The role of informal competition in driving export propensity of emerging economy firms

Abstract

Purpose Competitive pressure from informal firms has always been a threat to the formal enterprises. However, the strategic choices a firm makes to deal with such competitive pressures still remain under-explored. The purpose of this paper is to examine the influence of informal competitive pressures in driving export propensity of formal firms. Design/methodology/approach The paper is based on a standard error logistic model, and the model takes into account the contingent relationships along with the primary relationship. The authors draw the sample of 9,812 manufacturing firms spanning across the Indian sub-continent from the World Bank enterprise survey conducted in the year 2014. Findings The empirical results indicated that the level of competition from informal firms is positively associated with the propensity to export. The primary relationship is also affected by various contingent factors such as regulatory obstacles, bribery and new product development. Research limitations/implications Although the World Bank enterprise survey data provide a broad coverage, the study warranted few proxy measures in order to operationalize formal competition as it was not captured directly in the concerned data set. Practical implications The analysis demonstrates that informal competition has direct effect on the firm’s propensity to export. The findings indicate that export is an attractive action alternative for firms facing informal completion in an emerging economy. The results further indicate that this effect strengthens as institutional factors such as regulatory obstacles and bribery increase. Social implications The paper is an attempt to alter the prevailing negative view on informality. The findings indicate that informal competition spurs competitiveness in the formal sector indicating its positive role in the economic growth of the nation. Originality/value The paper takes cue from attention-based view of the firm and the institutional escapism logic to affirm the role of informal competition and various contingent institutional and strategic factors in driving export propensity.

Entry, speed and degree of formality for household businesses: an integrated approach

“…In contrast to prior findings, the findings of this study reveal that internationalisation and innovation significantly impact the admission and degree of formality when viewed through the lens of entrepreneurship (Bu and Cuervo-Cazurra, 2020). Integrating informal enterprises into the supply chains of multinational organisations or participating in their export initiatives helps formalise their activities from a management and market standpoint (Chena and Noguera, 2020; Deb et al , 2020; Kedir and Baricako, 2021). Additionally, the impetus for process, technology and product innovation could increase to meet formality requirements.…”

“…Firms regard growth into new international markets as a crucial strategic choice for improving firm performance (Tuppura et al, 2008). Internationalisation, such as export strategy, is a compelling option for firms confronted with informal competition in a developing economy (Berdiev and Saunoris, 2019;Deb et al, 2020). Chena and Noguera (2020) demonstrate a solid and positive relationship between the increased internationalisation of production in global value chains and the growth of informality in terms of both unregistered jobs and the informal economy.…”

Risk-oriented approach to managing the social market economy

“…Literature review Preconditions and perspectives of creation of the social market economy and the accumulated practical experience are discussed in the works of Agunovich et al (2018), Andronova andRiazantsev (2006), D'Aleo and, Goyal and Sergi (2015a), Goyal and Sergi (2015b), Goyal et al (2015), Goyal et al (2017), Haabazoka et al (2019), Ivanov et al (2019), Pichkov (2016), Popkova and French (2017), Popkova and Sergi (2020), , , Popkova et al (2018), Popkova and Zmiyak (2019), Pritvorova et al (2018), Qerimi and Sergi (2015), Ragulina (2019), Sergi et al (2019), Shevyakova and Petrenko (2018), Shevyakova et al (2019) and Zavyalova et al (2018). Risk management and related crisis management of market economy ("pure" market) are described in the works of Adetiloye et al (2017), Amin (2019), Apergis (2015), Balima et al (2017), Benda et al (2019), Bertolini and Goglio (2019), Boonman (2019), Bouri (2015), Br€ ulle et al (2019), Deb et al (2020), Demiralay (2019), Floyd (2019), Gencer and Demiralay (2016), Ha-Huy et al (2016), Jiang et al (2017), Kourachanis (2019), Laitsou et al (2017), Matsuoka (2018), Mul e (2019), Naess and B ardsen (2015), ...…”

Evaluating Entrepreneurs’ Motives for Participating in the Informal Sector in Europe

“…Given that 86.1 percent of all own-account workers worldwide are in the informal economy (ILO, 2018), a new sub-discipline of entrepreneurship has emerged that studies entrepreneurship in the informal sector (Alnahedh and Alsanousi, 2020;Deb et al, 2020;Karki and Xheneti, 2018;Lin, 2018;Mannila and Eremicheva, 2018;Ogando et al, 2017;Petersen and Charman, 2018;Ram et al, 2017;Ullah et al, 2019;Williams and Laden, 2019;. Informal sector entrepreneurs are defined here as those working on an own-account basis who do not declare all their paid activities to the authorities for tax, social security and/or labor law purposes (Chepurenko, 2018;Ketchen et al, 2014;Siqueira et al, 2016;Williams, 2017;Williams and Martinez-Perez, 2014a, b;.…”