Associations versus registration as alternative strategies of small firms

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.

Child Labor and Multinational Conduct: A Comparison of International Business andStakeholder Codes

Increasing attention to the issue of child labor has been reflected in codes of conduct that emerged in the past decade in particular. This paper examines the way in which multinationals, business associations, governmental and non-governmental organizations deal with child labor in their codes. With a standardized framework, it analyzes 55 codes drawn up by these different actors to influence firms external, societal behavior. The exploratory study helps to identify the main issues related to child labor and the use of voluntary instruments such as codes of conduct. Apart from a specific indication of the topics covered by the code, especially minimum-age requirements, this also includes monitoring systems and monitoring parties. Most important to company codes are the sanctions imposed on business partners in case of non-compliance. Severe measures may be counterproductive as they do not change the underlying causes of child labor and can worsen the situation of the child workers by driving them to more hazardous work in the informal sector. This underlines the importance of a broad rather than a restrictive approach to child labor in codes of conduct. The paper discusses the implications of this study, offering suggestions for future research.