Does bootstrapping corrupt? The curvilinear effect of trade credit on entrepreneurial corruption perception in emerging economies
Ikenna Uzuegbunam, Amanda S. Hinojosa, Stephanie R. Leonard, Michael OgboluPurpose
This study examines how trade credit from suppliers/buyers affects entrepreneurs' corruption perception (as an obstacle) in emerging economies. Specifically, we argue that the relationship between the degree of trade credit and corruption perception is curvilinear, with trade credit initially increasing corruption perception and then subsequently decreasing this perception. Given the central role of state actors in situations of corruption in economies around the world, we explore the role that state ownership plays in the relationship between trade credit and corruption.
Design/methodology/approach
The data consists of 14,922 nascent firms across 142 emerging economies. We analyzed the data using ordinary least squares (OLS) and ordered probit regression models. In robustness checks, we also conducted three-stage least squares (3SLS) simultaneous equation models.
Findings
The results support the key hypothesis of a curvilinear U-shaped relationship. Furthermore, the findings indicate that the inverted U-shaped effect is accentuated for state-owned enterprises.
Originality/value
Given the adverse impact of corruption as a constraint on entrepreneurial and country development in emerging economies, our study offers novel insights into how trade credit power dynamics in entrepreneurial resource mobilization affect new firms' corruption perception. Moreover, our study advances the literature by empirically teasing out the endogeneity between trade credit and corruption. In effect, we demonstrate that even though corruption might lead to trade credit situations, trade credit also encourages corruption in a non-linear fashion. Given that bootstrapping methods such as trade credit indicate entrepreneurial resourcefulness, this research addresses recent calls to highlight the adverse effects of resourcefulness.