Entrepreneurship in the Informal Economy

What is it about?

Over the past decade or so, two competing theoretical perspectives have arisen that explain participation in informal entrepreneurship as resulting from either too little or too much state intervention. To evaluate these competing explanations critically, the authors report on a 2012 UK survey of 595 small business owners.

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Why is it important?

Twenty per cent of these owners said that they had traded informally when starting up their ventures, and the authors examine and evaluate their reasons for doing so. It was found that 41% of the entrepreneurs attributed their off-the-books trading to too little state intervention (for example, a lack of government advice and support), 35% to too much intervention (burdensome red tape, high taxes, etc) and 24% to a mix of both factors. However, a multivariate analysis displays significant socio-demographic, firm-level and regional variations in the reasons. The outcome is a call to move towards more nuanced context bound explanations of entrepreneurship in the informal economy.

Perspectives