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Initial informality as an obstacle to intellectual capital acquisitions: Empirical evidence from Latin America

Rodrigo Costamagna (INALDE, Universidad de la Sabana, Chía, Colombia)
Sandra Idrovo Carlier (INALDE, Universidad de la Sabana, Chía, Colombia)
Pedro Mendi (Department of Business, University of Navarra, Pamplona, Spain)

Journal of Intellectual Capital

ISSN: 1469-1930

Article publication date: 26 June 2019

Issue publication date: 1 October 2019

206

Abstract

Purpose

Most developing countries are characterized by large informal sectors. A substantial proportion of firms in these countries began operations in the informal sector, eventually becoming formal. The purpose of this paper is to study whether, after formalization, firms that began operations in the informal sector are more or less likely to use intellectual capital in the form of disembodied technology licensing than firms that began operations in the formal sector. The moderating roles of being a downstream firm, age and the country’s per capita income are also analyzed.

Design/methodology/approach

The effect of initial informality on the probability of licensing is estimated using firm-level data from the World Bank’s Enterprise Survey, conducted in several Latin American countries in 2006–2017.

Findings

Formal firms that began informally are less likely to use licensed technology, suggesting the existence of long-run effects of informality. The effect of initial informality is more negative among downstream firms.

Research limitations/implications

The analysis uses cross-sectional data. Unobservable firm fixed effects could be controlled for using longitudinal data.

Practical implications

Initial informality affecting the innovation strategies of firms should be considered when designing policies that incentivize formality.

Social implications

If, in light of the results of this analysis, policies are designed which foster a better allocation of resources, there will be a tangible impact in the lives of many people in developing countries.

Originality/value

This is the first paper that analyzes the relationship between initial informality status and technology licensing, a relevant channel for the international diffusion of technology.

Keywords

Acknowledgements

The authors thank the conference participants at BALAS-2017 for their helpful suggestions. Mendi gratefully acknowledges financial support from Ministerio de Economía y Competitividad (ECO2014-55236-R) and Fundación Ramón Areces. The data that support the findings of this study are available on the World Bank’s Enterprise Surveys website: www.enterprisesurveys.org/portal/login.aspx. All errors are our own.

Citation

Costamagna, R., Idrovo Carlier, S. and Mendi, P. (2019), "Initial informality as an obstacle to intellectual capital acquisitions: Empirical evidence from Latin America", Journal of Intellectual Capital, Vol. 20 No. 4, pp. 472-487. https://doi.org/10.1108/JIC-12-2018-0218

Publisher

:

Emerald Publishing Limited

Copyright © 2019, Emerald Publishing Limited

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