Effects of informal competition on innovation performance: the case of Pacific Alliance

Abstract

This study evaluates the impact of informal competition on the innovation performance of formal firms in emerging economies. A theoretical model under the strategy tripod framework is proposed. It analyzes the effects of Institutional factors as the quality of governance and market labor rigidities on innovation performance, and the mediating effect of informal competition. It is used the Causal Mediation Analysis with data from 3,268 companies from the World Bank Enterprise Survey from countries of the Pacific Alliance (Chile, Colombia, Mexico, and Peru). The results state that informal competition has a negative effect on the innovation performance of formal companies. Based on these findings, It is suggested some promising avenues for future research and managerial implications.

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“…y prefieren innovar comprando maquinaria, hardware y software (Tello, 2017). También enfrentan competencia informal (Heredia et al, 2017) y tienen problemas para obtener recursos financieros para promover la innovación .…”

Análisis cualitativo de los determinantes de la innovación en una economía emergente

“…A pesar de esta situación, las empresas peruanas tienden a invertir muy poco en Investigación y Desarrollo (I+D), y prefieren innovar comprando maquinaria, hardware y software (Tello, 2017). También enfrentan competencia informal (Heredia et al, 2017) y tienen problemas para obtener recursos financieros para promover la innovación (Pérez et al, 2018).…”

“…Se debe tomar en cuenta que las economías latinoamericanas pasaron por un periodo de bonanza económica, para luego enfrentar una realidad distinta, en la que destaca la baja estabilidad política (Olavarrieta & Villena, 2014), alto niveles de corrupción (Paunov, 2016), y de informalidad (Heredia, Flores, Geldes & Heredia, 2017). Es este contexto el que se convierte, en algunos casos, en un limitante para llevar a cabo las innovaciones.…”

Casting a Shadow: Productivity of Formal Firms and Informality

“…In such circumstances, competition between informal and formal firms and its impact on formal firms may be limited or even non-existent. On the other hand, given the formal-informal nexus, other studies report that competition from the informal sector may hinder the profitability of firms that operate in the formal sector, limiting the resources available to firms to enhance their productivity (Gonzalez and Lamanna 2007;Heredia et al 2017;Mendi and Costamagna 2017). This is likely to occur when informal firms are sufficiently productive to survive in the formal sector yet choose to remain informal to benefit from the cost advantage of noncompliance withpossibly excessive-taxes and regulations (Maloney 2004;de Mel, McKenzie, and Woodruff 2011).…”