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Article
Publication date: 30 August 2021

Jun Ma

This paper aims to investigate the co-evolve relationship between informal relational governance (i.e. family involvement and personal authority) and family formal…

Abstract

Purpose

This paper aims to investigate the co-evolve relationship between informal relational governance (i.e. family involvement and personal authority) and family formal governance system in the process of growth and transformation. This co-evolve relationship is especially affected by the external institutional environment and market competition power. Thus, in the comprehensive process of deepening the reform and changing market, the modern transformation of family business means that rediscovery of unique superiority of family business and the core of this transformation is the governance of status privileges and private interests.

Design/methodology/approach

To test the hypotheses, this paper uses the 9th Chinese Private Enterprise Survey in 2010. A total of 4,900 questionnaires are issued, 4,614 are recovered and the total recovery rate is 94.16%. After clean the data, the study obtained 1,239 samples. To overcome the possible existence of heteroscedasticity, this study uses the feasible generalized least squares (FGLS) to estimate the model. Besides, as for dummy dependent variables, this study uses logistics regression.

Findings

This paper makes an empirical test for the evolution of family governance driven by institutional change and organizational growth willingness in the process of growth and transformation, including a co-evolve relationship between family involvement and governance institution. Meanwhile, the empirical analysis comes to the conclusion that the institutional constraint to relational governance improves firm performance, which further promotes the modern transformation of family business governance.

Practical implications

It is the key to transformation to the modern corporate organization that family business could beyond the intervention of the traditional nepotism, patriarchal authority and family will. The fundamental of this process is to take advantage of formal institutions to manage family power.

Originality/value

This paper discusses the modern transformation of the formal organization from the perspective of modern ideal dominant type proposed by Max Weber. Modern organization is a hybrid system of the non-personified and personified institution. The primary reason why modern organization suffered erosion and destruction is that informal institution (status and relationship network) were endowed with legal privileges and private interests in modern organization including family business. The governance of privileges and private interests has become the core issue that whether the family business could play an instrumental value and realize modern transformation successfully.

Details

Nankai Business Review International, vol. 12 no. 3
Type: Research Article
ISSN: 2040-8749

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Article
Publication date: 8 June 2015

Samuel Adomako, Albert Danso and Ernest Ampadu

Previous scholarly studies on institutions tend to create a sombre picture of institutions by ignoring to examine the antecedents of formal and informal institutions. The…

Abstract

Purpose

Previous scholarly studies on institutions tend to create a sombre picture of institutions by ignoring to examine the antecedents of formal and informal institutions. The purpose of this paper is to overcome this limitation by proposing a conceptual framework of the antecedents of formal and informal institutions of entrepreneurial climate in a less developed market setting.

Design/methodology/approach

This study builds on a comprehensive survey of the literature on institutions by using a synthesis thematic methodology to identified key scholarly studies which have been published in previous theoretical and empirical studies and proposes a conceptual framework of the role of formal and informal institutions in defining entrepreneurial climate in a developing economy’s context.

Findings

The findings of the paper suggest that political factors and economic factors define formal institutions whilst socio-cultural factors define informal institutions. These factors rooted in political, economic and socio-cultural factors have a major influence on the rate and nature of entrepreneurial activity in a developing country setting.

Practical implications

This paper contributes to the literature on entrepreneurship and intuitional theory by focusing on the antecedents of formal and informal institutional factors that shape entrepreneurial climate in Ghana.

Originality/value

To the authors’ knowledge, this is the first review that explores the nature of entrepreneurial climate and proposes a conceptual framework of the role of formal and informal institutions in defining entrepreneurial climate in Ghana.

Details

International Journal of Social Economics, vol. 42 no. 6
Type: Research Article
ISSN: 0306-8293

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Article
Publication date: 16 June 2017

Nataliia Ostapenko

The purpose of this paper is to empirically define the ways in which informal institutions influence entrepreneurial intentions. It tests the statement that informal

Abstract

Purpose

The purpose of this paper is to empirically define the ways in which informal institutions influence entrepreneurial intentions. It tests the statement that informal institutions can have an impact on people’s decisions, directly and indirectly, by affecting their perceptions of the external world.

Design/methodology/approach

The paper develops a theoretical model of the probability of starting a business by a potential entrepreneur. The model takes into account a comparison of current wages and future profits. The empirical analysis is based on European social survey data at the individual level. Three-stage least squares regression helps to overcome the endogeneity problem since perceptions of government actions are individual specific.

Findings

Informal institutions can affect expectations about future activities in a person’s lifetime utility maximisation problem. The paper empirically concludes that these institutions are connected with a person’s satisfaction with government and can indirectly affect the probability to be self-employed.

Research limitations/implications

Research limitations are related to employing proxies for informal institutions, using only the “satisfaction with government” as a perceptions indicator, and cross-sectional data while defining the causal effect.

Practical implications

Policymakers should consider that institutional settings affect people in a different manner when developing their policies.

Originality/value

The paper makes a novel contribution by analysing the effect of informal institutions on the probability to start a business by using both theoretical arguments and empirical tests. Building upon insights from a broader informal institutions’ effect on entrepreneurial intentions, this paper is the first to study a linkage between informal institutions and their indirect effect on people’s profit expectations.

