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Evaluating The Impact Of Informal Sector Competition On Firm Performance: Some Lessons From South-East Europe

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  • COLIN C. WILLIAMS

    (Sheffield University Management School, University of Sheffield, Conduit Road, Sheffield, S10 1FL, UK)

  • SLAVKO BEZEREDI

    (Institute of Public Finance, Zagreb, Croatia)

Abstract

A widespread assumption is that competition from the informal sector has a negative impact on the firm performance of legitimate enterprises. This is because of the unfair competition they face from such enterprises in the informal sector. The aim of this paper is to provide an evidence-based evaluation of whether this is the case based on an analysis of the relationship between the firm performance of enterprises and their perception of the prevalence of informal sector competition. To do so, data is reported from a representative sample of 1,430 enterprises in Bulgaria, Croatia and FYR Macedonia. The finding is that enterprises asserting that their competitors participate in the informal economy have significantly lower real annual sales growth rates compared with those who assert that their competitors do not participate in the informal economy. The theoretical and policy implications are then discussed.

Suggested Citation

  • Colin C. Williams & Slavko Bezeredi, 2018. "Evaluating The Impact Of Informal Sector Competition On Firm Performance: Some Lessons From South-East Europe," Journal of Developmental Entrepreneurship (JDE), World Scientific Publishing Co. Pte. Ltd., vol. 23(04), pages 1-14, December.
    • Handle: RePEc:wsi:jdexxx:v:23:y:2018:i:04:n:s1084946718500255
    DOI: 10.1142/S1084946718500255
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    References listed on IDEAS

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    11. Erkko Autio & Kun Fu, 2015. "Economic and political institutions and entry into formal and informal entrepreneurship," Asia Pacific Journal of Management, Springer, vol. 32(1), pages 67-94, March.
    12. Colin C Williams & Abbi M. Kedir, 2016. "Business Registration And Firm Performance: Some Lessons From India," Journal of Developmental Entrepreneurship (JDE), World Scientific Publishing Co. Pte. Ltd., vol. 21(03), pages 1-19, September.
    13. Pablo Fajnzylber & William F. Maloney & Gabriel V. Montes-Rojas, 2009. "Releasing Constraints to Growth or Pushing on a String? Policies and Performance of Mexican Micro-Firms," Journal of Development Studies, Taylor & Francis Journals, vol. 45(7), pages 1027-1047, August.
    14. Colin C. Williams, 2006. "The Hidden Enterprise Culture," Books, Edward Elgar Publishing, number 3948.
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    16. Colin C. Williams & Besnik Krasniqi, 2018. "Explaining Informal Sector Entrepreneurship In Kosovo: An Institutionalist Perspective," Journal of Developmental Entrepreneurship (JDE), World Scientific Publishing Co. Pte. Ltd., vol. 23(02), pages 1-20, June.
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    Cited by:

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    2. Mohammad Amin, 2023. "Does competition from informal firms hurt job creation by formal manufacturing SMEs in developing and emerging countries? Evidence using firm-level survey data," Small Business Economics, Springer, vol. 60(4), pages 1659-1681, April.
    3. Sana Ullah & Colin C. Williams & Babur Wasim Arif, 2019. "The Impacts Of Informality On Enterprise Innovation, Survival And Performance: Some Evidence From Pakistan," Journal of Developmental Entrepreneurship (JDE), World Scientific Publishing Co. Pte. Ltd., vol. 24(03), pages 1-19, September.
    4. Aysa Ipek Erdogan, 2023. "Drivers of SME Growth: Quantile Regression Evidence From Developing Countries," SAGE Open, , vol. 13(1), pages 21582440231, March.
    5. Zaineb Hlioui & Mohamed Gabsi & Abdelwahed Omri, 2022. "Informal Competition Effect on SMEs’ Innovation: Do Credit Constraints Matter? Evidence from Eastern European Countries," Sustainability, MDPI, vol. 14(21), pages 1-23, October.
    6. Ali, Abdilahi & Ali, Syed Imran, 2020. "Antecedents of the propensity to learn management practices and their impacts on firm outcomes in emerging markets: A Bayesian Model Averaging approach," International Business Review, Elsevier, vol. 29(4).

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