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

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  • Dorgyles C. M. Kouakou

    (CREM, UMR CNRS 6211, Université de Rennes 1
    LAMPE, Université Alassane Ouattara)

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 Côte 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.

Suggested Citation

  • Dorgyles C. M. Kouakou, 2023. "Competing against ‘invisibles’: the effect of competition from informal firms on formal firms’ R&D," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 13(1), pages 87-117, March.
    • Handle: RePEc:spr:eurasi:v:13:y:2023:i:1:d:10.1007_s40821-022-00217-0
    DOI: 10.1007/s40821-022-00217-0
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    More about this item

    Keywords

    Competition from informal firms; Formal and informal sectors; $$hbox {R} & hbox {D}$$ R & D; Côte d’Ivoire;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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