SMEs, Competition and Entry - A developing country perspective

Camilla Jensen

Research output: Contribution to conferenceConference abstract for conferenceResearchpeer-review

Abstract

The paper develops a simple model for a developing country with a dual economic structure. The model is a further theoretical extension and empirical work to an earlier published book chapter on the same topic. The abstract was updated after presentation at the conference in Gold Coast, Australia.

The main research question is why it is so difficult for new entrepreneurs to enter markets, or in other words, why are the barriers to entry seemingly higher in developing countries?

Development writers such as Hernando de Soto and Daron Acemoglu suggest that this question is closely related with a sizeable informal sector in developing countries and corruption. Other leading transition researchers such as Andrei Shleifer offer a variety of views on the informal sector from the romantic to the parasitic. This paper leans on the realist interpretation of de Soto grounded in institutional theory. High entry barriers push the entrepreneurs towards the informal sector. Whether entrepreneurs succeed in the transition towards the formal sector depends on the size of the entry barriers which are indirectly regulated both by informal institutions such as corruption and formal institutions such as competition policy.

The model is tested using the World Bank's BEEPS dataset which is a repeated cross section survey of firms across countries in development and transition. This data gives access to observe among other firm size and whether firms pay a bribe or not. This data is combined with Stephan Voigt's data that measures competition policy for a large cross section of countries.

The paper generally finds confirmation for the hypothesized relationship between the informal sector, firm size and corruption and the idea that competition policy may have a moderating effect on this relationship.

The implications of the paper for development policy is that the fight against corruption should also incorporate elements of the establishment of a sound competition policy. For international business practitioners the implications of the research is that they will need to enter into strategic alliances in countries with high corruption and a poor competition policy framework. Furthermore, prior to the entry into a strategic alliance the investor must carefully investigate the ethical behaviour and attitudes of the partners towards culturally embedded concepts such as what constitutes fair competition practise so that they conform with the expectations and formal institutions of the investor's home country and possible requirements in terms of good governance standards enshrined in the EUs free trade agreements with third countries.
Original languageEnglish
Publication date12 Jul 2012
Number of pages2
Publication statusPublished - 12 Jul 2012
Externally publishedYes
Event4th Global Conference on SME, Entrepreneurship & Service Innovation 2012: SMEs, Entrepreneurship & Service Innovation and Sustainable Economic Development and Enhancement of Living Standards - Hyatt Regency, Sanctuary Cove, Gold Coast, Queensland, Australia
Duration: 12 Jul 201213 Jul 2012

Conference

Conference4th Global Conference on SME, Entrepreneurship & Service Innovation 2012
LocationHyatt Regency, Sanctuary Cove
CountryAustralia
CityGold Coast, Queensland
Period12/07/201213/07/2012

Cite this

Jensen, C. (2012). SMEs, Competition and Entry - A developing country perspective. Abstract from 4th Global Conference on SME, Entrepreneurship & Service Innovation 2012, Gold Coast, Queensland, Australia.
Jensen, Camilla. / SMEs, Competition and Entry - A developing country perspective. Abstract from 4th Global Conference on SME, Entrepreneurship & Service Innovation 2012, Gold Coast, Queensland, Australia.2 p.
@conference{e894741224e641cbade8bafaeea84d9c,
title = "SMEs, Competition and Entry - A developing country perspective",
abstract = "The paper develops a simple model for a developing country with a dual economic structure. The model is a further theoretical extension and empirical work to an earlier published book chapter on the same topic. The abstract was updated after presentation at the conference in Gold Coast, Australia.The main research question is why it is so difficult for new entrepreneurs to enter markets, or in other words, why are the barriers to entry seemingly higher in developing countries?Development writers such as Hernando de Soto and Daron Acemoglu suggest that this question is closely related with a sizeable informal sector in developing countries and corruption. Other leading transition researchers such as Andrei Shleifer offer a variety of views on the informal sector from the romantic to the parasitic. This paper leans on the realist interpretation of de Soto grounded in institutional theory. High entry barriers push the entrepreneurs towards the informal sector. Whether entrepreneurs succeed in the transition towards the formal sector depends on the size of the entry barriers which are indirectly regulated both by informal institutions such as corruption and formal institutions such as competition policy.The model is tested using the World Bank's BEEPS dataset which is a repeated cross section survey of firms across countries in development and transition. This data gives access to observe among other firm size and whether firms pay a bribe or not. This data is combined with Stephan Voigt's data that measures competition policy for a large cross section of countries.The paper generally finds confirmation for the hypothesized relationship between the informal sector, firm size and corruption and the idea that competition policy may have a moderating effect on this relationship.The implications of the paper for development policy is that the fight against corruption should also incorporate elements of the establishment of a sound competition policy. For international business practitioners the implications of the research is that they will need to enter into strategic alliances in countries with high corruption and a poor competition policy framework. Furthermore, prior to the entry into a strategic alliance the investor must carefully investigate the ethical behaviour and attitudes of the partners towards culturally embedded concepts such as what constitutes fair competition practise so that they conform with the expectations and formal institutions of the investor's home country and possible requirements in terms of good governance standards enshrined in the EUs free trade agreements with third countries.",
author = "Camilla Jensen",
year = "2012",
month = "7",
day = "12",
language = "English",
note = "null ; Conference date: 12-07-2012 Through 13-07-2012",

}

Jensen, C 2012, 'SMEs, Competition and Entry - A developing country perspective', Gold Coast, Queensland, Australia, 12/07/2012 - 13/07/2012, .

