This paper assesses the effects of perceived corruption on corporate activity using cross-country, firm-level data. Results suggest that perceived corruption relatespositively to corporate investment and innovation. To test whether corruption plays disparate roles in investment and innovation across countries, we divide the sample into two groups basedon a country’s development status-whether a country’s economy is emerging or in an advanced state. For countries in an advanced economic state, we show that corruption relatespositivelywith corporate innovation but relates negatively, oris non-significant,with corporate investment. In emerging economies, greater corruption relates positively with investment,but we find no effect on corporate innovation.Findings suggest that corruption encouragesfirms to focus on what is needed in their societies. 

Keywords: corruption, corporate investment, innovation, greasing wheel, sanding wheel, cross-country analysis​