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The transition toward the business formality of the Peruvian MSEs: How does the perception of entrepreneurs and the sector influence?

The transition toward the business formality of the Peruvian MSEs: How does the perception of... The formalization of a company is a process that requires compliance with standards established by government institutions. In developing countries, many businesses start this process, but do not finish it, with different levels of formality. The objective of this research is to analyze how the perception of entrepreneurs about bureaucratic procedures and the sector determine the level of formality regarding an established company that has taken the first step to formality.Design/methodology/approachThe National Survey of Micro and Small Enterprises (MSEs) is used with a sample of 4,619 Peruvian MSEs with more than three years of operation within the manufacturing and services sector. The data are analyzed with the ordered logistic regression technique.FindingsThe results show that the more favorable the perception of entrepreneurs about the ease of bureaucratic procedures, the higher the level of business formality; and companies in the manufacturing sector are less formal than those in the services sector. In addition, the perceptions of entrepreneurs positively moderate the level of formality in the case of companies in the manufacturing sector.Originality/valueLevels of formality in established companies are analyzed, defined by the compliance degree with the requirements to be a formal company. The literature on business informality in emerging countries is expanded, particularly in Latin America, incorporating the analysis of the formalization process. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Academia Revista Latinoamericana de Administración Emerald Publishing

The transition toward the business formality of the Peruvian MSEs: How does the perception of entrepreneurs and the sector influence?

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Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
1012-8255
DOI
10.1108/arla-05-2021-0106
Publisher site
See Article on Publisher Site

Abstract

The formalization of a company is a process that requires compliance with standards established by government institutions. In developing countries, many businesses start this process, but do not finish it, with different levels of formality. The objective of this research is to analyze how the perception of entrepreneurs about bureaucratic procedures and the sector determine the level of formality regarding an established company that has taken the first step to formality.Design/methodology/approachThe National Survey of Micro and Small Enterprises (MSEs) is used with a sample of 4,619 Peruvian MSEs with more than three years of operation within the manufacturing and services sector. The data are analyzed with the ordered logistic regression technique.FindingsThe results show that the more favorable the perception of entrepreneurs about the ease of bureaucratic procedures, the higher the level of business formality; and companies in the manufacturing sector are less formal than those in the services sector. In addition, the perceptions of entrepreneurs positively moderate the level of formality in the case of companies in the manufacturing sector.Originality/valueLevels of formality in established companies are analyzed, defined by the compliance degree with the requirements to be a formal company. The literature on business informality in emerging countries is expanded, particularly in Latin America, incorporating the analysis of the formalization process.

Journal

Academia Revista Latinoamericana de AdministraciónEmerald Publishing

Published: Feb 14, 2022

Keywords: Perceptions; Industry; MSEs; Levels of informality; Peru; Percepciones; Industria; Mypes; Niveles de informalidad; Perú; D73; E24; E26; L26

References