The impact of corruption on innovation activities: the case of Malaysia

Chung, Yong Li and Tan, Harry Che Pei and How, Chao Xun and Tan, Chao Eu (2022) The impact of corruption on innovation activities: the case of Malaysia. Final Year Project, UTAR.

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Abstract

The primary objective of this research is to determine the factors that impact the innovation in Malaysia, especially to put the spotlight how the corruption impacts on the innovation in Malaysia. As the world is moving toward industrial revolution 4.0, and the innovation activities are getting complex yet important due to the change in global landscape. Malaysia as a developing country in Southeast Asia which is one of the fastest growing regions, the well innovation environment is indispensable for the country to growth and compete. However, the accountability of government in terms of clean handed was suspected by the world, so this study is to investigate on the relationship between innovation activities and corruption in Malaysia. Other than that, this research used secondary data from 1995 to 2019 and the methodology of ARDL to investigate the long run effect of corruption as well as other control variables which included foreign direct investment (FDI), trade openness, and human capital on the innovation in Malaysia. The empirical test result showed that corruption has significantly negative impact on the innovation in Malaysia, which mean the corruption “grease the wheel” of innovation in the case of Malaysia. On the other hand, the other control variables; FDI has significant positive relationship, while trade openness has significant negative relationship with the innovation in Malaysia. The human capital has showed no significant impact on the innovation in Malaysia. All of these provided insights for implications. This provides a crucial notice to Malaysian that the innovation activities are positively affected by corruption activities which need to pay more attention on in order for a more sustainable growth for the country. Not only that, it was also concluded that attracting FDI is also important for Malaysia to improve in the innovation activities. Besides, the Malaysia’s policies and governance need to revisit in order to win in trade with other countries and make it have positive effect on the innovation. Lastly, the limitations and recommendations of the study are discussed as well for future improvement for future researcher.

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