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

Dorgyles Kouakou (dorgyles.kouakou@ensta-paris.fr)
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Dorgyles Kouakou: CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR - Université de Rennes - CNRS - Centre National de la Recherche Scientifique, Université Alassane Ouattara [Bouaké, Côte d'Ivoire]

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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 Cote 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; R&D; Côte d'Ivoire (search for similar items in EconPapers)
Date: 2023
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Published in Eurasian Business Review, 2023, 13, pp.87-117. ⟨10.1007/s40821-022-00217-0⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03715711

DOI: 10.1007/s40821-022-00217-0

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