The New Strategy to The Legitimation of Informal Firms.

• Main Authors: Jorge Heredia, Cristian Geldes, Alejandro Flores, Walter Heredia
• Format: Article
• Language: English
• Published: Universidad Alberto Hurtado 2021-01-01
• Series: Journal of Technology Management & Innovation
• Subjects: Digital transformation; crowdfunding platform; partner; collaborate; social finance; signaling theory
• Online Access: https://www.jotmi.org/index.php/GT/article/view/3582

Competition between formal and informal companies has been increasingly studied. However, there is a lack of studies in the collaboration between formal and informal companies generated using crowdfunding platforms.  Based on the signaling theory and using the loans from 2019 of the Kiva crowdfunding platform. The drivers and enablers of the collaboration between formally registered firms (partners micro finances) and informal firms (unregistered firms - borrowers) in the context of the crowdfunding digital platform are studied. The results state a negative relationship between the lender's propensity to make loans and the informal firm's percentage borrowed. However, if the borrower receives a trustworthy partner (micro-finance), the borrower's negative impact decreases. Moreover, the lender's propensity to make loans lesser in projects of the tertiary sector. The study contributes to the entrepreneurship theory to understand the mechanism to legitimization the informal firm through collaboration with formal firms in the digital platforms.