Entrepreneurial activity in the informal economy: a missing piece of the entrepreneurship jigsaw puzzle

Abstract

This paper takes stock of the current debate around the informal sector and informal entrepreneurship. Informal entrepreneurship represents a worldwide characteristic of entrepreneurial activity, the main distinguishing feature of which is that it is operating outside the law. Since what is legal can vary considerably between countries, studies of entrepreneurship which exclude informal activity must be considered partial. Moreover, it can be argued that the distinction between formal and informal is not black and white but rather shades of grey. Although informal economic activity is often more prominent in developing countries and transition economies, it is by no means confined to them. There are parts of the UK, for example, where local economies are dependent upon informal employment and for many goods and services. More generally, much of the home-based economic activities, such as cleaning, painting and decorating and other services, are typically provided, at least partially, in the informal sector. As a consequence, it is difficult to argue against including informal activity as part of the study of entrepreneurship, and particularly where the entrepreneurial potential of an economy is being assessed.

Keywords::

• entrepreneurship; informal entrepreneurship; informal economy; context

Keywords::

• L26
• P37

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

^1. Visiting Professor at Jönköping University, Jönköping International Business School, Sweden.

^2. Godfrey (2011) provides a comprehensive overview of definitions of the informal economy within sociology, economics and the management disciplines, see Table 1, 236–242.

^3. Bangasser (2000) reviews the history of the concept within the ILO, while in a special issue of World Development Bromley (1978) assembles now classic papers on the informal sector in developing countries, amongst them the reviews by Moser (1978) and Tokman (1978).

^4. Interestingly enough, the term ‘second economy’ has been introduced again in South Africa and has been accepted as part of the policy discourse on all government levels, see Rogerson (2007, 1053).