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How Does Competition By Informal Firms Affect The Innovation In Formal Firms?

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  • Jorge A. Heredia Pérez
  • Xiaohua Yang
  • Ou Bai
  • Alejandro Flores
  • Walter Heredia Heredia

Abstract

This study applies a resource-based perspective to investigate how competition by informal firms affects innovation in formal firms in China. By analyzing survey data, collected from 1,686 Chinese manufacturing firms, we find that formal firms tend to increase their rate of innovation when faced with informal competition. However, formal firms’ access to increased global supply chain collaboration mitigates the challenges presented to their rate of innovation by the informal firms. We present implications for future research, practice, and policy-making.

Suggested Citation

  • Jorge A. Heredia Pérez & Xiaohua Yang & Ou Bai & Alejandro Flores & Walter Heredia Heredia, 2019. "How Does Competition By Informal Firms Affect The Innovation In Formal Firms?," International Studies of Management & Organization, Taylor & Francis Journals, vol. 49(2), pages 173-190, April.
    • Handle: RePEc:taf:mimoxx:v:49:y:2019:i:2:p:173-190
    DOI: 10.1080/00208825.2019.1608402
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    Cited by:

    1. Omar Farooq & Khondker Aktaruzzaman & Harit Satt & Fatima Zahra Bendriouch, 2022. "Innovations as a Response to Shadow Economy: Evidence from Privately Held Firms," Journal of Industry, Competition and Trade, Springer, vol. 22(3), pages 349-370, December.
    2. 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.
    3. 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.
    4. Elchin Aghazada & Gaygysyz Ashyrov, 2021. "Corruption And Firm Innovation: Evidence From Post-Soviet Countries," University of Tartu - Faculty of Economics and Business Administration Working Paper Series 129, Faculty of Economics and Business Administration, University of Tartu (Estonia).
    5. Fernandez, Viviana, 2022. "Environmental management: Implications for business performance, innovation, and financing," Technological Forecasting and Social Change, Elsevier, vol. 182(C).
    6. Zhao, Nan & Liu, Xiaojie & Zhang, Zizhe, 2022. "Does competition from the informal sector affect firms’ energy intensity? Evidence from China," Structural Change and Economic Dynamics, Elsevier, vol. 62(C), pages 130-142.
    7. Sharma, Gautam & Dahlstrand, Åsa Lindholm, 2023. "Innovations, informality, and the global south: A thematic analysis of past research and future directions," Technology in Society, Elsevier, vol. 75(C).

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