Work

Informal Legacy and Exporting Among Sub-Saharan African Firms

Year: 2022

Type: article

Abstract: Around the world and especially in areas of widespread poverty, firms start their operations without registering with relevant authorities (i.e., in the informal economy). We explore whether firms that initiated their operations in the informal economy but later register have a higher propensity to export than firms that register at the time of their foundation. We reason that the experience of having operated informally provides formally registered firms with the advantage of low-cost and flexible exploration but also a domestic legitimacy liability. We suggest that these factors likely contribute to making foreign export markets more attractive after registration. Based on a comprehensive sample of sub-Saharan African firms, we find that, conditional on registration, firms with an informal legacy have a higher propensity to initiate exporting than firms that started their operations formally. We contribute with theoretical and policy-oriented insights on the dynamics of informality and exporting. Funding: The work of M. M. Larsen was supported by the Carlsbergfondet [Grant CF17_0384].

Source: Organization Science

DOI: 10.1287/orsc.2022.1623

Authors: Marcus M. Larsen, Caroline T. Witte

Institutions: Copenhagen Business School, BI Norwegian Business School, Erasmus University Rotterdam

Language: English

Topic: International Business and FDI

Subfield: Strategy and Management

Field: Business, Management and Accounting

Domain: Social Sciences

SDGs: Decent work and economic growth, Peace, justice, and strong institutions

Open Access status: green

Funder: Carlsbergfondet