Innovations as a Response to Shadow Economy: Evidence from Privately Held Firms

Omar Farooq (), Khondker Aktaruzzaman (), Harit Satt () and Fatima Zahra Bendriouch ()
Additional contact information
Omar Farooq: ADA University
Khondker Aktaruzzaman: Xiamen University Malaysia
Harit Satt: Al Akhawayn University in Ifrane
Fatima Zahra Bendriouch: Université Sidi Mohamed Ben Abdellah

Journal of Industry, Competition and Trade, 2022, vol. 22, issue 3, No 2, 349-370

Abstract: Abstract Using the data provided by the World Bank’s Enterprise Surveys, this paper shows that firms with higher exposure to informal competition are more likely to innovate than firms with lower exposure to informal competition in 121 developing countries. Our results hold in various sub-samples based on the size of firms and on the location of firms (Europe and Central Asia, Africa, Asia, Latin America, and Middle East and North Africa). We argue that formal firms use innovation as a tool to protect and sustain their competitive advantage vis-à-vis informal firms. The findings of this paper also show that the firm-level business environment and the country-level economic environment affect the sensitivity of innovation to informal competition.

Keywords: Informal competition; Innovations; Private firms; Developing countries; World Bank Enterprise survey (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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DOI: 10.1007/s10842-022-00388-6

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