Understanding the Firm in the Informal Economy: A Research Agenda

Haarman, Amanda; Larsen, Marcus Møller; Namatovu, Rebecca

doi:10.1057/s41287-022-00508-2

Cited by 6 publications

(2 citation statements)

References 124 publications

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“…The informal sector is extensive and covers a wide range of businesses, including the Shanzhai mobile industry (Lee & Hung, 2014), luxury counterfeits (Jiang & Shan, 2016), convenience stores, automotive repair shops, and handicraft manufacturers, among others (Assenova & Sorenson, 2017). The majority of existing literature has operationalized informal firms as unregistered companies (Haarman et al, 2022). Many emerging economies exhibit dual‐economy structures wherein both formal and informal sectors coexist (Assenova & Sorenson, 2017).…”

Section: Conceptual Backgroundmentioning

confidence: 99%

Competition from informal firms and new‐to‐market product innovation: A competitive rivalry framework

Wang,

Wang

2023

J of Product Innov Manag

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Although informal firms are rare in developed economies, they are prevalent in emerging economies and create significant competitive pressure for formal firms. Recent literature has focused on the effects of informal competition on product innovation, but the results have been inconsistent. This discordance motivated this study. Drawing on insights from competitive rivalry, this study investigates how informal competition affects formal firms’ product innovativeness (i.e., whether to develop new‐to‐market products or not). Using a sample of firms operating in Eastern Europe and Central Asia from the World Bank Enterprise Survey, we find that if formal firms encounter intense competitive pressure from informal firms, they are less inclined to develop new‐to‐market products. Furthermore, credit constraints strengthen the adverse effect of competitive pressure from informal firms on the development of new‐to‐market product innovation, but state legitimacy weakens this effect. This investigation provides insight into the barriers to innovation in emerging economies and adds to the existing literature by highlighting the need to consider the varied effects of informal competition on different types of product innovation.

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Section: Conceptual Backgroundmentioning

confidence: 99%

Competition from informal firms and new‐to‐market product innovation: A competitive rivalry framework

Wang,

Wang

2023

J of Product Innov Manag

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“…Specifically, entrepreneurs identifying with sociocultural logics rather than business or commercial logics will likely strategize differently (Haarman et al, 2022).…”

Section: Entrepreneurial Identitymentioning

confidence: 99%

Strategic Entrepreneurship in the Informal Economy

TEYI¹

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The informal economy accounts for the majority of global economic activities. Entrepreneurs significantly contribute to the growth of the informal economy. This thesis contributes to the growing literature on entrepreneurship in the informal economy by taking a strategy perspective. The thesis consists of three papers that examine strategic entrepreneurship in the informal economy at the early stages of the venture creation process. It also investigates the strategies entrepreneurs (who have successfully launched their firms) in the informal economy employ in response to adversity. Drawing on entrepreneurial identity literature, the first paper highlights important heterogeneities among entrepreneurs in the informal economy and how it shapes the different strategies entrepreneurs employ in adversity. We find four primary entrepreneurial identities in our sample and three response strategies closely related to these identities. The second paper focuses on the decision-making of prospective entrepreneurs. The paper examines the pre-entry search activities that individuals engage in as they search for information and learn about the viability and feasibility of their business idea. The paper shows that both individual (human capital) and external factors (embeddedness in informal institutions) when examined jointly and separately are essential in understanding entrepreneurial behavior at the earliest stage of the venture creation process. The third paper sheds light on entrepreneurial learning by examining the pre-entry search activities of habitual entrepreneurs during two spells of entrepreneurship. The paper shows a strong positive association between the number of pre-entry search activities that entrepreneurs conduct in both spells of entrepreneurship when they exceed their performance aspirations. This aligns with the literature on performance feedback, which suggests that organizations do not change their current strategy when seen to be successful. However, the notion that habitual entrepreneurs in the informal economy may pursue a repetitive ‘winning’ strategy contrasts with the findings that habitual entrepreneurs in the formal economy may pursue more innovative businesses. This may also help us understand why replicative businesses are common in the informal economy. In conclusion, this thesis finds that human capital is beneficial in conducting an extensive search during the entrepreneurial pre-entry stage. More so, being deeply embedded dampens the gains from having high human capital endowments, while being broadly embedded in a larger number of informal institutions strengthens the benefits of human capital. We also find that the positive association between the number of pre-entry steps taken in the first and second spells of entrepreneurship is stronger when entrepreneurs perform above their aspirations. Finally, our data reveals four entrepreneurial identities and three key response strategies that are closely related to entrepreneurial identities.

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Institutional environments and conflict between foreign investors and local communities in large-scale agricultural land acquisitions

Ueta

2024

International Business Review

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Understanding the Firm in the Informal Economy: A Research Agenda

Cited by 6 publications

References 124 publications

Competition from informal firms and new‐to‐market product innovation: A competitive rivalry framework

Competition from informal firms and new‐to‐market product innovation: A competitive rivalry framework

Strategic Entrepreneurship in the Informal Economy

Institutional environments and conflict between foreign investors and local communities in large-scale agricultural land acquisitions

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