The impact of corruption on the performance of innovative brazilian firms as a cost in Brazil

This study analyzes the impact of corruption on the performance of brazilian firms as they approach the technological frontier. To this end, it was developed a static model of endogenous growth in a Schumpeterian environment. Under the equilibrium conditions in the model, the appropriation mechanisms of innovative firms exert a dual effect on the rate of technical progress, known as the 'appropriability paradox'. This paradox linked to corruption reveals that a persistent demand for illicit practices, as an attempt to guarantee appropriation of gains and protection from fraudulent contracts, can lead the economy towards a non-convergence trap. Using a sample of 3,444 companies according to World Bank microdata and efficiency scores using the non-parametric technique of order-alpha, the results show that advances towards the frontier entail increasing costs with the presence of corruption. These facts were observed both for the total sample (Brazil) and for firms in the state of Ceará.