NEW VENTURE ATTEMPTS TO INFLUENCE STATE INSTITUTIONS ...

Frontiers of Entrepreneurship Research Volume 28 | Issue 18 CHAPTER XVIII. INTERNATIONAL ENTREPRENEURSHIP

Article 5

6-7-2008

NEW VENTURE ATTEMPTS TO INFLUENCE STATE INSTITUTIONS: EFFECTS ON INNOVATION Manjula S. Salimath University of North Texas, USA, [email protected]

John B. Cullen Washington State University, USA

Recommended Citation Salimath, Manjula S. and Cullen, John B. (2008) "NEW VENTURE ATTEMPTS TO INFLUENCE STATE INSTITUTIONS: EFFECTS ON INNOVATION," Frontiers of Entrepreneurship Research: Vol. 28: Iss. 18, Article 5. Available at: http://digitalknowledge.babson.edu/fer/vol28/iss18/5

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Salimath and Cullen: NEW VENTURE ATTEMPTS TO INFLUENCE STATE INSTITUTIONS

NEW VENTURE ATTEMPTS TO INFLUENCE STATE INSTITUTIONS: EFFECTS ON INNOVATION Manjula S. Salimath, University of North Texas, USA John B. Cullen, Washington State University, USA

ABSTRACT Despite recognition of the importance of facilitative environments to promote new ventures and the corresponding efforts of many governments to provide the necessary infrastructure to fuel growth in entrepreneurship, our understanding of the relationship between the new venture and the state is surprisingly uninformed. To fill gaps in our knowledge of firm-state relationships, we focus on an interesting issue: new venture behaviors to influence state institutions. We pose questions that are related to three distinct issues a) the existence of captor firms and state capture in new ventures, b) the impact of state capture on new venture innovation and c) whether country level characteristics have an impact on the effect of corruption new venture innovation in 26 transition economies. Results indicate the presence of captor firms in new ventures in transition economies. We also find support for the impact of state influencing behaviors on the innovation of new ventures in transition economies, as well as the impact of country characteristics. INTRODUCTION Despite recognition of the importance of facilitative environments to promote new ventures and the corresponding efforts of many governments to provide the necessary infrastructure to fuel growth in entrepreneurship, our understanding of the relationship between the new venture and the state is surprisingly uninformed. To fill gaps in our knowledge of firm-state relationships, we focus on new venture behaviors to influence state institutions. We begin with the phenomena of captor firms and state capture (derived from the well established concept of regulatory capture, Laffont and Tirole, 1993) and introduce these constructs into the entrepreneurship field. By integrating insights from economics, our paper sheds light on the firm- state relationships in dynamic institutional environments that characterize transition economies. We test propositions on the existence, impact, and strategies used by captor firms to capture the state in 26 transition economies. To our knowledge this is the first documented effort at uncovering the nature of influence mechanisms employed by new ventures. Our paper is organized as follows: First we discuss the phenomenon of corruption in transition economies. Second we introduce a theoretical frame of anomie and strain in these transition economies. Third, we explain the impact of strain and corruption in new ventures in transition economies. In subsequent sections we discuss the methodology used and conclude with results and discussion. TRANSITION ECONOMIES AND CORRUPTION In transition economies where institutions are being reframed from a state controlled to a more open system, the resulting business environment poses unique challenges to the new venture. The new venture seeking to gain a foothold in this shifting landscape of rules and regulations also has to face tremendous entry barriers erected by a few large, powerful incumbent firms that tend to dominate these economies. Further, the power of the incumbent firms to influence rapidly

