Formal institutions,informal institutions,and red tape: A comparative study

Firms across the globe are affected by red tape, but there is little academic research on how country‐level institutions shape red tape perceptions. Drawing on institutional theory, we argue that a variety of formal and informal country‐level institutions affect perceptions of red tape in the private sector. We test our hypotheses using six data sources, including the World Economic Forum and the World Bank. Our results indicate that red tape is weakly associated with a country's level of formalization and rule enforcement effectiveness and more prevalent in federal as opposed to unitary states. As for informal institutions, we find that red tape perceptions are more pronounced in countries with an increased conservative political ideology, higher levels of corruption, and cultures that emphasize individualism and uncertainty avoidance. We conclude with a discussion of the implications for theory and practice.