The Effects of Corruption and Innovation on Sustainability: A Firm-Level Analysis

Abstract

In recent years, analysts’ interest in understanding sustainability as a new and exclusive economic paradigm has been matched by the research for tools that might both promote and hinder it. In particular, innovation has been widely regarded for its beneficial effects on sustainability, whereas corruption has been regarded for its negative implications. This study adds to our understanding of these linkages by revealing that, depending on the nature of the sustainability targets, these important drivers can have varying effects. Therefore, using a sample of Italian firms, through SEM analysis, we estimate two latent variables representing innovation and corruption for their relationship with sustainability in two models, covering two sets of indicators (sustainable industrialization and sustainable employment and labour). Whereas both models’ results indicate that innovation and sustainability have a substantial positive link, the relationship between corruption and sustainability yields contradictory results. Furthermore, the findings show a negative relationship between innovation and corruption. As a result, the distinction between types of sustainability leads to a different interpretation of how their driving factors operate. This approach suggests the establishment of more tailored sustainability strategies, in line with the diverse consequences that may arise when corruption, innovation, and sustainability are at play.