Frontiers of Entrepreneurship Research 2008

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Frontiers of Entrepreneurship Research, Vol. 28 [2008], Iss. 18, Art. 5

developing institutions could override the constraints imposed by other rival interest groups and civil society. The risk is enhanced when structural reform of state institutions is still underway, as the outcome may not be beneficial to the interest of society, or to new entrants. During transition, the fear of an over powerful state is reduced and gives way to increased concern over those who "capture the state." State capture refers to the actions of individuals, groups, or firms in both the public and private sectors to influence the formation of laws, regulations, decrees, and other government policies (i.e., the basic rules of the game) to their own advantage by means of the illicit, illegitimate, and non-transparent provision private benefits to public officials. Captors are those that engage in these activities for the benefits that accrue to them. In a capture economy, the state institutions are shaped to provide undue advantages to the captor firms at the cost of the rest of the enterprise sector. State capture is therefore distinct from corruption, which is the attempt to influence the implementation of laws and policies to their own interests, and differs from legal influence modes such as lobbying. State capture is a broad concept including the formation of regulations by a wide range of state institutions (executive, legislature, judiciary, ministries, and state agencies). The captors range from private firms, political leaders, or narrow interest groups. Thus state capture can be unbundled to display a wide range of relations. States are therefore “captured” when they regulate businesses according to the private interests of the regulated rather than the intended public interest. However all forms of state capture distort the basic legal and regulatory framework to benefit a small subset of firms and individuals at the expense of society at large. In transition economies with unclear boundaries between political and business interests of state officials, and scarce public goods, this problem is exacerbated firstly when the formal channels of political intervention are underdeveloped. Secondly, it poses a difficult situation for new ventures as they try to foster the most conducive regulatory environment for their survival and success. Surprisingly, captor firms are more likely to be new entrants to the market as state capture becomes a useful strategy for new ventures to create zones of relative security and incorporate competitive advantages for themselves in the emerging legal and regulatory frameworks at the expense of all other firms. To remain competitive in this distorted environment, new entrepreneurs invest resources in state capture rather than innovation, leading to eventual problems in growth and obstacles to new venture entry. ANOMIE AND STRAIN IN TRANSITION ECONOMIES The origin of the term “anomie” can be traced to Durkheim (1893) who describes it as a state of “normlessless” that occurs when norms (expectations of behavior) are absent, unclear or confused. Hence anomie was a condition of deregulation that occurred in society in which the rules governing interaction were breaking down and it was unclear to people what the expectations were in this changing situation. He argued that such normlessness in society had an impact on deviant individual behavior. An alternative argument to the causes for the breakdown of the normative order was provided by Merton, known as the strain theory. According to Merton, deviance is a symptom of the social structure. Normlessness occurs when a social structure advocates certain goals to all members of a society but does not provide the same means to achieve them. Thus societal incoherence or a lack of integration between valued goals and what the structure, permits causes deviant behavior. The strain between the means and ends exerts a definite pressure on the individual to engage in forms of illegitimate conduct (Merton, 1957; Sumner, 1994).

