Associations versus registration as alternative strategies of small firms

Associations versus registration as alternative strategies of small firms Small firms, especially those in developing countries, face several serious problems: (1) costs of regulation, including corruption, (2) contract enforcement, and (3) idiosyncratic risks that leave their owners with high costs of finance. To deal with these problems, it is recognized that firms exercise choice over their degree of formality. Little attention, however, has been given to the alternative strategies that firms may choose in gaining formality and dealing with these problems. This article examines the choice between two different strategies: (1) registering with official entities, and (2) participating in private associations. We develop hypotheses concerning factors that would favor one such choice over the other and then test these hypotheses with data taken from a large sample survey of Mexican microenterprises. The results provide support, in some cases strong support, for most of the hypotheses. Small Business Economics Springer Journals

Associations versus registration as alternative strategies of small firms

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Springer US
Copyright © 2008 by Springer Science+Business Media, LLC.
Business and Management; Management; Microeconomics; Entrepreneurship; Industrial Organization
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