Does Informality Impact Formal Sector Firms?: A Case Study from Nicaragua

Pisani, Michael J.

doi:10.1353/jda.2015.0033

Cited by 13 publications

(12 citation statements)

References 22 publications

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“…The enterprise survey does ask specifically, "Does this establishment compete against unregistered or informal firms?" Such a question also allows for a dichotomous dependent variable (yes/no) and the use of logistic regression to estimate the likelihood of competition and its impact via informal firms using a set of independent variables drawn from previous research (Pisani, 2015a) and our understanding of the Chinese economic and business context. This is a very important competitive aspect of the Chinese economy, as 57.7 per cent of respondent firms in the Chinese Enterprise Survey note they compete head-to-head with informal firms.…”

Section: Methodsmentioning

confidence: 99%

“…While much has been written about informality and the informal sector, very little attention has been focused on the impact of informal firm competition upon formal sector firms in emerging markets. Three recent studies focused on Nicaragua and Central America and noted the important role informal firms and informality play within the formal economic environment (Pisani, 2015a(Pisani, , 2015b(Pisani, , 2017. Fundamentally, this research argues that formal sector firms often face intense competitive pressures from firms operating in the informal sector as well as formal firms behaving in part informally in Central America.…”

Section: Introductionmentioning

confidence: 99%

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When informality meets formality: evidence from China

Yang¹,

Pisani²

2018

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Purpose This study aims to explore “what impact does competition from informal enterprises have on formal firms” within the Chinese economic and business environment. Design/methodology/approach The paper opted for an exploratory study utilizing the cross-sectional survey data “2012 China Enterprise Survey” conducted by the World Bank. The survey is composed of approximately 200 business-related questions across the spectrum of business operations. In all, 2,700 privately owned Chinese firms are included in the logistic regression analysis. Findings Results show the impact of informal firm competition upon formal firms in China are influenced by geographical location, industry sector, ownership profile, governmental ownership, online presence and the extent of obeying labor regulations or the time spent in handling the governmental regulatory environment. There is a competitive and complementary simultaneous intertwined relationship between formal and informal economy. It occurs in a formal economy not fully divorced from the structural inertia of the planned economy as it transitions to a market-based economy. Practical implications This paper extended the assumption of institutional theory and presented it as a dynamic view of the evolution of organizations. It contributes by offering a simultaneous dual relationship between the formal and informal economy. It also adds one more potential feature of populations in the population ecology theory. Originality/value This exploratory paper empirically examines the impacts of informal sector enterprises on formal sectors firms in China and proposes a dual force effect of the informal economy to the formal economy given the current Chinese institutional environment. The study also provides a platform for further research on the interactions between the formal and informal sectors in emerging markets.

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Section: Methodsmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

When informality meets formality: evidence from China

Yang¹,

Pisani²

2018

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“…However, the study does not offer any direct evidence on the impact of informal competition on formal firms’ productivity. Using ES data for Nicaragua, Pisani (2015) explores the firm characteristics that determine the likelihood of formal firms to face informal competition. Mendi and Costamagna (2017) use data from ES to estimate the impact of informal competition on formal sector firms’ innovation.…”

Section: Literature Reviewmentioning

confidence: 99%

Casting a shadow: Productivity of formal firms and informality

Amin¹,

Okou

2020

Review Development Economics

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The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.

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“…Their findings suggest that about 40 percent of the firms in the region face significant informal competition, with sizeable variation across industries and firm sizes. Using Enterprise Surveys data for Nicaragua, Pisani (2015) explores the firm characteristics that determine the likelihood of formal firms to face informal competition. Mendi and Costamagna (2017) use data from Enterprise Surveys to estimate the impact of informal competition on formal sector firms' innovation.…”

Section: Introductionmentioning

confidence: 99%