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According to Merton, "Our primary aim is to discover how some social structures exert a definite pressure upon certain persons in the society to engage in nonconformist rather than conformist conduct. . . . high rates of deviant behavior in these groups [occur] not because the human beings comprising them are compounded of distinctive biological tendencies but because they are responding normally to the social situation in which they find themselves." Merton, 1938 As such Merton’s theoretical model was grounded in the principles of structural probability, and not outright determinism, as not every case of disjuncture would propel individuals into deviant activity. Rather, deviant behavior was more likely to emerge in societies with such structural strain (Merton, 1995). Merton proposes that adaptation to strain occurs through one of the four following routes: innovation, ritualism, retreatism, or rebellion. One of the results of strain is that it creates pressures on the disadvantaged to pursue any effective available means to success even if these means are not legal (Akers, 2000, p. 144). Strain may be further classified into two categories – social processes and personal experiences (Durkheim, 1897). And these further produce two general types of strain: structural and individual. While structural strain evolves due to the environment caused by social processes, individual strain is caused by personal experiences. According to General Strain Theory, when aspirations increase and expectations decline, there is an increase in delinquency and the amount of deviant acts. Merton identified five specific “modes of adaptation” to these strains (Akers, 2000, p. 144). Anomie strain theory has progressed criminology and related fields. Following Merton, strain theory assumes, that delinquency represents “the normal reaction, of normal persons, to abnormal conditions” (Merton 1938: 672, note 2). Merton's theory does not focus upon crime per se, but rather upon various acts of deviance, which may lead to criminal behavior. Notwithstanding other inequities that may characterize the social structure, both the value and accessibility of economic success remain in the cultural foreground, and are continuously re-enforced by the society’s institutional complex (Merton, 1938[1957; 1968]). Hence economic success and perceptions of self-worth are combined and held up by the socializing effects of the cultural structure. The foundation of "the means-end theory of deviance" is that crime breeds in the gap, imbalance, or dysjuncture between culturally induced aspirations for economic success and structurally distributed possibilities of achievement. The theory attempts to explain why crime is concentrated among the lower classes who have the least legitimate opportunities for achievement. "It is the combination of the cultural emphasis and the social structure which produces intense pressure for deviation" (Merton 1968). Though system can be stabilized by providing rewards for noneconomic pursuits, the stress, or "strain toward anomie" (Merton 1968:211) continues to operate in the exclusive concern for outcome over intrinsic satisfaction of competition. The limited effectiveness of social structure in providing regularity and predictability leads to a condition where "anomie or cultural chaos supervenes" (Merton 1968) due to the imperfect coordination of means and ends. Merton presents five modes of adapting to strain caused by the restricted access to socially approved goals and means such as conforming, rebelling, retreating, innovating or ritualizing. Messner and Rosenfeld (1994) developed an institutional anomie theory (IAT) similar to Merton's, in which they argue that not only has a concern for economics has come to dominate our culture, but that the noneconomic institutions in society have tended to become subservient to the


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economy. A classic example is the shift in values that is necessary to allow individuals in transition economies to be successful. The predominance of economic goals linked to material success take precedence over the community and collectivist goals in state owned economies that cease to have relevance in the new social and economic order. When beliefs and values are closer to the values of the marketplace, the more likely that the logic of the economy will exert a powerful force that motivates the pursuit of material wealth by any means necessary. The application of a Mertonian analysis to corruption and influence in transition economies includes three inter-related assumptions. First, the desirability of social goals is extremely widespread and comes close to being a universal social goal (for e.g., the predominance of certain values in national level culture). Second, the means to achieve these universal social goals are unequally distributed across the social structure. This disjuncture between pressures to achieve these goals and the lack of structural opportunities to do so, creates strain for those seeking a resolution of this means/goals gap or structural anomic condition. Third, a variety of seemingly unrelated forms of nonnormative conduct exists that reflect attempts to resolve this kind of social strain. We believe that all three conditions are seen in transition economies. Firstly, transition economies have made a state commitment to changing economic and political systems in their countries. Such state sponsored large scale change is necessarily accompanied by a shift in societal values and social goals. Secondly, though transition economies have publicly proclaimed their willingness and intent to transform their countries institutional and cultural systems, the requisite infrastructure to allow all individuals to pursue the new capitalist goals of wealth and prosperity are usually not as forthcoming. New infrastructure, new systems, new processes, and new structural pathways to individual wealth take time and are usually unequally distributed, resulting in a structural anomic condition and strain. Finally, from observing various country level corruption data, we see that corruption or other non normative means to achieve these ends seem to be pursued by firms and individuals in transition economies, perhaps as an attempt to resolve such structural strain in their countries. NEW VENTURES IN TRANSITION ECONOMIES Generally, most new ventures appear to suffer from various liabilities (Stinchcombe, 1965). For example, new ventures face liabilities of age, liabilities of newness, low legitimacy, and the paucity of financial and other resources are likely to be less of an issue in established firms. Consequently, many new firms struggle, especially during start up stages, to overcome these many liabilities. It is argued that the high rate of new venture failure may in part be attributed to some of these unique challenges that must necessarily be overcome to ensure continuity and success of the firm. In addition to these complex constraining factors that every new venture must battle against, a further compounding factor is added to the mix for new ventures in transition economies. Transition economies are in the middle of transiting between two different and sometimes opposing ideologies, logics, values, and economics. Consequently, transition economies have both high dynamism and complexity (Dess and Beard, 1984). Further, in contrast to non transition economies (that are not undergoing systematic state sponsored change) they are likely to represent a classic case of high volatility as they are in a state of flux. From a business standpoint, these macro level influences and changes in structure, systems, and processes precipitate a subtle pressure towards shaping a different dominant logic (Prahalad


