Do Small Business Start-Ups Test-Trade in the Informal Economy? Evidence from a UK Survey

International Journal of Entrepreneurship and Small Business, Vol. 22, No. 1, 2014

16 Pages Posted: 27 Dec 2015

See all articles by Colin Williams

Colin Williams

University of Sheffield - School of Management

Alvaro Martinez

University of Sheffield

Date Written: 2014

Abstract

The aim is to evaluate critically whether small businesses start-up in the informal economy and whether they do so to test-trade the viability of their businesses. Reporting a 2012 survey of 595 small business owners in the UK, 20% report trading informally when starting their business, 64% of whom asserted a main reason was to test its viability. Some 13% of all small businesses therefore start-up test-trading in the informal economy, although multivariate analysis shows that businesses started by men, with low current annual turnovers in particular sectors are significantly more likely to do so. Regional variations are not significant. The outcome is a call for not only similar studies in other countries to determine the proportion of enterprises that start up test-trading in the informal economy but also a discussion of the policy implications of this finding.

Keywords: informal economy, underground sector, shadow economy, nascent entrepreneurship, business start-up, venture creation, enterprise development, UK

JEL Classification: H26, J46, J48, K34, K42, O17, P2, P3

Suggested Citation

Williams, Colin and Martinez, Alvaro, Do Small Business Start-Ups Test-Trade in the Informal Economy? Evidence from a UK Survey (2014). International Journal of Entrepreneurship and Small Business, Vol. 22, No. 1, 2014, Available at SSRN: https://ssrn.com/abstract=2708449

Colin Williams (Contact Author)

University of Sheffield - School of Management ( email )

15 Conduit Road
Sheffield, S10 1FL
United Kingdom

HOME PAGE: http://https://www.sheffield.ac.uk/management/staff/williams/index

Alvaro Martinez

University of Sheffield ( email )

17 Mappin Street
Sheffield, Sheffield S1 4DT
United Kingdom

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