Facilitating the formalisation of entrepreneurs in the informal economy

Abstract

Purpose – Although it has been recognised that many entrepreneurs operate in the informal economy, little is so far known about their reasons for doing so. The purpose of this paper is to begin to unravel entrepreneurs’ rationales for trading in the informal economy in order to consider what policy measures need to be adopted to facilitate their formalisation. Design/methodology/approach – To do this, the results of an empirical survey are reported conducted in Ukraine during 2006/2007 with 331 individuals who had started-up or owned/managed an enterprise. Findings – Revealing that the rationales for entrepreneurs operating in the informal economy markedly differ according to whether they are wholly or partially informal entrepreneurs operating temporarily or permanently in the informal economy, the result is a call for a move beyond a “one-size-fits-all” policy approach and towards a variegated public policy approach whereby policy measures are tailored to tackling the different types of informal entrepreneurship, each of which operate informally for varying reasons. Research limitations/implications – No evidence yet exists of whether the rationales for engaging in each type of informal entrepreneurship, and the consequent policy measures that need to be used to formalise each type, are more widely valid. Further research to evaluate this is required. Originality/value – This is the first paper to start to move beyond a “one size fits all” policy approach when considering how to facilitate the formalisation of entrepreneurs in the informal economy.