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and Bettis, 1986) than one that operated previously. Firms therefore have to quickly understand the impact of such changing trends in values and reward structures from a functional level and modify their behavior accordingly in order to ensure the continuity of their firms. This is especially true in new firms, as the primary focus is on survival, and continuity (also equally important) can only be attained if the firm is viable in the first phase. These combined pressures on a new venture force the firm to adopt all necessary means available to pursue the new goals that are fostered by the State. While the State may have every intention of providing legitimate pathways to attain the new goals, it is likely that some structural imbalances may exist during the transition phase. Rapid and large scale institutional change in transition economies requires both time and effort. In the interim (during the transition phase) therefore, these economies seem to exhibit significant lags in their infrastructure and support systems. Consequently, it is likely that firms, and in particular new firms, try to find alternate and perhaps non normative means to accomplish the new goals in times of such transition and flux. Economic success therefore may be accompanied by less than ideal pathways in order to overcome such structural deficits. We believe, therefore, that new ventures in transition economies are most likely to exhibit some types of grand corruption such as state capture, influence, etc in order to deal with these situational and structural constraints and strain. THEORETICAL MODEL AND PROPOSITIONS Transition economies provide unique environmental conditions under which new firms must operate, as they are in the throes of state sponsored change. These environments therefore are volatile, complex, and dynamic as they are shifting from an old politico economic order to a new and different political economy. From a simple anomie perspective, we argue that the distinct lack of regulative structures in transition economies will lead to innovative mechanisms to achieve success, even when they are illegal. This particularly applies to these economies undergoing change in a Durkheim perceptive, such as economies in transition. Figure A provides an outline of our theoretical model. This serves to illustrate the application of anomie and strain theory to new ventures in transition economies. It must be noted that we only illustrate the non normative adaptation to anomie and strain in the model. This does not mean that all new firms adopt non normative means. Rather, we did not draw another box representing normative adaptation since that is not germane to our investigation. Clearly, firms may choose legitimate pathways. However given that we focus on transition economies, where it is likely that structural imbalances exist during the changing phase, such non normative adaptations become particularly salient. Basically, we propose that when the environmental conditions in transition economies create pressures that push firms towards grand corruption (e.g., state capture, influence, and bribery), the firms that do it more are likely to be more successful than those that do not. Hence macro environmental conditions can propel firms towards particular pathways of action even when they are illegal. Further, the benefits that accrue to such firms are likely to be a function of the overall corruption prevalent in the country. By implication, if a country is perceived to be corrupt, then more firms are engaging in corruption, and consequently there is a greater pressure for other firms to follow the new rules of the game in order to remain viable and obtain the rewards of economic success. In a sense, deviance pays in more corrupt societies due to the existence of anomie and strain. Hence we propose the following set of hypotheses:


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H1: Captor firms exist among new ventures in transition economies H2: State capture, influence and bribes positively affect new venture innovation H3: The more a country is perceived as corrupt, the more likely that state capture, influence and bribery positively impact new venture innovation METHODOLOGY Measures Used The Business Environment and Enterprise Performance Survey The 2005 Business Environment and Enterprise Performance Survey (BEEPS), is jointly developed by the World Bank and the European Bank for Reconstruction and Development. It contains survey data of firms in 26 transition countries and examines a wide range of interactions between firms and the state. Based on face-to-face interviews with firm managers and owners, BEEPS is designed to provide comparative measurements in such areas as corruption, state capture, lobbying, and the quality of the business environment, specific firm characteristics, and firm performance. The countries included in the 2005 BEEPS are 26 transition economies ( i.e., Albania, Armenia, Azerbaijan, Belarus, Bosnia, Bulgaria, Croatia, Czech Republic, Estonia, Georgia, Hungary, Kazakhstan, Kyrgyzstan, Latvia, Lithuania, Macedonia, Moldova, Poland, Rep Serpska, Romania, Russia, Slovakia, Slovenia, Turkey, Ukraine, and Uzbekistan). Corruption Perception Index Since 1995, Transparency International, a nonprofit organization has been providing reliable cross national data on corruption, and the Corruption Perception Index (CPI) is perhaps its most widely known diagnostic tool. The CPI ranks 180 countries by their perceived levels of corruption, based on expert assessments and opinion surveys. Corruption perceptions relate to the perceived “misuse of public power for private benefit” such as bribing public officials, kickbacks in private procurement, or embezzlement of public funds. Homogenized definitions of the “extent” of corruption among public officials and policemen are also included in the country in question. Non parametric statistics were used to standardize the data and to determine precision of the scores. The CPI is a composite index that provides extensive perceptions of corruption within countries that is based on surveys of business people and business analysts. International surveys on perceptions serve as the most credible means of compiling a ranking of nations as they overcome some of the more problematic validity concerns in direct corruption measures. For example, numbers of prosecutions reflect the quality of prosecutors and not the actual levels of corruption in a country. Analysis New Ventures: We define new ventures based on age and nature of origin. Hence new ventures are defined as firms less than 6 years old (Brush, 1995; Zahra, Ireland, and Hitt, 2000), and were originally established as private firms from the time of start up (i.e., these firms have no state owned predecessor) in 26 transition economies.

State Capture: We used a measure of impact of state capture similar to the State Capture Index


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developed by Hellman, Jones and Kaufman (2003) to assess the capture of various institutions such as the parliament, executive, and political parties. This was the sum of responses to three questions related to the extent of direct impact of state capture on the firm’s business: Private payments/gifts or other benefits to Parliamentarians to affect their votes; Private payments/gifts or other benefits to Government officials to affect the content of government decrees; and Private payments/gifts or other benefits to local or regional government officials to affect their votes or content of government decrees. Innovation: This was the sum of responses to four questions related to company initiatives in the last 36 months: Developed successfully a major new product line / service; Upgraded an existing product line/service; Obtained a new product licensing agreement; or Obtained a new quality accreditation (ISO 9000, 9002 or 14,000, AGCCP, etc). Influence: We used a measure of the firm’s attempts to influence the content of laws that significantly affected the business. This was the sum of responses to two questions: Thinking about national laws and regulations enacted over the last 12 months that had a substantial impact on your business, did your firm seek to influence the content of laws or regulations affecting it?; and Thinking about local or regional laws and regulations enacted over the last 12 months that had a substantial impact on your business, did your firm seek to influence the content of laws or regulations affecting it? Bribes: Bribery was measured by the firm’s unofficial payments to the government and public officials. We used the percentage of payments based on responses to two questions: On average, what percent of total annual sales do firm’s like yours typically pay in unofficial payments/gifts to public officials; and When firms in your industry do business with the government, what percent of the contract value would be typically paid in additional or unofficial payments/gifts to secure the contract? Controls: Since innovation may be a function of particular sector to which the new venture belongs, we controlled for the effect of sales from seven major sectors (mining and quarrying; construction; manufacturing; transport storage and communication; wholesale, retail, repairs; real estate, renting and business services; hotels and restaurants). We used a cross level regression model to test the hypotheses. Descriptive statistics as well as the results of the regression analysis are provided in Tables 1 & 2. RESULTS AND DISCUSSION Few, if any systematic efforts exist that explore how new venture firms can encode advantages for themselves into the basic legal and regulatory structure of the economy, and even less assess this across countries. We find support for our key hypotheses that shed interesting light on a fairly new phenomenon in entrepreneurship: the relationship between the firm and the state. More importantly we explore these relations in an anomic environment, i.e., transition economies where the pressures to engage in various types of state capture and grand corruption are most salient. Thus findings indicate that captor firms do exist among new ventures in transition economies and that engaging in state capture does have a positive effect on the new venture’s innovation. Further, we also find that country characteristics (corruption perception index) does affect the relationship between state capture, influence and bribes on new venture innovation. . State capture and bribery seem to


