What is it about?

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.

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Why is it important?

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.

Perspectives

Competitors operating in the informal economy are shown to have a negative impact on firm performance.

Professor Colin C Williams
University of Sheffield

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This page is a summary of: EVALUATING THE IMPACT OF INFORMAL SECTOR COMPETITION ON FIRM PERFORMANCE: SOME LESSONS FROM SOUTH-EAST EUROPE, Journal of Developmental Entrepreneurship, December 2018, World Scientific Pub Co Pte Lt, DOI: 10.1142/s1084946718500255.
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