Bribery, on‑the‑job training, and firm performance

Abstract

The previous literature has extensively examined the effect of firm-level bribery on firm performance but not through on-the-job training. This paper investigates the impact of paying bribes on the firm’s investment decisions in on-the-job training and offers mediating implications of corruption on firm performance. We empirically examine the relationship between bribery and on-the-job training using firm-level data from the World Bank Enterprise Surveys consisting of a sample of 94 developing countries with 20,601 firms. The findings show that bribery and on-the-job training intensity affects real annual sales growth rates negatively and positively, respectively. Furthermore, firms exposed to more bribery reduce their on-the-job training intensity. The results are robust to the different classifications of the firm’s size, different subsamples, and controls for the endogeneity of the on-the-job training and bribery.