Entrepreneurial activity in the informal economy: a missing piece of the entrepreneurship jigsaw puzzle

Welter, Friederike; Smallbone, David; Pobol, Anna

doi:10.1080/08985626.2015.1041259

Cited by 97 publications

(77 citation statements)

References 73 publications

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“…All societies have both formal institutions (i.e., codified laws and regulations) that set out the legal rules of the game, as well as informal institutions which are the "socially shared rules, usually unwritten, that are created, communicated and enforced outside of officially sanctioned channels" (Helmke & Levitsky, 2004, p. 727). Informal entrepreneurship is viewed as an endeavor occurring outside of formal institutional prescriptions but within the norms, values, and beliefs of informal institutions (Godfrey, 2011;Kistruck, Webb, Sutter, & Bailey, 2015;Siqueira et al, 2016;Welter, Smallbone, & Pobol, 2015). For example, although avoiding registration laws is formally illegal, in many developing economies registration requirements are seen as overly burdensome, due to the formal institutional imperfections, and their circumvention thus deemed socially legitimate (De Soto, 1989;Webb, Bruton, Tihanyi, & Ireland, 2013).…”

Section: Informal Entrepreneurship In Developing Countries: An Institmentioning

confidence: 99%

Informal Entrepreneurship in Developing Economies: The Impacts of Starting up Unregistered on firm Performance

Williams

Martínez-Pérez

Kedir

2017

Entrepreneurship Theory and Practice

177

189

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To advance understanding of the entrepreneurship process in developing economies, this article evaluates whether registered enterprises that initially avoid the cost of registration, and focus their resources on overcoming other liabilities of newness, lay a stronger foundation for subsequent growth. Analyzing World Bank Enterprise Survey data across 127 countries, and controlling for other firm performance determinants, registered enterprises that started up unregistered and spent longer operating unregistered are revealed to have significantly higher subsequent annual sales, employment, and productivity growth rates compared with those that registered from the outset. The theoretical and policy implications are then discussed.

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Section: Informal Entrepreneurship In Developing Countries: An Institmentioning

confidence: 99%

Informal Entrepreneurship in Developing Economies: The Impacts of Starting up Unregistered on firm Performance

Williams

Martínez-Pérez

Kedir

2017

Entrepreneurship Theory and Practice

177

189

View full text Add to dashboard Cite

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“…The government's inability to provide official employment has led to the emergence of several unregistered enterprises in the name of entrepreneurship. Welter, Smallbone and Pobol (2015) confirmed that underground economy gives the enablement, freedom and allows active involvement in private enterprise. Several terms have been used to describe underground economy among them are: shadow economy, unofficial economy, informal sector or economy, parallel economy, clandestine economy, hidden or black economy (Mughal & Schneider, 2018).…”

Section: Introductionmentioning

confidence: 75%

The Financial and Economic Implications of Underground Economy: The Nigerian Perspective

Omodero¹

2019

Academic Journal of Interdisciplinary Studies

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The economic and financial effect of underground economy in all emerging countries is of tremendous concern. Sometimes due to the inputs of the sector to economic growth of nations, it is usually assumed that the government has nothing to lose, meanwhile it goes beyond the seemingly economic benefits, but provides an avenue whereby the government has to suffer financial losses through unavoidable and inherent tax evasions. This study evaluates the impact of shadow economy using the transaction approach and the MIMIC approach which helped to determine the size of the shadow economy as a percentage of GDP and the tax revenue losses suffered by the government for a period spanning from 1991 to 2018. Ordinary least squares method is used to examine the impact of tax revenue earned and lost on Nigeria’s GDP. The regression results indicate that tax revenue earned has a significant positive impact on economic growth, while the tax revenue loss has a significant negative influence on GDP. The study finds that underground economy activities do more harm to the government than good and is also detrimental to Nigeria’s economic progress. Therefore the suggestion among others is that the legal activities among them should be formalized and taxed while the unlawful ones should be exterminated.

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“…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).…”

Section: Theorizations Of the Variable Commonality Of Informal Sectormentioning

confidence: 99%

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

Williams

Liu

2019

J. Dev. Entrepreneurship

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To advance understanding of the relationship between entrepreneurship and the informal sector, the aim of this paper is to evaluate and explain variations in the extent to which formal enterprises witness competition from unregistered or informal enterprises across Latin American and Caribbean countries. Reporting World Bank Enterprise Survey (WBES) data on 31 Latin American and Caribbean countries, this reveals that two-thirds (65.5 percent) of formal enterprises witness competition from informal sector enterprise. To explain the cross-country variations, four competing theories are evaluated, which variously view the prevalence of the informal sector to be determined by either: economic under-development (modernization theory); high taxes and state over-interference (neo-liberal theory); too little state intervention (political economy theory), or an asymmetry between the laws and regulations of formal institutions and the unwritten socially shared rules of informal institutions (institutional theory). A probit regression analysis confirms the modernization, political economy and institutional theories, but not the neo-liberal theory. Beyond economic under-development, therefore, it is too little state intervention and whether the laws and regulations developed by governments are in symmetry with the norms, values and beliefs of entrepreneurs. The paper concludes by discussing the theoretical and policy implications of these findings.

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Entrepreneurial activity in the informal economy: a missing piece of the entrepreneurship jigsaw puzzle

Cited by 97 publications

References 73 publications

Informal Entrepreneurship in Developing Economies: The Impacts of Starting up Unregistered on firm Performance

Informal Entrepreneurship in Developing Economies: The Impacts of Starting up Unregistered on firm Performance

The Financial and Economic Implications of Underground Economy: The Nigerian Perspective

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

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