The effect of competition from informal firms on proactive environmental strategies in emerging economies

Abstract

Drawing on the Attention Base View (ABV) theory, this paper examines the adoption of Proactive Environmental Strategies (PES) by formal firms in emerging economies and explores the influence of informal competition. We investigate the moderating effects of contextual factors (number of formal competitors) and firm characteristics (CEO's experience). Using data from the 2019 World Bank Enterprise Survey, we apply a Negative Binomial model to a sample of 7,436 manufacturing firms across 25 emerging economies. Unlike previous evidence, our findings suggest that formal firms facing competition from informal counterparts tend to adopt PES to bolster competitiveness. However, the perception of high formal competition and the CEO's industry experience may reduce PES adoption. This study advances our understanding of PES adoption in emerging economies, emphasizing the significance of informal competition. It also increases the evidence of the ABV approach to environmental strategy research, offering insights for managing environmental challenges in emerging markets.