Journal Article

Associations versus registration as alternative strategies of small firms

Nugent, Jeffrey B., Sukiassyan, Grigor

2008

Overview

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.

• Publisher: Springer,Springer US,Springer Nature B.V
• Subject: Associations / Business and Management / Business management / Business organization / Business strategies / Business structures / Business studies / Commercial regulation / Companies / Compliance / Contract enforcement / Corruption / Cost efficiency / Costs / Court costs / Developing countries / Enforcement / Entrepreneurship / Formality / Government agencies / Government bureaucracy / Government corruption / Hypotheses / Industrial Organization / LDCs / Management / Mexico / Microanalysis / Microeconomics / NGOs / Nongovernmental organizations / Owners / Public finance / Registrars of securities / Registration / Regulation / Small and medium sized enterprises / Small business / Strategic planning / Strategies / Studies