of public administration. In result, the government effort to improve public service quality has failed to implement in-depth changes.

Although, the existing literature on corruption stresses the importance of strong institutions to support innovation development, as well as corruption practices as one of the factors hampering innovations growth, there is still unclear evidence on relations between corruption and innovative performance. Theoretical discussion states two approaches to corruption impact. First approach states that corruption “sands the wheel of the business” by creating additional costs hampering the business (such as reduction of resources used for R&D, limiting innovative activities). On the other hand, the corruption can “grease the wheel of the business” by the means of bribes to public officials reducing the barriers to functioning (such as easier to obtain licenses for innovative product/services, secure contracts, etc.).

Although the existing literature provide conflicting results regarding corruption's impact on innovations in the countries in transition due to the weak institutional framework, there is still a need to shed the light on the issue to provide more consistent recommendations to public decision-makers and companies' management.

In comparison with cross-country level studies, the firm-level research on the corruption effects still remain understudied due to the lack of data on the firms’ experience. There is a gap in research on firm-level innovation in Kazakhstan as well as the impact of corruption on firm-level innovation.

This research aims at analyzing the impact of corruption on firm’s innovative performance using the Kazakhstan data of 1314 observations from the World Bank Enterprise Survey conducted in 2019. The research reveals the significant positive relations of corruption on the firm innovative performance. The study contributes to the existing literature on the economies in transition and sheds more light on the firm-level innovative performance determinants.