The Effect of Corruption on the Productivity of Manufacturing Firms in Kenya

Abstract

This study sought to determine the effect of corruption on productivity of manufacturing firms in Kenya. Specifically, the study sought to investigate the extent to which the productivity of firms in the manufacturing sector is affected by corruption. Additionally, the study compared how corruption affects the productivity of different firm sizes. The study employed panel data from the World Enterprise Survey covering the period 2007-2018. The study found out that corruption had an insignificant positive effect on the productivity of manufacturing firms. Ownership type has also an insignificant effect on productivity. However, large firms engaged in corrupt activities showed a positive effect on their productivity compared to medium sized firms which also showed a positive effect when compared to smaller firms. Thus overall, corruption positively affects the productivity of large firms: large firms have the financial muscles for paying bribe tax and time tax reducing bureaucracies hence improved efficiency.