Informal Legacy and Exporting Among Sub-Saharan African Firms

Marcus M. Larsen () and Caroline T. Witte ()
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Marcus M. Larsen: Department of Strategy and Innovation, Copenhagen Business School, 2000 Frederiksberg, Denmark; Department of Strategy and Entrepreneurship, BI Norwegian Business School, 0484 Oslo, Norway
Caroline T. Witte: Department of Strategy and Entrepreneurship, Rotterdam School of Management, Erasmus University Rotterdam, 3000 DR Rotterdam, The Netherlands

Organization Science, 2023, vol. 34, issue 3, 987-1003

Abstract: Around the world and especially in areas of widespread poverty, firms start their operations without registering with relevant authorities (i.e., in the informal economy). We explore whether firms that initiated their operations in the informal economy but later register have a higher propensity to export than firms that register at the time of their foundation. We reason that the experience of having operated informally provides formally registered firms with the advantage of low-cost and flexible exploration but also a domestic legitimacy liability. We suggest that these factors likely contribute to making foreign export markets more attractive after registration. Based on a comprehensive sample of sub-Saharan African firms, we find that, conditional on registration, firms with an informal legacy have a higher propensity to initiate exporting than firms that started their operations formally. We contribute with theoretical and policy-oriented insights on the dynamics of informality and exporting.

Keywords: exporting; informal economy; experimentation; legitimacy; sub-Saharan African firms (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:inm:ororsc:v:34:y:2023:i:3:p:987-1003

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