SMEs, Competition and Entry - A developing country perspective. / Jensen, Camilla.

2012. Abstract from 4th Global Conference on SME, Entrepreneurship & Service Innovation 2012, Gold Coast, Queensland, Australia.

Research output: Contribution to conferenceConference abstract for conferenceResearchpeer-review

TY - ABST

T1 - SMEs, Competition and Entry - A developing country perspective

AU - Jensen, Camilla

PY - 2012/7/12

Y1 - 2012/7/12

N2 - The paper develops a simple model for a developing country with a dual economic structure. The model is a further theoretical extension and empirical work to an earlier published book chapter on the same topic. The abstract was updated after presentation at the conference in Gold Coast, Australia.The main research question is why it is so difficult for new entrepreneurs to enter markets, or in other words, why are the barriers to entry seemingly higher in developing countries?Development writers such as Hernando de Soto and Daron Acemoglu suggest that this question is closely related with a sizeable informal sector in developing countries and corruption. Other leading transition researchers such as Andrei Shleifer offer a variety of views on the informal sector from the romantic to the parasitic. This paper leans on the realist interpretation of de Soto grounded in institutional theory. High entry barriers push the entrepreneurs towards the informal sector. Whether entrepreneurs succeed in the transition towards the formal sector depends on the size of the entry barriers which are indirectly regulated both by informal institutions such as corruption and formal institutions such as competition policy.The model is tested using the World Bank's BEEPS dataset which is a repeated cross section survey of firms across countries in development and transition. This data gives access to observe among other firm size and whether firms pay a bribe or not. This data is combined with Stephan Voigt's data that measures competition policy for a large cross section of countries.The paper generally finds confirmation for the hypothesized relationship between the informal sector, firm size and corruption and the idea that competition policy may have a moderating effect on this relationship.The implications of the paper for development policy is that the fight against corruption should also incorporate elements of the establishment of a sound competition policy. For international business practitioners the implications of the research is that they will need to enter into strategic alliances in countries with high corruption and a poor competition policy framework. Furthermore, prior to the entry into a strategic alliance the investor must carefully investigate the ethical behaviour and attitudes of the partners towards culturally embedded concepts such as what constitutes fair competition practise so that they conform with the expectations and formal institutions of the investor's home country and possible requirements in terms of good governance standards enshrined in the EUs free trade agreements with third countries.

AB - The paper develops a simple model for a developing country with a dual economic structure. The model is a further theoretical extension and empirical work to an earlier published book chapter on the same topic. The abstract was updated after presentation at the conference in Gold Coast, Australia.The main research question is why it is so difficult for new entrepreneurs to enter markets, or in other words, why are the barriers to entry seemingly higher in developing countries?Development writers such as Hernando de Soto and Daron Acemoglu suggest that this question is closely related with a sizeable informal sector in developing countries and corruption. Other leading transition researchers such as Andrei Shleifer offer a variety of views on the informal sector from the romantic to the parasitic. This paper leans on the realist interpretation of de Soto grounded in institutional theory. High entry barriers push the entrepreneurs towards the informal sector. Whether entrepreneurs succeed in the transition towards the formal sector depends on the size of the entry barriers which are indirectly regulated both by informal institutions such as corruption and formal institutions such as competition policy.The model is tested using the World Bank's BEEPS dataset which is a repeated cross section survey of firms across countries in development and transition. This data gives access to observe among other firm size and whether firms pay a bribe or not. This data is combined with Stephan Voigt's data that measures competition policy for a large cross section of countries.The paper generally finds confirmation for the hypothesized relationship between the informal sector, firm size and corruption and the idea that competition policy may have a moderating effect on this relationship.The implications of the paper for development policy is that the fight against corruption should also incorporate elements of the establishment of a sound competition policy. For international business practitioners the implications of the research is that they will need to enter into strategic alliances in countries with high corruption and a poor competition policy framework. Furthermore, prior to the entry into a strategic alliance the investor must carefully investigate the ethical behaviour and attitudes of the partners towards culturally embedded concepts such as what constitutes fair competition practise so that they conform with the expectations and formal institutions of the investor's home country and possible requirements in terms of good governance standards enshrined in the EUs free trade agreements with third countries.

M3 - Conference abstract for conference

ER -

Jensen C. SMEs, Competition and Entry - A developing country perspective. 2012. Abstract from 4th Global Conference on SME, Entrepreneurship & Service Innovation 2012, Gold Coast, Queensland, Australia.