Details

Journal of Small Business and Enterprise Development, vol. 24 no. 3
Type: Research Article
ISSN: 1462-6004

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Article
Publication date: 10 May 2021

Amine Abi Aad and James G. Combs

We raise and address an unexamined research question: Why do managers place some business activities in the formal economy and others in the informal? This firm-level…

Abstract

Purpose

We raise and address an unexamined research question: Why do managers place some business activities in the formal economy and others in the informal? This firm-level managerial choice is most visible in emerging economies and is important due to its performance implications.

Design/methodology/approach

We theorize that managers use social ties with formal institutions (e.g. parliament, central bank) to protect against (1) being singled out for enforcement and (2) opportunistic business partners, and that these protections allow managers to conduct more activities in the informal economy. Based on regulatory focus theory, we also submit that managers with a promotion (prevention) focus mindset are more (less) prone to use their social ties with formal institutions to emphasize the informal economy. Hypotheses are tested using survey data from 362 Lebanese top managers.

Findings

Managers' social ties with formal institutions relate positively to their propensity to use the informal economy, and managers with a promotion mindset are more willing and those with a prevention mindset are less willing to leverage their social ties with formal institutions to conduct activities in the informal economy.

Originality/value

Our study raises an important new research question at the intersection of strategic and international management and offers an initial answer. Working within the informal economy requires informal social ties among informal actors, but for formally registered firms, entry into the informal economy requires informal ties with formal actors.

Details

Cross Cultural & Strategic Management, vol. 28 no. 3
Type: Research Article
ISSN: 2059-5794

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Article
Publication date: 10 March 2021

Kee Hoon Chung and DaEun Kim

Much of existing research has attempted to explain Asian Growth Paradox through formal institution – role of the government or rule of law. Therefore, this paper attempts…

Abstract

Purpose

Much of existing research has attempted to explain Asian Growth Paradox through formal institution – role of the government or rule of law. Therefore, this paper attempts to empirically explain the paradox with informal institution including interaction between informal and formal institutions. Two interrelated research questions summarize this research. First, how can we capture the relationship between informal and formal institutions? Then, how is that relationship different for Asian Paradox states vs non-paradox states?

Design/methodology/approach

To capture the relationship between informal and formal institutions, we use Helmke and Levitsky (2004)'s framework to categorize the interaction as complementing, competing, substituting and accommodating. We perform cross-sectional regression analysis for more than 130 countries.

Findings

We find that the developed, developing and the Asian Paradox states display different patterns of interaction between informal and formal institutions. However, we also find that the interaction effect has a limited value explaining growth for most of these countries, suggesting that Helmke and Levitsky (2004)'s framework has limitations. Finally, we challenge the notion of Asian Paradox states, as countries outside of Asia also qualify as the Paradox states.

Originality/value

Not much empirical effort has examined how different relationships between informal and formal institutions can explain growth internationally across countries. We show that different institutional patterns explain growth across the Paradox states and non-Paradox states.

Details

Asian Education and Development Studies, vol. 10 no. 4
Type: Research Article
ISSN: 2046-3162

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Article
Publication date: 2 November 2015

Nataliia Ostapenko

The purpose of this paper is to examine the potential pathway of influence of formal and informal institutions and economic development on the business productive…

Abstract

Purpose

The purpose of this paper is to examine the potential pathway of influence of formal and informal institutions and economic development on the business productive behaviour at the national level.

Design/methodology/approach

In the paper SEM models and regression analysis are used to define the causal relationships. Using data from cultural dimensions of Hofstede, Inglehart and Tabellini, proxies for formal institutions and economic development this research empirically examines the way of influence of these factors on entrepreneurship performance in the national economy.

Findings

This paper demonstrates that, stimulating by the economic growth, formal and informal institutions could affect business productive behaviour at the macro level in both direct and indirect ways through each other. Formal and informal institutions were found to act as substitutes. The author argues that the decision to act productively is not just a result of the formal institutional framework – “bad” outcomes of business development may also be a consequence of the activity of certain informal institutions as well as caused by poor levels of national economic development.

Practical implications

Based on the findings of this research it is possible to improve the methods of formation of stimulation policy for driving business behaviour in a productive way by taking into account existing formal and informal institutions and the level of development of the national economy.

Originality/value

This paper by using SEM techniques examines the causal relationships between the quality of formal and informal institutions and productivity of entrepreneurs at the national level.

Details

Journal of Entrepreneurship and Public Policy, vol. 4 no. 3
Type: Research Article
ISSN: 2045-2101

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Article
Publication date: 20 September 2019

Eunice Santos, Cristina I. Fernandes and João J. Ferreira

There has been a diverse range of research on the factors enabling informal entrepreneurship as well as the means to avoid or to eradicate its incidence. However, the…

Abstract

Purpose

There has been a diverse range of research on the factors enabling informal entrepreneurship as well as the means to avoid or to eradicate its incidence. However, the authors may also identify how a significant proportion of research on this field of study centres around developing economies and correspondingly justifying the application of such analysis to countries with different levels of economic development as is the case of Europe. The purpose of this paper is to depict the ways in which economic and political institutions influence informal entrepreneurship.

