Entrepreneurship in the Informal Economy: Why it Matters

Abstract

<jats:p> The informal economy is generating 10–20% of GDP in developed countries. It takes many forms and is difficult to measure, but has nevertheless a permanent and widely acknowledged characteristic: strong entrepreneurial dynamism. However, research seldom focuses on this aspect. This paper addresses this gap by offering a conceptual framework for entrepreneurial activities within the informal economy. The authors also discuss how crossing canonical entrepreneurship models and theories with atypical empirical contexts – such as, for instance, deprived neighbourhoods – can help consolidate existing evidence and/or, on the contrary, unveil myths and even generate new hypotheses and innovative and stimulating management methods. </jats:p>

Beyond the marginalisation thesis: evaluating participation in informal sector entrepreneurship

“…It is also widely recognised that many entrepreneurs conduct some or all of their transactions in the informal economy (Aidis et al, 2006;Barbour and Llanes, 2013;Bureau and Fendt, 2011;De Castro et al, 2014;Kus, 2014;Mróz, 2012;Thai and Turkina, 2013;Webb et al, 2013;Williams, 2007Williams, , 2010Williams, , 2015a and that a large proportion of enterprises start-up on an unregistered basis in the informal sector (Thai and Turkina, 2014;Williams, 2015a,b,c;Williams and Martinez, 2014a,b,c,d). As Autio and Fu (2014) highlight, some twothirds of businesses start-up without registration in the informal sector not only in emerging and transition economies (where 0.62 informal businesses compared with 0.37 formal businesses are created annually for every 100 people) but also in OECD countries (where 0.62 informal businesses compared with 0.43 formal businesses are annually created for every 100 people).…”

“…Over the past decade or so, a new sub-field of entrepreneurship scholarship has emerged which focuses upon those previously ignored entrepreneurs who conduct some or all of their transactions in the informal sector (Aidis et al, 2006;Barbour and Llanes, 2013;Bureau and Fendt, 2011;Dellot, 2012;Kus, 2014;Mróz, 2012;Thai and Turkina, 2013;Webb et al, 2013;Williams, 2006). This emergent sub-field of 'informal sector entrepreneurship' has so far analysed the magnitude of entrepreneurship in the informal sector (Autio and Fu, 2014;Williams, 2013), the extent to which entrepreneurs operate in the informal sector (De Castro et al, 2014;Williams and Shahid, 2014) and their reasons for doing so (Adom, 2014;Chen, 2012;Hudson et al, 2012;Williams, 2009;Williams et al, 2010).…”

Determinants of the informal economy of an emerging economy: a multiple indicator, multiple causes approach

“…Defined variously as traditional and modern sectors (Boeke, 1953), firm-centred and bazaar-type economies (Geertz, 1963), upper and lower circuits (Santos, 1973), modern and traditional economies (Sethuraman, 1976), and high and low income sectors (Sethuraman, 1981), Dualism/Modernisation theory describes two distinct economies in which relative advantages exist in one (the formal) over the other (the informal economy). In addition, this theory argues that the informal economy exists to provide income or a safety net for the poor (ILO, 1972;Becker, 2004), represents a systemic flaw in, and shows the failure of, the economic model of a country (Bureau and Fendt, 2011), but it (the informal economy) will cease to exist once development and modernisation sets-in (Becker, 2004).…”

“…All of these can contribute to an expansion in the size of the informal economy (ILO, 1972;Sethuraman, 1988;Bureau and Fendt, 2011;Chen, 2012).…”

The embeddedness of illegal entrepreneurship in a closed ethnic community

“…First of all it is necessary to distinguish between illegal entrepreneurship and informal Entrepreneurship (Bureau and Fendt, 2011) or what (Williams, 2006; refers to as 'Off the books enterprise'. Williams (2008), differentiates between 'necessity-driven' entrepreneurs pushed into entrepreneurship because other options for work are absent or unsatisfactory; and 'opportunity-driven' entrepreneurs who engage in entrepreneurship out of choice.…”