Competition from the informal sector, including digital platforms, presents a significant challenge for formal companies. In response to this pressure, formal firms may introduce innovations that provide them with a competitive advantage. Using a probit model, this study examines the relationship between informal competitive pressure and the innovation activities of formal firms, based on enterprise survey data conducted by the World Bank in Uzbekistan in 2019. The results indicate that informal competition increases the likelihood of innovative activity in formal companies by 7 percentage points, holding other variables at an average level. Additionally, holding international certifications and membership in trade organizations increase the likelihood of innovation by 13.9% and 14.5%, respectively. Although informal competition has a significant positive effect on the adoption of innovative products/services, it may also have other implications; therefore, policy recommendations should consider measures to reduce the level of informality in the economy.