DO ENTERPRISES WHOSE COMPETITORS PARTICIPATE IN THE INFORMAL SECTOR SUFFER FROM LOWER LEVELS OF FIRM PERFORMANCE? AN EVIDENCE-BASED EVALUATION FOR THE CASE OF ALBANIA

Brunilda Kosta – Faculty of Economics, University of Tirana, Albania

DOI: https://doi.org/10.31410/ERAZ.2019.291

5th International Conference – ERAZ 2019 – KNOWLEDGE BASED SUSTAINABLE DEVELOPMENT, Budapest – Hungary, May 23, 2019, CONFERENCE PROCEEDINGS

Published by: Association of Economists and Managers of the Balkans – Belgrade, Serbia
Conference partners: Faculty of Economics and Business, Mediterranean University, Montenegro; University of National and World Economy – Sofia, Bulgaria; Faculty of Commercial and Business Studies – Celje, Slovenia; Faculty of Applied Management, Economics and Finance – Belgrade, Serbia;

ISBN 978-86-80194-20-2, ISSN 2683-5568, DOI: https://doi.org/10.31410/ERAZ.2019

Abstract

There is a wide belief that firms who operate into the informal economy negatively affect
their competitors who operate in the formal economy. This paper aims to provide an evidence-based
evaluation of this assumption in the context of Albania. Different official sources confirm Albanian’s
informal economy counts for around 40 percent of GDP. Unfair competition remains a huge obstacle
of doing business. To evaluate the impact of informal competition into firms that operate fully formal, a
survey is conducted using a national representative sample size of 400 firms operating in Albania, comprising
all sizes and economic sectors. The linear regression analysis is employed to develop the impact
analysis. The results uncovered that firms whose competitors operate into the informal economy, have
lower annual sales growth rates compared with those who admit that their competitors do not engage
in the informal economy. The survey results have both theoretical and practical implications which are
discussed at the end of the paper.

Key words

firm performance, informal economy, Albania.

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