Common acts of corruption such as bribery and informal payments are virtually illegal everywhere and prevalent in every corner of the world. This paper aims to contribute to the literature by considering the influences of corruption and female top management on the likelihood of technological innovation by using a nationwide survey and a sample of private small-medium sized companies (SMCs) in China. Interestingly, we find that female top managers have less enthusiasm for innovation than their male counterparts. Corruption, when measured by informal payments, poses a positive effect on the possibility of innovation after controlling for firm-level characteristics. However, female executives may weaken the positive innovation effects caused by corruption. Furthermore, one of our implied findings is that a firm with a female top manager is less likely to engage in corruption because this may raise the costs of doing business without any benefits for innovation. The results collectively illustrate the role that female top management and corrupt actions have in shaping innovative activities of private SMCs, and suggest that bribe-combating actions in firms are necessary, such as a framework for rationalizing the proportion of female executives involved in management.
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