The goal of this research is to measure the difference in degree by which corruption
presented an obstacle to firms that did or did not innovate. Using cross sectional data from the
World Bank Enterprise Survey covering 26 African and Latin American/Caribbean countries in
2006, this study looks at 7,776 innovative firms, defined as a firm that has introduced a new
product or service in the past three years. This study finds that when a non-innovating firm
decides to innovate, it will likely find corruption to be a bigger obstacle to their operations. This
discovery is robust when controlling for country level heterogeneity through fixed effects. The
addition of control variables concerning education and the firm characteristics of size, access to
finance, exports and market competition did not result in a large change in results.