Social ties have been found to be facilitators of innovation because of their network benefits. However, these benefits are often accompanied by potential costs and risks. Bribe payments are considered the negative consequences of social capital. Therefore, we argue that social ties serve as a missing link between innovation and bribery. Adopting a social capital perspective, we explain the various positive effects that social capital is believed to have on innovation process. On one hand, transition economy firms enjoy the benefits of social capital from political ties and business ties to support innovation process. The benefits of social capital compensate for the weak legal framework’s inability to generate and protect innovation in transition economies. On the other hand, social capital exposes the firm to higher risks of bribery. This research found that innovation increases the scope of both political ties and business ties. At the same time, political ties drive bribery propensity and intensity, whereas business ties raise bribery propensity rather than intensity. Further, the results show that business ties enlarge the scope of political ties and thus indirectly increase rates of bribery. This result contributes to the knowledge of how innovation is linked to bribery through social ties. This research also provides an explanation of why firms pay bribes: innovators accept and offer bribes to support innovation.
