Informal Entrepreneurship and Industry Conditions

Authors

  • Ana Cristina O. Siqueira,

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    • Please send correspondence to: Ana Cristina O. Siqueira, tel.: (412) 396-4314; e-mail: siqueiraa@duq.edu.

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    • Ana Cristina O. Siqueira is an Assistant Professor at the Palumbo Donahue School of Business, Duquesne University, 600 Forbes Avenue, Pittsburgh, PA 15282, USA.
  • Justin W. Webb,

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    • Justin W. Webb is an Assistant Professor at the School of Entrepreneurship, Oklahoma State University, 104C Business Building, Stillwater, OK 74078, USA.
  • Garry D. Bruton

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    • Garry D. Bruton is a Professor at the Neeley School of Business, Texas Christian University, FortWorth, TX 76129, USA, and an Honorary Professor at Sun Yat-sen Business School, Guangzhou, China.

Abstract

Scholars have argued that informality is driven by the degree to which it is expensive or difficult to operate in the formal economy. In contrast, we argue that firms choose to be informal or formal partly driven by industry conditions. We examine informal firms that are not registered with a governmental authority. Based on a large data set of Brazilian businesses, we find that firm informality is positively associated with dynamism, yet negatively associated with munificence and concentration. Our findings suggest that informality is a decision driven by both cost of registering and risk reduction for entrepreneurs depending on industry conditions.

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