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foster more innovation within companies in more corrupt societies perhaps as a competitive response to the anomic environment. Key limitations of the paper include the reliance on survey data for cross national comparisons. Further, we used a well known measure (CPI) but this provides data on the perceptions of corruption and not actual levels of corruption. The latter are not only harder to locate but also difficult to find comparable data for a cross country comparison. Also, though innovation is an appropriate measure for new firm innovation, future studies should investigate the effects on other performance variables. Finally we take a unique and relevant strain theory and apply it to the firm level, and though firm behavior is a complex composite of individual decisions and preferences, it does involve some generalization to do so with the given theory. Nonetheless, despite these limitations, the paper serves to help initiate scholarly discussion on new venture firm-state relations in complex institutional environments, as well as direct attention to policy implications, institutional reform, and regulatory frameworks that uniquely impact new ventures. CONTACTS: Manjula S. Salimath; [email protected]; (T): 940 -565- 3140; (F): 940-565- 4394; Department of Management, University of North Texas, Denton, TX 769203. REFERENCES Akers, R. 2000. Criminological Theories. Los Angeles, Cal.: Roxbury. Brush, C.G.1995. International entrepreneurship: The effects of firm age on motives of internationalization. New York: Garland. Dess, G. G. and Beard, D. W. (1984). Dimensions of Organizational Task Environments. Administrative Science Quarterly, Vol. 29, No. 1: 52-73. Durkheim, É. 1893 (1964). The division of labor in society. New York: Free Press. Durkheim, É. 1897 (1966). Suicide: A study in sociology. New York: Free Press. Hellman, J. S., Jones, G. and Kaufman, D. (2003) Seize the state, seize the day: State capture, and Influence in transition economies. Journal of Comparative Economics, 31: 751-773. Laffont, J. J. and Tirole, J. (1993). A Theory of Incentives in Procurement and Regulation. The MIT Press: Cambridge Merton, R.K. 1938 [1996]. Social structure and anomie. American Sociological Review, 3: 672682. Reprinted in On Social Structure and Science, essays by Robert K. Merton, Sztompka, P. (Ed) Chicago: University of Chicago Press, 1996. Merton, R.K. 1957 (1968). Social theory and social structure. New York: The Free Press. Merton, R.K. 1964. Anomie, anomia, and social interaction. In M.B. Clinard (Ed.), Anomie and deviant behavior. New York: The Free Press. Merton, R.K. 1995. Opportunity structure: The emergence, diffusion, and differentiation of a sociological concept. In F. Adler and W.S. Laufer (Eds), The legacy of anomie theory. Advances in criminological research, 6: 3-78. New Brunswick, NJ: Transaction. Messner, S.F., & R. Rosenfeld. 1994. Crime and the American dream. Second Edition. Belmont, CA: Wadsworth Publishing Company. Prahalad, C. K. and Bettis, R. A. 1986. The Dominant Logic: A New Linkage between Diversity and Performance. Strategic Management Journal, 7(6): 485-501. Stinchcombe, A. L. 1965 Social structure and organizations. Pp. 153-93 in J. G. March (ed.), Handbook of Organizations. Chicago: Rand McNally. Sumner, C. 1994. The Sociology of Deviance: An Obituary New York: The Continuum Publishing Company. Zahra, S. A., Ireland, R. D., and Hitt, M. A. 2000. International Expansion by New Venture Firms: International Diversity, Mode of Market Entry, Technological Learning, and


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Performance. The Academy of Management Journal, 43 (5): 925-950.


