Entrepreneurship in the Informal Economy: A Product of Too Much or Too Little State Intervention?
Entrepreneurship and Innovation, 2014, Vol 15, No 4, November 2014, pp 227–237
11 Pages Posted: 27 Dec 2015
Date Written: 2014
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. 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 contextbound explanations of entrepreneurship in the informal economy.
Keywords: informal sector, informal entrepreneurship, enterprise culture, enterprise creation, informal economy, shadow economy, entrepreneurship
JEL Classification: H26, J46, J48, K34, K42, O17, P2, P3
Suggested Citation: Suggested Citation