Anti-corruption and firm innovation: political path dependence perspective

Drawing on the concept of political path dependence, we hypothesise a positive impact of anti-corruption measures on firm innovation, illustrating how businesses can benefit from both eliminating illegal political ties ('cleaning house') and cultivating lawful relationships with the government ('hosting new guests'). By analysing a sample of A-share listed companies from 2010 to 2015 using the PSM-DID model, we demonstrate that anti-corruption campaigns enhance innovation performance. Specifically, anti-corruption efforts sever the nexus of interests between government and businesses, curbing corporate expenditures on rent-seeking activities. Firms located in regions with stringent governmental oversight have experienced significant improvements in innovation outputs following the implementation of anti-corruption policies, particularly private-owned enterprises. This study provides empirical support for the benefits of anti-corruption from the perspective of political path dependence, offering valuable insights for governments aiming to bolster firm innovation through improved public governance and legal frameworks.