Informal Entrepreneurship and Industry Conditions. (January 2016)

• Record Type: Journal Article
• Authors: Siqueira, Ana Cristina O.; Webb, Justin W.; Bruton, Garry D.
• Is Part Of: Entrepreneurship theory and practice. Volume 40:Number 1(2016:Jan.)
• Page Start: 177
• Page End: 200
• Publication Date: 2016-01
• Subjects: Small business -- Periodicals; New business enterprises -- Periodicals; Entrepreneurship -- Periodicals; 658.421
• DOI: 10.1111/etap.12115
• Languages: English
• ISSNs: 1042-2587

Abstract

Scholars have argued that informality is driven by the degree to which it is expensive or difficult to operate in the formal economy. In contrast, we argue that firms choose to be informal or formal partly driven by industry conditions. We examine informal firms that are not registered with a governmental authority. Based on a large data set of Brazilian businesses, we find that firm informality is positively associated with dynamism, yet negatively associated with munificence and concentration. Our findings suggest that informality is a decision driven by both cost of registering and risk reduction for entrepreneurs depending on industry conditions.