Corruption—the misuse of public authority for private gain—is widely recognized as a global challenge for both economic growth and entrepreneurship. While some scholars see corruption as “sand in the wheels” that stifles innovation and firm performance, others argue it can “grease the wheels” by helping firms bypass bureaucratic inefficiencies. But most research has treated entrepreneurs as if they are all the same, overlooking how individual backgrounds shape responses to corruption.
To better understand how corruption affects entrepreneurs, we adopt a contingency approach that closely examines entrepreneurs’ generation in our recently published article in the Strategic Entrepreneurship Journal. Our research suggests that the effect of corruption on entrepreneurial performance depends on entrepreneurs’ attributes that are shaped by their generation.
Building upon imprinting theory, we suggest that a given generation of entrepreneurs shares the same formative experience at adolescence and develops a distinct generational imprint that reflects the prominent features of the environment in which they formed their cognitive inclination and capability. Such an imprint may shape their values and beliefs toward the corrupt environment in which they manage their firms, thus creating variations in firm performance when entrepreneurs come from different generations.
Further complicating the imprinting effect, we probed entrepreneurs’ personal life experiences that may moderate the relationship between entrepreneurs’ generational imprint and their firm performance in the corrupt environment. We propose two kinds of personal experience—living in a rural area and receiving a college degree—and examine how entrepreneurs’ generational imprints interact with their personal life
experiences to influence firm performance in an environment where corruption prevails.
We situated our study in the context of China, which has witnessed increasing collusive corruption that is characterized by the exchange of power for money between government officials and businesspeople, and a generational shift after the country launched the move toward a market economy. This generational shift has occurred alongside the appearance of Millennials in the West. It is evident in the emerging class of private entrepreneurs, where both older and younger generations of entrepreneurs are actively shaping the economic landscape within a system plagued by corruption.
This setting provides an opportunity for an empirical investigation to examine how entrepreneurs’ generational imprints affect their firm performance in the environment characterized by collusive corruption.
Using a proprietary dataset of corruption and entrepreneurs in China, we find that, in an environment of collusive corruption, the market-generation entrepreneurs who experienced adolescence and cognitive development after the onset of the market transition developed a transactional imprint, characterized by materialism and a utilitarian view of society.
Those entrepreneurs tended to achieve better firm performance in the short run than the premarket-generation entrepreneurs who came of age before the market transition and developed a principled imprint, marked by a commitment to moral and ethical standards in business exchanges.
Moreover, the firm performance gap between market-generation entrepreneurs and premarket-generation entrepreneurs in the environment characterized by collusive corruption was diminished among entrepreneurs who had a rural living experience or received higher education. We supplement the quantitative analyses with informal interviews with both generations of entrepreneurs to substantiate our proposed mechanisms.
Our research makes three contributions. First, we contribute to the literature of corruption and entrepreneurship by moving beyond the debate about the universal effect of corruption. We integrate the concept of “generation” into entrepreneurship literature and provide a contingency view of corruption in relation to entrepreneurship.
Yifan Wei is an Assistant Professor of Strategy at the Beedie School of Business, Simon Fraser University. His work investigates organizations’ interactions with domestic and global institutional environments, with a focus on corporate political activity and innovation strategy.
