Competing against ‘invisibles’: the effect of competition from informal firms on formal firms’ R&D

Dorgyles C. M. Kouakou ()
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Dorgyles C. M. Kouakou: CREM, UMR CNRS 6211, Université de Rennes 1

Eurasian Business Review, 2023, vol. 13, issue 1, No 4, 87-117

Abstract: Abstract Competition from informal firms is an important issue that face most formal firms in developing countries. It usually leads to market share losses in formal firms and weakens their self-financing capacity. Recently, a stream of literature has been developed concerning its impact on the outcomes and strategic choices of formal firms. This paper contributes to this literature by investigating the effect of the Competitive Pressure from the Informal Sector (CPIS) on the research and development (R&D) investment of formal firms using firm-level data from Côte d’Ivoire. It emerges that the CPIS incites formal firms to engage more in R&D when it constitutes a problem, but not a severe one, for them in conducting their activities, which implies a positive effect. However, this effect is lost when the problem is severe. We conclude by discussing policy implications.

Keywords: Competition from informal firms; Formal and informal sectors; $$\hbox {R} \& \hbox {D}$$ R & D; Côte d’Ivoire (search for similar items in EconPapers)
JEL-codes: D22 L22 O17 O32 O55 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s40821-022-00217-0

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