The role of informal competition in driving export propensity of emerging economy firms: An attention based approach

Abstract

Purpose

Competitive pressure from informal firms has always been a threat to the formal enterprises. However, the strategic choices a firm makes to deal with such competitive pressures still remain under-explored. The purpose of this paper is to examine the influence of informal competitive pressures in driving export propensity of formal firms.

Design/methodology/approach

The paper is based on a standard error logistic model, and the model takes into account the contingent relationships along with the primary relationship. The authors draw the sample of 9,812 manufacturing firms spanning across the Indian sub-continent from the World Bank enterprise survey conducted in the year 2014.

Findings

The empirical results indicated that the level of competition from informal firms is positively associated with the propensity to export. The primary relationship is also affected by various contingent factors such as regulatory obstacles, bribery and new product development.

Research limitations/implications

Although the World Bank enterprise survey data provide a broad coverage, the study warranted few proxy measures in order to operationalize formal competition as it was not captured directly in the concerned data set.

Practical implications

The analysis demonstrates that informal competition has direct effect on the firm’s propensity to export. The findings indicate that export is an attractive action alternative for firms facing informal completion in an emerging economy. The results further indicate that this effect strengthens as institutional factors such as regulatory obstacles and bribery increase.

Social implications

The paper is an attempt to alter the prevailing negative view on informality. The findings indicate that informal competition spurs competitiveness in the formal sector indicating its positive role in the economic growth of the nation.

Originality/value

The paper takes cue from attention-based view of the firm and the institutional escapism logic to affirm the role of informal competition and various contingent institutional and strategic factors in driving export propensity.

Citation

Deb, R., Samalia, H.V. and Prusty, S.K. (2020), "The role of informal competition in driving export propensity of emerging economy firms: An attention based approach", International Journal of Sociology and Social Policy, Vol. 40 No. 1/2, pp. 184-203. https://doi.org/10.1108/IJSSP-06-2019-0131