BusinessStartupsStarting a Business informally is beneficial for Growth

Starting a Business informally is beneficial for Growth

-

- Advertisment -sslate

Starting a business informally almost always benefits its development in the early stages, new research from NEOMA Business School reveals.

According to the NEOMA researchers, Ana Colovic (Full Professor of Strategy and Entrepreneurship), Bisrat Misganaw (Assistant Professor of Strategy and Entrepreneurship), and Dawit Assefa (Research Engineer), starting a business without reporting it to the authorities can be a key ingredient for success in some countries.

“The informal economy is typified by activities that are not formally registered with the relevant government agencies. Up to 50 percent of businesses in developing countries operate in the shadows, compared to 15 percent in member states of the Organization for Economic Co-operation and Development (OECD),” says Professor Bisrat Misganaw.

Studying the performance of 49,520 companies from 116 countries, the authors’ findings show that an informal beginning is usually beneficial for the development of start-ups, but firms would lose this benefit if they stay informal for more than a few years. The findings also show that this window is shorter in countries with better institutional quality.

“Pro-informal business scientists champion the idea that registering with the authorities in the start-up phase stunts growth. Informal start-ups can redirect money usually earmarked for authorities in taxes, registration fees, etc., to expand the company. They also rely more on their leaders’ networks than on public services to obtain resources and gain legitimacy,” says Professor Ana Colovic.

After the first years (about 7.52 years, according to authors’ findings), these advantages start to dry up due to the increased costs needed to keep the company afloat, limited access to external resources, and a personal network that burns out after a finite period of time, the researchers find.

The researchers believe informal companies should be encouraged to become legal by swelling the associated advantages, for example by cutting the costs of registering the company. They can then contribute fully to the local and national economy.

This research was published in the International Journal of Entrepreneurial Behaviour & Research.

Sunshine Slate
Sunshine Slatehttps://www.sunshineslate.com
Sunshine Slate is your news, entertainment, music fashion website. We provide you with the latest breaking news and videos straight from the United States of America.

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Latest news

The FPA issues guidance on packaging claiming to be ‘plastic-free’

The Foodservice Packaging Association (FPA) has issued guidance to address the claims made by producers of ‘plastic-free’ packaging.

Possible Solutions to deal with rising USA Inflation

This article discusses the causes and possible solutions to deal with rising USA inflation.

Redefining Professional Spaces: The Rise of Dual-Purpose Backyard Office Sheds in America

The American Dream Reimagined: Backyards Transforming into Profitable Workspaces

The Ultimate Fighter 31: McGregor vs. Chandler: The Battle Begins

The Ultimate Fighter 31 is set to premiere on ESPN+ on June 6, 2023, and it is sure to be a must-watch for fans of mixed martial arts.
- Advertisement -

Florida Faces Lawsuits Over Sweeping New Elections Law

The moment Florida Governor Ron DeSantis signed a sweeping elections bill into law last week, several voter-advocacy groups filed lawsuits against it.

U.S. House Votes to Rescind Student Debt-Relief Program

A new report outlined the importance of student debt relief to workers in New York and across the country.
edealo.com
- Advertisement - Motel 6
transformerscon

Must read

Best Apps for your New Mobile Phone

We can install any app from the google play store very quickly. Let’s take a look at some most amazing apps for android mobile phones.

Survivors Call for Monument in Honor of Fallen Heroes

Congress is moving forward with plans to build the monument to honor the 3,600 Americans who have earned the nation's highest award for valor in combat.
- Advertisement -
- Advertisement -sslate

You might also likeRELATED
Recommended to you