Christopher Boafo, Alexis Catanzaro and Utz Dornberger
The International Labor Organization (2020) estimates that eight out of ten enterprises (i.e. own-account workers and small economic units) are informal worldwide. However, less…
Abstract
Purpose
The International Labor Organization (2020) estimates that eight out of ten enterprises (i.e. own-account workers and small economic units) are informal worldwide. However, less is known about the internationalization of informal enterprises. Here, it is argued that economic blocs, such as sub-Saharan Africa, with a greater proportion of informal enterprises, may provide broader societal legitimacy for them to operate internationally. Thus, informal firms would need to collaborate with other firms to overcome their resource constraints. Geographic colocation is one way to facilitate positive interfirm interactions that promote networking and subsequently cooperation. The purpose of this paper is, thus, to addresses two questions. Firstly, how and to what extent does interfirm marketing cooperation in geographic colocation influence the internationalization of micro and small informal manufacturing enterprises? Secondly, how do the perceived benefits of local external economies moderate this relationship?
Design/methodology/approach
The study draws evidence from 125 randomly selected informal enterprises located in two major clusters in Ghana, using a mixed-method approach.
Findings
The partial least square - structural equation modeling (PLS-SEM) analysis applied revealed two central points. Firstly, sharing marketing costs allows informal firms to upgrade their phases of export development directly. Secondly, the linkage of increasing sales activities and local external economies encourages the progress of the phases of export development and the scope of internationalization. Results confirm that the cluster benefits of interfirm cooperation and local external economies on the informal firm internationalization process complement each other in addition to their linear relationship.
Originality/value
The study contributes to understanding the nexus of the informal sector, geographic colocation and the entrepreneurial internationalization literature. The results should motivate researchers and policymakers to approach informal firm internationalization through collaborative business activities.