Advancing the institutional perspective on informal entrepreneurship: a study of formalization intentions among street entrepreneurs

Abstract

PurposeInformal entrepreneurship is seen as a direct outcome of either the failure of formal institutions or the asymmetry between formal and informal institutions. These two viewpoints are so far debated as alternative theoretical explanations for the prevalence of informal entrepreneurship. In this paper, the authors offer a theoretically integrative approach to further advance the institutional perspective of informal entrepreneurship. The purpose of this paper is to address these issues.Design/methodology/approachUsing face-to-face surveys of 322 street entrepreneurs from Lahore, Pakistan, the authors deploy the hitherto unused partial least square approach (PLS) to structural equation modeling (SEM) to analyze data within the field of informal entrepreneurship.FindingsThe empirical findings strongly support the theoretical propositions of the new institutional perspective that the authors present in their paper. The authors find no direct impact of factors like procedural justice, redistributive justice and public sector corruption (i.e. formal institutional failings) on the formalization intentions of street entrepreneurs. Their findings demonstrate that the relationship between formal institutional failings and formalization intentions can only be explained through the mediating role of institutional asymmetry (i.e. tax morality).Research limitations/implicationsFrom a policy perspective, the authors find that if they can encourage street entrepreneurs to obtain a local-level registration as the first step toward formalization, it will significantly increase their chances to opt for higher national-level registrations.Originality/valueThis paper presents a unique attempt to further understand the context of street entrepreneurship through the theoretical lens of the institutional theory. In doing so, it synthesizes the arguments of existing institutional perspectives and further develops the institutional theory of informal entrepreneurship. Moreover, the paper develops the concept of “formalization intentions”.

The interplay of entrepreneurial motivations, job attractiveness and family-owned SMEs growth: evidence from China Pakistan Economic Corridor region

“…work core). These findings were contextual (Shahid et al, 2022). For example, family business entrepreneurs were focused on achieving economic core as it could help their families to prosper financially.…”

“…Thus, future research is needed to extend the promising scholarship of expectancy (Renko et al, 2012(Renko et al, , 2021 and institutional (Scott, 2001) theories to link with the socioemotional wealth theory of family firms (Bruton et al, 2010;Berrone Cruz and Gomez-Mejia, 2012). Firstly, one can compare the motivation factors in the context of formal and informal institutes in informal economies (Shahid et al, 2022). Secondly, our sample of family SMEs belongs to the Lahore region because we could not visit the Gwadar region for data collection due to financial constraints by the funding agency.…”

“…Other scholars said that if one is financially independent, it is enough for him or her to pull someone to do anything new to complete entrepreneurship-related activities (Murnieks et al, 2020). So, financial indigence is a natural factor in motivating emerging market entrepreneurs (Shahid et al, 2022). Thus, the individual core can encourage SMEs and business owners to move to the relatively least developed economic region for business growth.…”

“…Family-owned small or medium enterprises (SMEs) in Pakistan are typically self-regulating organizations with fewer than 50 workers owned by the same family members, including brothers or a father and sons (Shahid et al , 2022; Saleem et al , 2019). Family-owned SMEs growth could refer to an increase in SMEs’ revenues, assets or market share in an underdeveloped region (Memili et al , 2015).…”

“…Finally, most research on EM has been conducted in Western countries, with little attention paid to Asian cultures and societies. Shahid et al (2022) further claimed that not only situational, institutional configuration of business in a particular economy matters but also individual motivation factors of entrepreneurs are highly deficient in the context of an informal and developing economy to link institutional perspective (Bruton et al , 2010). These scholars ask for integrating different theoretical perspectives, as most studies on EM focus on a single theoretical perspective (Bruton et al , 2010; De Clercq et al , 2013; Renko et al , 2021).…”