Some effects of business environment on retail firms

This paper empirically tests how formal retail entrepreneurs’ perception about the business environment in Cameroon affects the performance of the retail sector. I use business owners’ responses from the 2009 Enterprise Survey to estimate an econometric model that corrects for heteroscedasticity. The results show that regulation costs, corruption, credit constraints, and lack of infrastructure negatively affect the gross margins of firms. In contrast, the competition of the informal sector – perceived by many formal entrepreneurs as a major constraint – is positively associated with the gross margins of formal firms. Policy implications are discussed.