The Accounting, Governance and Sustainability (AGS) Research Group at the School of Finance and Accounting, Westminster Business School, hosted a research seminar titled “Greasing a Hollow Wheel: Political Corruption and Innovation Strategy.” The seminar was delivered by Dr Mohamed Mekhaimer, Associate Professor of Finance at St John Fisher University, USA.
Dr Mekhaimer’s research interests include corporate governance, political risk, innovation, liquidity and financial market design. His work has been published in leading journals, including The Accounting Review, Journal of Corporate Finance, Journal of Banking & Finance, Review of Quantitative Finance and Accounting and The Financial Review.
The seminar examined how local political corruption influences firms’ innovation strategies. It considered two competing perspectives: corruption as “sand in the gears”, which obstructs productive activity, and corruption as “grease”, which may help firms overcome bureaucratic barriers and gain access to resources.
Using data from listed US firms, the study distinguished between exploratory innovation, which focuses on new technologies and knowledge, and exploitative innovation, which develops firms’ existing capabilities. The findings showed that firms located in more corrupt areas were more likely to pursue exploratory innovation and less likely to undertake exploitative innovation.
Lobbying and government contracts were identified as important channels through which corruption influenced firms’ innovation choices. However, the shift towards exploratory innovation did not produce stronger outcomes. Political corruption was associated with lower innovation efficiency, reduced patent value and a lower likelihood of producing breakthrough innovations. Corruption therefore appeared to “grease a hollow wheel” by encouraging riskier innovation while weakening its economic and technological value.
The seminar was attended by 25 colleagues and doctoral researchers from the University of Westminster and Westminster International University in Tashkent.
The session generated engaging discussion among colleagues and doctoral researchers on political connections, managerial risk-taking, the allocation of research and development resources and the implications of corruption for innovation policy.
Overall, the seminar provided valuable insights into how political institutions influence both the direction and outcomes of corporate innovation, with important implications for researchers, business leaders and policymakers.
