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Alternative Strategies For Firms In Oppressive And Corrupt States: Informality Or Formality Via Business Associations?

Author

Listed:
  • JEFFREY B. NUGENT
  • GRIGOR. SUKIASSYAN

Abstract

Firms operating in oppressive conditions such as those in the transition countries often take advantage of informality, making unofficial payments to officials and underreporting their sales for tax purposes. This paper argues that business associations may constitute a more transparent, efficient, and formal alternative. Empirical support for the argument is provided based on firm level data on several thousand firms from the Business Environment and Enterprise Performance Surveys in 25 transitions countries for 2002 and 2005. We show that, despite their often rather bad reputation, business associations tend to play a rather positive role, helping firms to reduce both having to make unofficial payments and underreporting of sales for tax purposes.(JEL D2, D7, L2, P2, P3)

Suggested Citation

  • Jeffrey B. Nugent & Grigor. Sukiassyan, 2009. "Alternative Strategies For Firms In Oppressive And Corrupt States: Informality Or Formality Via Business Associations?," Contemporary Economic Policy, Western Economic Association International, vol. 27(4), pages 423-439, October.
    • Handle: RePEc:bla:coecpo:v:27:y:2009:i:4:p:423-439
    DOI: 10.1111/j.1465-7287.2009.00171.x
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Jens Prüfer, 2016. "Business Associations and Private Ordering," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 32(2), pages 306-358.
    2. Andrei Govorun, 2013. "The choice of lobbying strategy: direct contacts with officials or mediation via business associations," HSE Working papers WP BRP 24/EC/2013, National Research University Higher School of Economics.
    3. Larrain Aylwin, M.J. & Prüfer, J.O., 2014. "Business Associations, Lobbying, and Endogenous Institutions," Other publications TiSEM 99d2d002-87d2-4d8e-b1d9-8, Tilburg University, School of Economics and Management.
    4. Lei, Zhenhuan & Nugent, Jeffrey B., 2018. "Coordinating China's economic growth strategy via its government-controlled association for private firms," Journal of Comparative Economics, Elsevier, vol. 46(4), pages 1273-1293.
    5. Larrain Aylwin, M.J. & Prüfer, J.O., 2014. "Business Associations, Lobbying, and Endogenous Institutions," Discussion Paper 2014-043, Tilburg University, Tilburg Law and Economic Center.
    6. repec:idq:ictduk:13663 is not listed on IDEAS
    7. Ma, Guangrong & Rui, Oliver Meng & Wu, Yiping, 2015. "A springboard into politics: Do Chinese entrepreneurs benefit from joining the government-controlled business associations?," China Economic Review, Elsevier, vol. 36(C), pages 166-183.
    8. Marcus M. Larsen & Caroline T. Witte, 2023. "Informal Legacy and Exporting Among Sub-Saharan African Firms," Organization Science, INFORMS, vol. 34(3), pages 987-1003, May.
    9. Rosana Fuentes-Fernández & Eduardo Sánchez-García & Javier Martínez-Falcó & Bartolomé Marco-Lajara, 2024. "Uncovering external factors that influence the acquisition of knowledge for innovative purposes," Operational Research, Springer, vol. 24(3), pages 1-28, September.
    10. I. S. Kukaev, 2015. "Analysis of institutional preferences in the cooperative interactions for the development of industrial enterprises," Russian Journal of Industrial Economics, MISIS, issue 2.
    11. Larrain Aylwin, M.J. & Prüfer, J.O., 2014. "Business Associations, Lobbying, and Endogenous Institutions," Other publications TiSEM bb36b0e2-f17f-4d76-8637-a, Tilburg University, School of Economics and Management.
    12. Nam Hoang Vu & Tram-Anh Nguyen & Tram Bao Hoang & Nguyen Viet Cuong, 2024. "Formal Firms with Bribery in a Dynamic Business Environment," Journal of Business Ethics, Springer, vol. 191(3), pages 571-589, May.

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    More about this item

    JEL classification:

    • D2 - Microeconomics - - Production and Organizations
    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • P2 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies
    • P3 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions

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