Business Formalization: Costs versus Institutional Efficiency

Arruñada, Benito (2010), Business Formalization: Costs versus Institutional Efficiency, Thomson Reuters, Cizur Menor.


Reforms to simplify initial business formalization (especially to incorporate new companies) incur huge costs but maintain unnecessary formalities and, above all, they disregard the need for business registers to provide sound evidence for future judicial and administrative decisions. A more ambitious strategy is needed, one which will aim to improve institutional efficiency, to identify and eliminate obsolete formalities and to ensure register reliability. Such reliability is essential if registers are to efficiently perform their social function, that of reducing total transaction costs for companies. This strategy should be adopted in collaboration with private facilitating services providing entrepreneurs with advice and assistance in formalities. Any services requiring independence on the part of the decision-maker should be kept in the public arena while others can benefit from the comparative advantages of private initiative.

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Extracte sobre el fracàs de la iniciativa espanyola de la SLNE per simplificar tràmits empresarials

Analysis of the reforms introduced by the Spanish Sustainable Development Act (2011)


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Table of contents


A value strategy
Method and content

Part One: The state of the question

  1. Administrative simplification: Why so many mistakes

Part Two: The value of business formalization

  1. The logic of contractual formalization of companies
  2. Control in business records

Part three: Opportunities for reform

  1. General approach to reform
  2. Analysis of contractual arrangements
  3. Analysis of administrative procedures
  4. Two experiences of Iberian reform
  5. How to organize the provision of formalization services

Part Four: Methodology of evaluation and analysis

  1. Evaluation and monitoring of reforms

Part Five: Summary

  1. Priorities in the reform of the institutions of business formalization

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