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Several empirical studies indicate that the existence of a large informal sector is a major obstacle to firms’ choices of innovation strategies. This paper aims to address this issue and investigates the effect of the informal sector on the innovation of formal firms in Greece.

Using the World Bank’s Enterprise Survey data, the impact of informal competition on formal firms’ innovation in Greece is investigated by testing whether formal firms use innovation as a tool to protect and sustain their competitive advantage vis-à-vis informal firms and whether overall and informal competition has an inverted-U relationship with the innovation of formal firms. The effects of bribing and other variables drawn from the empirical literature are also controlled for.

The findings fill a gap in the literature regarding the effects of the informal sector on formal economic activity in Greece, by indicating that the informal sector puts pressure on formal firms to innovate, in order to differentiate their product or service and enhance their productivity and by offering learnings to help policymakers to promote innovation in Greece.

The originality of this study is that it investigates the impact of informal competition on formal firms’ innovation in Greece, a developed economy with a large informal sector. It does so by focusing on the effects that formal firms’ informal practices have on their competitors’ innovation activities, and the role of informal competition in creating and sustaining a competitive advantage in Greece.

This paper aims to investigate whether Kazakh small- and medium-sized enterprises (SMEs) that claim to compete with the informal sector are more likely to invest in innovation than their competitors who do not perceive such pressure.

Logistic regression and classification trees are performed on the Business Environment and Enterprise Performance Survey (2018–2020) to examine whether the degree of informal competition correlates with a firm's propensity to innovate.

The findings show that informal sector competition is a critical factor that shapes the organizational behaviour of Kazakh SMEs. There is a stimulating positive effect of informal competition on both product and process innovation, depending on its perceived intensity.

This study challenges conventional thinking that still views informal sector competition as a barrier to innovation and entrepreneurship by assessing whether innovation is compatible with informal entrepreneurial practice.

The purpose of this paper is to document how male and female managers respond to competition posed by informal firms.

The methodology uses the ordered logistic regression and the data provided by the World Bank’s Enterprise Survey to test the arguments for firms headquartered in India.

The findings show that firms managed by females are more likely to consider informal competition as a bigger obstacle for their operations than firms managed by males. It also shows that this relationship is more pronounced in provinces with weak institutional infrastructure. Lastly, the paper shows that firms managed by females respond to competition from the informal sector by undertaking more innovations than firms managed by males.

This research extends the literature on gender differences in response to competition by documenting how female managers respond to external competition in emerging markets.

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.

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.

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.

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.

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.

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.

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.

The purpose of this paper is to examine the empirical literature on the effects of informal competition on firm performance and provide directions for future research.

We search the Scopus and Web of Science databases and adopt a specific protocol to perform a systematic review of the literature. We screen 536 documents and apply three inclusion criteria for filtering.

We identify the impact of informal competition on nine types of formal firms' performance. We assess the findings according to the explanatory and response variables and the data samples of the articles reviewed. We find that five areas of focus are under-researched due to analyses of country or region-specific data, or lack of consensus because of contradicting findings.

To the best of our knowledge, this is the first review of the empirical literature on the effects of informal competition on the performance of formal firms.

This study aims to explore “what impact does competition from informal enterprises have on formal firms” within the Chinese economic and business environment.

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.

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.

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.

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.

Threats from the informal sector have become an important concern among formal firms. As a response to these threats, formal firms can adopt product innovation (PI) and marketing innovation (MI) strategies to differentiate themselves. The purpose of this paper is to examine how firm-level technical capability and external institutional quality affect firms’ reactions to the threats from informal firms by adopting innovative activities.

Based on attention-based view (ABV), an empirical study is conducted by using firm-level data from the World Bank Enterprise Survey in 2013.

The findings indicate that when faced with competition from informal firms, formal firms will intensify their innovation activities in both MI and PI, and their technical capability mitigates the competitive threats from informal sectors and thus weakens the impact of informal competitors on the level of product and marketing innovations. Moreover, it is found that the improvement of institutional quality reduces formal firms’ urgency to introduce new products when facing informal competitors. However, this improvement strengthens the impact of informal rivalry on formal firms’ innovation in marketing methods.

Previous studies that investigate the influence of informal threats are focused on technological innovation (e.g., PI and process innovation) strategies, but little knowledge is provided on non-technological innovative strategies, such as marketing strategies (e.g., MI and organizational innovation). This study contributes to the innovation literature by delving into the circumstances under which PI and/or MI is adopted to counter informal rivals. The findings enrich ABV by investigating how inter-firm resource similarity and marketing commonality strengthen top managers' attention to competition from informal firms.

Drawing on the bribery literature, this paper aims to examine the effect of bribes paid in the home country on firms’ decision to internationalize through exports from transition economies. It also investigates whether the effect of home country bribery may vary from new ventures to established firms, and from those firms that operate in an environment with high to low informal competition.

This paper tests several hypotheses using a panel data with fixed effects based on a sample of firms in transition economies from the Business Environment and Enterprise Performance Survey.

First, home country bribery in transition economies can make domestic markets more lenient and dampen firms’ motivation to seek opportunities abroad. Second, new ventures have a higher motivation to focus on their domestic markets after paying bribes. Finally, despite the benefits accrued in the home country through bribery, firms that face a higher level of informal competition in the home country are more likely to seek opportunities abroad.

Managers in transition economies should consider their home country bribery activities in their evaluation of foreign market opportunities. Firms that use money to influence home country government officials, especially new ventures, are advised to have a more holistic view in evaluating foreign market opportunities so they will not miss out on new opportunities.

This paper advances literature on home country institutions and the research on firm global strategies. Moreover, it also highlights several contingencies that shape the effect of home country bribery on firms’ foreign market focus.

Competition is a prominent topic of discussion among academics and practitioners; yet the relevant literatures in management and psychology lack a consistent definition to describe this phenomenon. Consequently, much of the mixed results concerning competition's impact on attitudes and performance might be due to conceptual differences about the construct. A survey administered in a laboratory setting demonstrated individuals perceive different types of competition, and these different types had different impacts on attitudes and behavior. One type of competition identified here, the opportunity for informal competition, draws from a vast literature in social psychology—using social comparisons to evaluate performance. These results support broadening the definition of competition and expanding future research investigation efforts. Informal social competition can potentially benefit efforts to effectively direct and enhance motivation.

Recent work in the economics of innovation in developing countries increasingly considers the formality of business as a determining factor of economic development. However, current knowledge on how formality determines both innovation and business performance remains mixed. This article examines this relationship by analyzing, on the one hand, the role of formality on innovation and, on the other hand, the moderating effect of formality on the relationship between innovation and the performance of business in francophone Sub-Saharan Africa.

Based on a sample of 1,369 Cameroonian and Senegalese small and medium-sized enterprises (SMEs) from the International Development Research Center (IDRC), the Crepon Duguet et Maraise (CDM) technique was used to reduce the endogeneity bias inherent in this type of analysis.

The results show that formal companies have a better capacity for innovation. In addition, formality positively moderates the relationship between innovation and the performance of businesses in the case of product and commercial innovations. On the other hand, it negatively moderates the relationship between innovation and the performance for process and organizational innovations.

These results show that the advantages of formalization widely relayed by national public institutions and international organizations can present a risk for business if the expected gains are not accompanied by innovations.

This paper contributes to research by taking into account the heterogeneity of firms because it is one of the first to study formality as a moderator in the relationship between innovation and firm performance in Sub-Saharan African economies.