Informal Entrepreneurship in Economic Development
Summary
Informal entrepreneurship encompasses economic activities carried out beyond formal regulatory and institutional frameworks. Often driven by necessity or opportunity, these ventures span street vending, home‐based production and unregistered services, contributing substantially to employment and income generation in emerging and transitional economies. By navigating flexible entry and low overheads, informal entrepreneurs adapt rapidly to market shifts, fostering resilience in communities facing economic volatility. Their activities support livelihood strategies, stimulate grassroots innovation and meet local needs through affordable products and services. However, limited access to finance, exposure to regulatory uncertainty and constrained social protection often restrict growth potential. Understanding the dynamic interplay between informal and formal sectors is essential to designing policies that harness this vibrancy for inclusive development while safeguarding entrepreneurs’ rights and promoting sustainable pathways to formalisation.
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Informal Entrepreneurship in Economic Development publication trend
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Technical terms
Informal entrepreneurship: Economic activities undertaken outside formal regulatory and institutional frameworks, often unregistered and operating with minimal compliance requirements.
Formalisation: The process by which informal ventures adopt legal recognition, regulatory compliance and institutional safeguards to integrate into the formal economy.
Affordable innovation: The creation or adaptation of goods and services designed to be low‐cost and accessible to consumers with limited purchasing power, often emerging in informal settings.
Regulative legitimacy: The perceived acceptance and approval that an enterprise gains by conforming to formal rules, standards and licensing requirements imposed by authorities.
References
- Entrepreneurial identity and response strategies in the informal economy. Journal of Business Research (2023).
- Social innovation at the bottom of the pyramid: Effects of informality and sustainable affordable innovation. Sustainable Development (2024).
- Informal Entrepreneurship: An Integrative Review and Future Research Agenda. Entrepreneurship Theory and Practice (2022).
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