Explaining the Off-the-Books Enterprise Culture of Ukraine: Reluctant or Willing Entrepreneurship?

Abstract

In recent years, there has been a growing realisation that beyond the realm of legitimate entrepreneurship is a large hidden enterprise culture composed of entrepreneurs conducting some or all of their trade off-the-books. Until now, however, few have evaluated how many entrepreneurs start-up their ventures trading off-the-books and why they do so. Reporting face-to-face interviews conducted in Ukraine during 2005-06 with 331 entrepreneurs, the finding is not only that the vast majority (90%) operate partially or wholly off-the-books but also that they are not all driven by necessity and as a last resort and survival strategy into entrepreneurship. Revealing how many are willing rather than reluctant entrepreneurs and that even those who initially are reluctant entrepreneurs and doing so out of necessity became more willing entrepreneurs over time as their business became established, the paper concludes by discussing the implications of these findings for both further research and public policy.

Keywords: entrepreneurship, necessity entrepreneurs, enterprise culture, informal economy, shadow economy, underground sector, tax compliance, Ukraine

JEL Classification: O17, H26