Business Leadership under Institutional and Ethical Pressure: Management Practices, Informal Influence, and Innovative Behavior

Abstract

Innovation performance across enterprises depends not only on access to technology and finance but also on the quality of managerial systems through which business leaders organize monitoring, targets, incentives, and people management under heterogeneous institutional conditions. Existing evidence rarely integrates structured management quality, realized innovation outcomes, and corruption-related institutional pressure within a single firm-level framework, leaving uncertainty about whether stronger business leadership capacity is associated with innovation independently of institutional conditions and organizational scale. This study examines whether structured and merit-oriented management practices are associated with product innovation, process innovation, any product or process innovation, and research and development activity, and whether these relationships vary with corruption-related institutional pressure and firm size. The analysis uses pooled World Bank Enterprise Surveys data for 25,347 establishments in 39 European economies, represented by survey files labelled 2023–2026, with the management-practices index reconstructed uniformly from items R.1–R.11 and regression samples of 10,862–10,873 establishments. Survey-weighted logistic regression with country-clustered inference, average marginal effects, inverse-probability weighting, alternative management and corruption measures, fixed-effects models, generalized estimating equations, Firth’s penalized regression, wild-cluster bootstrap inference, leave-one-economy-out analysis, and omitted-variable sensitivity tests were applied. It was discovered that a ten-point increase in management quality is associated with 20.8% higher odds of product innovation, 30.9% higher odds of process innovation, 26.1% higher odds of any innovation, and 22.4% higher odds of research and development activity, with corresponding average marginal effects of 3.84, 5.18, 4.38, and 3.29 percentage points; all four associations are significant at p < 0.001. Corruption-related institutional pressure shows no stable negative association with innovation, while management-by-corruption interactions remain statistically non-significant across all four outcomes; for any innovation, the interaction coefficient is 0.018 (p = 0.323), and alternative corruption measures do not materially change this conclusion. The management–innovation relationship remains robust: the any-innovation odds ratio is about 1.26 after eligibility reweighting, 1.270 using the partial management index, and 1.296 under economy-by-sector fixed effects, while leave-one-economy-out estimates range from 1.245 to 1.311; no statistically significant organizational-scale heterogeneity is detected. These findings identify structured and merit-oriented management quality as a robust correlate of innovative behavior and provide an evidence base for business leadership without assuming that stronger management systematically offsets corruption-related institutional pressure.