Research by Juan Bu and Alvaro Cuervo-Cazurra shows that new ventures in emerging markets, initially created informally, suffer from costs that persist and constrain a firm's ability to innovate even after they formalize their status. As a result of these informality costs, informally created new ventures are more likely to develop imitative rather than innovative new products. However, being acquired by other firms and improvements in the national innovation system can weaken the persistence of these informality costs, resulting in more innovation. To explain these findings, Bu and Cuervo-Cazurra develop the concept of internal imprinting, which captures how the internal characteristics of a company result in the establishment of practices that persist over time, affecting behavior and innovation. Managers in emerging markets should consider formalizing their firms from the beginning or joining a private business group to mitigate the negative impact of informality on their firms' innovativeness.