Corruption – A Grease on Wheels or an Obstruction for SMEs in Developing Economies

Sadia Shaikh1, Dr. Imam Uddin Khoso2

Abstract
Corruption acts as a national adversary which affects the economic apparatus of countries. It has a persistent effect on market economies, which abruptly cause mistrust between the citizens of the nation, erodes law and order, destroys the legal framework of the government, and compromises the reliability of business sector. It has been found that corruption is fundamentally an ideological, social, and economic vested concept thus stresses a need of developing a comprehensive theory to fully conceptualize the underlying forms and causes of corruption in different economic and geographic context. Given the tremendous social and economic benefits of corruption free market to SMEs in the 21st century, the drive to eliminate corruption in all its forms has significantly increased especially among developing countries.
However, the past research studies on corruption have primarily focused on the forms
of corruption, its causes and remedies in isolation and unintegrated ways. This paper presents an extensive literature review on different forms and causes of corruption prevalent in developing economies and stresses on the impact of corruption on SMEs in particular. The review of literature suggests that there is lack of research, particularly analyzing corruption in the context of developing economies which hinders the generalizability of applications proposed by earlier research studies focused only on developed economies. As developing countries have unique social and cultural values and traits, it is recommended that the corruption phenomenon should be holistically theorized and its types, causes and solutions should be explained as a theoretical chain under compressive theoretical framework for each of developing countries. This will help policy makers to develop effective and coordinated strategies to root out the corruption from these economies.

Keywords: Corruption; Developing Economies; Small and Medium Enterprises
(SMEs); Pakistan.