Spatial Variations in the Character of Off-the-Books Entrepreneurship: Lessons from a Study of Contrasting Districts in Moscow

Abstract

Although there is growing recognition that many entrepreneurs start-up trading partially or wholly off-the-books, few have evaluated whether the character of this hidden enterprise culture varies spatially. To begin to do so, this paper evaluates whether and how the nature of off-the-books entrepreneurship differs across an affluent, mixed and deprived district of Moscow. Drawing upon 313 face-to-face interviews, the finding is that wholly legitimate enterprises represent just the tip of the iceberg in Moscow. Beneath the surface in all the districts is a large hidden enterprise culture. However, off-the-books entrepreneurship in the affluent district is comprised more of registered businesses trading partially off-the-books and conducted as a voluntarily chosen spin-off from their formal employment. In the deprived district, meanwhile, it is comprised more of unregistered wholly off-the-books businesses and such entrepreneurship is largely a survival tactic and last resort. The paper concludes by discussing the theoretical and policy implications of these findings.

Keywords: entrepreneurship, enterprise culture, enterprise development, informal economy, shadow economy, underground sector, tax compliance, Moscow

JEL Classification: O17, H26, H31