Starting-up unregistered and firm performance in Turkey

© 2016 The Author(s) Recent years have seen a questioning of the negative representation of informal sector entrepreneurship and an emergent view that it may offer significant benefits. This paper advances this rethinking by evaluating the relationship between business registration and future firm performance. Until now, the assumption has been that starting-up unregistered is linked to weaker firm performance. Using World Bank Enterprise Survey data on 2494 formal enterprises in Turkey, and controlling for other determinants of firm performance as well as the endogeneity of the registration decision, the finding is that formal enterprises that started-up unregistered and spent longer unregistered have significantly higher subsequent annual sales and productivity growth rates compared with those registered from the outset. This is argued to be because in such weak institutional environments, the advantages of registering from the outset are outweighed by the benefits of deferring business registration and the low risks of detection and punishment. The resultant implication is that there is a need to shift away from the conventional eradication approach based on the negative depiction of informal entrepreneurship as poorly performing, and towards a more facilitating approach that improves the benefits of business registration and tackles the systemic formal institutional deficiencies that lead entrepreneurs to decide to delay the registration of their ventures

Reconceptualizing informal work practices: Some observations from an ethnic minority community in urban UK

Whilst paid informal work has been conceptualized as a form of paid employment imbued with solely economic motivations, this article critically argues that such a market‐­oriented reading fails to take into account alternative explanations for the existence of informal work practices. Using evidence from 50 interviews conducted within a Pakistani urban community in a northern UK city, this article, uses a mixed‐embeddedness perspective to highlight the importance of predominantly socially and culturally driven motives in the decision to engage in informal work. The findings highlight that participation in informal work, whilst a product of marginalization due to certain institutional and structural factors, is also driven by a range of non‐monetary motives—a result of certain socially embedded work relations between ethnic minority workers and their employers. It is this social embeddedness of the employer–employee relationship in the Pakistani ethnic minority community that explains the continuation of informal work practices in the face of prevailing laws and regulations. The findings add weight to the understanding of informal work as being about more than just economics and constraints, offering these ethnic minority workers opportunities, even status, and giving them agency in an otherwise disempowered situation

Explaining cross-country variations in the prevalence of informal sector competitors: lessons from the World Bank Enterprise Survey

To advance understanding of informal sector entrepreneurship, the aim of this paper is to evaluate and explain the cross-country variations in the prevalence of informal sector competitors. To do so, World Bank Enterprise Survey (WBES) data is reported from 142 countries. This reveals that 27% of formal enterprises view competition from the informal sector as a major constraint on their operations, although this varies from 72% of formal enterprises in Chad to no formal enterprises in El Salvador. To explain these cross-country variations, four competing theories are evaluated which variously view informal sector entrepreneurship and enterprise to be more prevalent when there is either: economic under-development (modernisation theory); high taxes and state over-interference (neo-liberal theory); too little state intervention (political economy theory), or an asymmetry between the laws and regulations of formal institutions and the unwritten socially shared rules of informal institutions (institutional theory). A multilevel probit regression analysis confirms the modernisation and institutional theories, but not the neo-liberal and political theories. Beyond economic under-development, therefore, it is not too much or too little state intervention that is associated with the prevalence of informal sector competition but rather, whether the laws and regulations developed by governments are in symmetry with the norms, values and beliefs of entrepreneurs. The paper concludes by discussing the theoretical and policy implications of these findings