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Figure A: Showing the application of anomie and strain to new venture behavior in transition economies. Transition Economies Shift in economic values, and goals.

Breakdown of Existing Order

ideology,

Imbalance in Structural Paths

Old ideology, values and goals give way to the new order.

Lack of support/adequate means for all individuals to pursue new goals.

Anomie and Strain New ventures in transition economies

Non Normative Adaptation To Achieve New Goals State capture Influence Corruption

Innovation


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Table 1: Means and Correlations of variables in the study

Mean

Std. Dev. 1

2

3

4

1. Influence laws

.1811

.517

1

2. bribes

3.126

5.575

.03

1

1.096

2.276

.11**

.244**

1

4.373

1.122

.03

.002

.021

15.23

7.891

-.08**

1.018

1.036

.16**

3. State capture impact 4. Firm age 5. Perception of corruption in Country 6. innovation


5

1

.050* -.069** .005 .091**

6

.084** .028

1 -.011

1

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Table 2: Results of analysis of variance (state capture, influence and bribes on innovation) Tests of Between-Subjects Effects Type III Sum of Squares

Source

162.156a

Corrected Model

Mean Square

df

16 10.135

F

Sig.

10.518

.000

Intercept

5.429

1

5.429

5.634

.018

Firm age

.028

1

.028

.029

.865

State capture impact

.769

1

.769

.798

.372

Bribes

.047

1

.047

.049

.825

Influence laws

11.771

1 11.771

12.216

.000

Sales

38.682

1 38.682

40.143

.000

11.035

1 11.035

11.452

.001

Country Perception (CPI)

corruption

Sector: Mining and quarrying Sector: Construction Sector: Manufacturing Sector: Transport, storage & communication Sector: repairs

Wholesale,

retail,

.665

1

.665

.690

.406

7.377

1

7.377

7.656

.006

.008

1

.008

.008

.929

7.886

1

7.886

8.184

.004

1 11.393

11.823

.001

11.393

Sector: Real estate, renting & business services

3.169

1

3.169

3.289

.070

Sector: Hotels and restaurants

2.292

1

2.292

2.378

.123

State capture impact * CPI

3.237

1

3.237

3.359

.067

Bribes * CPI

2.798

1

2.798

2.904

.089

Influence laws * CPI

4.626

1

4.626

4.800

.029

Error

1286.412

1335

.964

Total

2890.000

1352

Corrected Total

1448.568

1351

a. R Squared = .112 (Adjusted R Squared = .101)


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Table 3: Showing Parameter Estimates 95% Confidence Interval Parameter

B

Std. Error

t

Sig.

Lower Bound

Upper Bound

Intercept

.427

.180

2.374

.018

.074

.780

Firm age

.004

.024

.170

.865

-.043

.052

Impact of state capture

-.030

.033

-.893

.372

-.095

.036

Bribes

-.003

.013

-.221

.825

-.029

.023

Influence laws

.414

.119

3.495

.000

.182

.647

Sales

.084

.013

6.336

.000

.058

.110

.070

.021

3.384

.001

.029

.110

-.003

.003

-.831

.406

-.009

.004

-.004

.002

-2.767

.006

-.007

-.001

.000

.001

-.089

.929

-.003

.002

Sector: Transport, storage & communication

-.005

.002

-2.861

.004

-.008

-.001

Sector: Wholesale, retail, repairs

-.004

.001

-3.438

.001

-.007

-.002

Sector: Real estate, renting & business services

-.003

.001

-1.814

.070

-.005

.000

Sector: Hotels restaurants

-.003

.002

-1.542

.123

-.006

.001

State capture impact * CPI

.017

.009

1.833

.067

-.001

.035

Bribes * CPI

.006

.003

1.704

.089

.000

.013

-.067

.031

-2.191

.029

-.128

-.007

Country perception

corruption

Sector: Mining quarrying

and

Sector: Construction Sector: Manufacturing

Influence laws * CPI


and

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