Mexico City's Informal Entrepreneurs

Abstract

Today, the informal economy represents 60 % of all workers globally, or as much as 90 % of workers in low income, developing countries (The Guardian, 2021). To unveil the long-standing stigma around entrepreneurs participating in the informal economy, the purpose of this thesis has been to showcase a wider and more nuanced picture on the different influencing factors that lead entrepreneurs to join the informal economy. Drawing on data collected from 29 informal entrepreneurs around Mexico City and analysing it through the application of the conceptual framework of the institutional theory, proposed by Scott (1995), this thesis poses and attempts to answer the following question: How can the high participation in the informal economy by street vendors in Mexico City be explained through the institutional theory? The findings of this thesis has shown, that the institutional pillars: regulative, normative, and cognitive are interrelated and their influence depend on their level of legitimacy. Under the regulative pillar the lengthy and expensive registration procedures together with the ineffective enforcement systems were identified as factors that can lead to participation in informal economy. Within the normative pillar, the existence of a ‘leader system’ and its shielding nature from formal institutions have been revealed. Moreover, the strength of family ties and traditions together with the positive perception of society towards informal vendors, create high legitimacy and positively impact the participation in the informal economy. As for the cognitive pillar, it has shown the significance of successful role models serving as inspiration along with earlier gained knowledge and experience in the informal sector, that can be leveraged when time comes. In addition, the role of religion has been observed which serves to create a safer space to the believer under the continuously changing circumstances of the informal economy.