Design/methodology/approach

To this end, the authors apply aggregate data at the national level collected from different sources, in particular the World Bank, the Organisation for Economic Cooperation and Development, the Global Entrepreneurship Monitor and Freedom House, for the years between 2006 and 2015 and for 23 European countries amounting to a total of 229 observations (unbalanced panel).

Findings

Through recourse to econometric estimations, based upon multiple regression model methodologies for panel data, the authors may report that the greater the quality of economic and political institutions, the lower the level of informal entrepreneurship.

Originality/value

The authors thus seek to contribute towards a better understanding of the influence of institutions and the policies that may feasibly influence informal entrepreneurship.

Details

World Journal of Entrepreneurship, Management and Sustainable Development, vol. 15 no. 4
Type: Research Article
ISSN: 2042-5961

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Article
Publication date: 7 April 2015

Huseyn Aliyev

The purpose of this paper is to suggest that informal practices and institutions of post-Soviet countries differ from informality in other post-socialist regions and…

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Abstract

Purpose

The purpose of this paper is to suggest that informal practices and institutions of post-Soviet countries differ from informality in other post-socialist regions and, therefore, proposes categorizing it as “post-Soviet informality” – a composite definition that extends beyond the concept of “informal economy” and encompasses, along with economic activities, social and political spheres.

Design/methodology/approach

The arguments of the paper are based on a comprehensive analysis of secondary sources.

Findings

This paper shows that, owing to the effects of antecedent regime’s legacies and the problems of post-communist transition, for the proper analysis of informality in post-Soviet countries it needs to be based on an own concept.

Originality/value

This study, in contrast to the existing literature on informality in post-communist spaces, specifically focuses on the informal sphere of post-Soviet countries, suggesting that the informal institutions and practices thriving across the vast post-Soviet space not only differ from the informal spheres elsewhere in the world, but also from informality in other post-communist regions.

Details

International Journal of Sociology and Social Policy, vol. 35 no. 3/4
Type: Research Article
ISSN: 0144-333X

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Book part
Publication date: 4 March 2021

Elina Pelto and Anna Karhu

The purpose of the study is to develop an understanding of the interplay between multinational enterprises (MNEs) and informal institutions on a firm–industry level…

Abstract

The purpose of the study is to develop an understanding of the interplay between multinational enterprises (MNEs) and informal institutions on a firm–industry level. “Interplay” here means how responses to institutions develop in a particular context and how this development is interrelated with stakeholders’ reactions and activities. To study this interplay between MNEs and informal institutions, the authors draw on literature on institutional complexity, as well as on a co-evolutionary perspective. Two case vignettes are presented on MNEs’ post-entry strategies and behaviors in their new host markets, with a view to understanding how and under what conditions informal institutions in the host market may compel MNEs to alter their initial strategies and behaviors in the market and, on the other hand, how and under what conditions MNEs’ strategies and behaviors may act as catalysts of change in these informal institutions.

Details

The Multiple Dimensions of Institutional Complexity in International Business Research
Type: Book
ISBN: 978-1-80043-245-1

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Article
Publication date: 1 March 2013

Daria Panina and Leonard Bierman

The rule of law and an efficient legal system are the core factors that ensure growth in BRIC economies. Weak institutions and failures with respect to the rule of law in…

Abstract

Purpose

The rule of law and an efficient legal system are the core factors that ensure growth in BRIC economies. Weak institutions and failures with respect to the rule of law in Russia call into question its position as one of the BRIC countries. The purpose of this paper is to propose that the legitimization of newly created formal legal institutions in Russia is impossible without a new set of values that reflect the ideals of professionalism. It aims to explore the role institutional stakeholders play in establishment of the new set of professional values.

Design/methodology/approach

A survey of existing legislation and academic research on professionalism and the development of the legal profession in Russia was undertaken to determine the state of the development of its formal and informal legal institutions. The role of stakeholders in the development of new professional institutions was also examined.

Findings

The paper finds that the creation of formal institutions supporting the rule of law in Russia is largely completed. Yet, in some cases the institutions lack legitimacy and public trust. Professionalism – a vital informal institution that promotes trust in legal systems and legitimizes its formal institutions is in the process of development. The agents of professional socialization such as the state, educational institutions, professional bodies and organizations play different roles in development of professionalism. Potential avenues for enhancing legal professionalism by the agents of socialization are identified.

Research limitations/implications

The current study contributes to the literature on institutional change in transition economies and suggests a complicated relationship between various formal and informal institutions in the Russian legal sector. Future empirical research should focus on the investigation of the newly forming informal institutions and the impact of old informal institutions on this process.

Practical implications

Companies doing business in Russia should be aware of the fact that the legal systems in the country are still in the process of development. Even though major formal legal institutions have already been created, some informal institutions still represent a serious challenge to safe and efficient business in the country.

Originality/value

The paper contains ideas for the future development of legal professionalism in Russia.

Details

Critical perspectives on international business, vol. 9 no. 1/2
Type: Research Article
ISSN: 1742-2043

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