Strategic Entrepreneurship in the Informal Economy

Shelter Teyi

Research output: Book/ReportPhD thesis

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Abstract

The informal economy accounts for the majority of global economic activities. Entrepreneurs significantly contribute to the growth of the informal economy. This thesis contributes to the growing literature on entrepreneurship in the informal economy by taking a strategy perspective. The thesis consists of three papers that examine strategic entrepreneurship in the informal economy at the early stages of the venture creation process. It also investigates the strategies entrepreneurs (who have successfully launched their firms) in the informal economy employ in response to adversity.
Drawing on entrepreneurial identity literature, the first paper highlights important heterogeneities among entrepreneurs in the informal economy and how it shapes the different strategies entrepreneurs employ in adversity. We find four primary entrepreneurial identities in our sample and three response strategies closely related to these identities.
The second paper focuses on the decision-making of prospective entrepreneurs. The paper examines the pre-entry search activities that individuals engage in as they search for information and learn about the viability and feasibility of their business idea. The paper shows that both individual (human capital) and external factors (embeddedness in informal institutions) when examined jointly and separately are essential in understanding entrepreneurial behavior at the earliest stage of the venture creation process.
The third paper sheds light on entrepreneurial learning by examining the pre-entry search activities of habitual entrepreneurs during two spells of entrepreneurship. The paper shows a strong positive association between the number of pre-entry search activities that entrepreneurs conduct in both spells of entrepreneurship when they exceed their performance aspirations. This aligns with the literature on performance feedback, which suggests that organizations do not change their current strategy when seen to be successful. However, the notion that habitual entrepreneurs in the informal economy may pursue a repetitive ‘winning’ strategy contrasts with the findings that habitual entrepreneurs in the formal economy may pursue more innovative businesses. This may also help us understand why replicative businesses are common in the informal economy.
In conclusion, this thesis finds that human capital is beneficial in conducting an extensive search during the entrepreneurial pre-entry stage. More so, being deeply embedded dampens the gains from having high human capital endowments, while being broadly embedded in a larger number of informal institutions strengthens the benefits of human capital. We also find that the positive association between the number of pre-entry steps taken in the first and second spells of entrepreneurship is stronger when entrepreneurs perform above their aspirations. Finally, our data reveals four entrepreneurial identities and three key response strategies that are closely related to entrepreneurial identities.
Original languageDanish
Place of PublicationFrederiksberg
PublisherCopenhagen Business School [Phd]
Number of pages177
ISBN (Print)9788775681778
ISBN (Electronic)9788775681785
DOIs
Publication statusPublished - 2023
SeriesPhD Series
Number16.2023
ISSN0906-6934

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