An Institutional Theory of Informal Entrepreneurship: Some Lessons From Fyr Macedonia

Abstract

In recent years, a new institutionalist theory has emerged to explain the prevalence of informal sector entrepreneurship. This argues that formal institutional failures lead to the emergence of an asymmetry between the formal rules (laws and regulations) and the norms, values and beliefs of entrepreneurs regarding the acceptability of participating in the informal sector, which in turn leads to the prevalence of informal entrepreneurship. The aim of this paper is to evaluate this social actor approach by reporting evidence from 453 face-to-face interviews with a nationally representative sample of entrepreneurs in FYR Macedonia. This reveals not only a significant association between participation in the informal economy and the non-alignment of entrepreneurs’ views with the formal rules, but specific formal institutional failings that are significantly associated with the acceptability of informal entrepreneurship, namely poor quality public services, a lack of tax fairness, corruption and instability in the formal institutions. The theoretical and policy implications are then discussed.

Informal sector entrepreneurship, individual entrepreneurial orientation and the emergence of entrepreneurial leadership

“…The actions of municipal authorities are driven by the perception that informal sector entrepreneurship is associated with criminal and other unwanted conduct. While criminal activities and other unwanted activities are found in the informal sector, there is evidence (Mashaba & Morris, 2012;Williams & Bezeredi, 2018) to suggest that informal sector entrepreneurship has been instrumental in the emergence of entrepreneurial leadership. This emergence of entrepreneurial leadership has not been studied within the South African context.…”

“…Considering the nature and the environment of informal sector entrepreneurship, the emergence of entrepreneurial leadership may be linked to informal sector entrepreneurship (Cannatelli et al, 2019;Williams & Bezeredi, 2018). Our understanding of entrepreneurship leadership, therefore, provides a springboard for establishing its relations to informal sector entrepreneurship.…”

“…More than two-thirds of enterprises in the world operated in the informal sector during their start-up phase (Autio & Fu, 2015). Williams (2018) further notes that even higher proportions of entrepreneurs are operating in the informal sector considering that an unknown number of informal enterprises do not report their actual operations. The informal economy plays an integral role in addressing the socio-economic issues facing many developing nations (Autio & Fu, 2015;Gurtoo & Williams, 2009;Webb et al, 2013;Williams & Youssef, 2015).…”

Explaining Variations in the Commonality of Informal Sector Competition Across Latin American and the Caribbean Countries

“…Institutions are the rules of the game that govern and prescribe behavior; on the one hand, all societies possess formal institutions (i.e., laws and regulations) that set out the legal rules of the game, and on the other hand, informal institutions, which are the unwritten socially shared rules that exist outside of officially sanctioned channels (Helmke and Levitsky, 2004), and are expressed in norms, values and beliefs regarding what is right and acceptable (Denzau and North, 1994). Therefore, normal sector entrepreneurship takes place within the formal institutional prescriptions of the codified laws and regulations, while informal entrepreneurship takes place outside of formal institutional prescriptions but within the norms, values and beliefs of informal institutions (Godfrey, 2011;Kistruck et al, 2015;Siqueira et al, 2016;Webb et al, 2009Webb et al, , 2013Webb et al, , 2014Welter et al, 2015;Williams and Bezeredi, 2018a;Williams and Gurtoo, 2017;Williams and Krasniqi, 2018).…”

Willingness to Formalize: A Case Study of the Informal Micro and Small-Scale Enterprises in Zimbabwe

“…Institutional asymmetry refers to a state whereby individual morality (norms and values with respect to non-formalization) differs from state morality (the laws and regulations of formal institutions (Williams and Bezeredi, 2018;Williams, 2015). The asymmetry may be caused by poor public services, corruption, instability of the formal institutions or failure by the government to provide support networks necessary for business growth and success, resulting in a lack of trust in the government (Ngwenya et al, 2018;Williams and Bezeredi, 2018;van Rooyen and Antonites, 2007). The mistrust in the government tends to discourage registration leading to the growth of informal sector.…”