Exploring the entrepreneurial ecosystem within the informal economy with a multifactor framework

Abstract

Despite its prominence, scale and dynamism, the informal economy is viewed as remnant of a traditional economic order that needs to be systematically reduced and eventually eradicated. Only in the past few decades has a promising strand of research emerged to explore the marked heterogeneity among entrepreneurs along the formal-informal continuum and the existence of ambitious entrepreneurs committed to business growth. These entrepreneurs combine their ambitions with the pervasive informality in their society; they make both informal transactions but register their firms. We adopt a critical position of the formal-informal dichotomy. We are guided by the question of how ambitious entrepreneurs find the support in entrepreneurial ecosystems characterised by pervasive informality to further innovation. We contend that informality is embedded in entrepreneurial ecosystems at the meso-level. We contribute an analytical framework that accommodates the diversity of entrepreneurs as they, deal with, and maintain varying levels of formality and informality in infinite combinations that are compatible and conducive to business growth.