Toward a Greater Understanding of Entrepreneurship and Strategy in the Informal Economy

• Author: Justin W. Webb,R. Duane Ireland,David J. Ketchen
• Date: 01 March 2014
• DOI: http://doi.org/10.1002/sej.1176
• Published date: 01 March 2014

TOWARD A GREATER UNDERSTANDING OF

ENTREPRENEURSHIP AND STRATEGY IN THE

INFORMAL ECONOMY

JUSTIN W. WEBB1*, R. DUANE IRELAND2, and DAVID J. KETCHEN, JR.3

1Spears School of Business, Department of Entrepreneurship, Oklahoma State

University, Stillwater, Oklahoma, U.S.A.

2Mays Business School, Department of Management, Texas A&M University,

College Station, Texas, U.S.A.

3Harbert College of Business, Department of Management, Auburn University,

Auburn, Alabama, U.S.A.

The informal economy consists of business activities that occur outside of formal institutional

boundaries but within the boundaries of informal institutions. A large gap exists between the

significant importance of the informal economy to commerce around the world and the small

amount of informal economy research with which entrepreneurship and strategic management

scholars have been involved. As a step toward filling this gap, this special issue includes four

articles with the potential to significantly advance our understanding of business activities

within the informal economy. In introducingthese four articles, we discuss the myriad activities

that fall within the boundaries of the informal economy and distinguish between the institu-

tional foundations of informality in developed versus developing economies. The articles

included within the special issue each offer a unique understanding of how entrepreneurs are

influenced by and manage their institutional contexts in various informal economy settings,

providing contributions that should give rise to a series of promising futureresearch questions.

Copyright © 2014 Strategic Management Society.

INTRODUCTION

Society establishes rules and structure that influence

how entrepreneurs complete transactions for the

purpose of operating their ventures (North, 1990).

However, with the objective of achieving competi-

tive success, entrepreneurs often break the rules and

redefine existing frameworks of understanding.

More specifically, entrepreneurs deviate from exist-

ing product offerings and depart from societal norms

and beliefs. Such departures are a means to create

value in society and to bring forth ideas previously

unimagined, but at times, entrepreneurs operate out-

side of society’s laws and regulations when doing so

(Webb et al., 2009). When breaking rules, entrepre-

neurs also construct new rules by delivering new

products, establishing more efficient and effective

processes, innovating in ways that lead to the devel-

opment of new markets, and shaping new norms

and beliefs (Chiasson and Saunders, 2005). At the

same time, because they break then-established

rules, entrepreneurs create outcomes that vary in the

extent to which they are productive, unproductive,or

destructive to society (Baumol, 1990).

This depiction of entrepreneurship has provided a

strong foundation for research for examining the

interactions of entrepreneurs and their contexts. To

some degree, though, this extant understanding pro-

vides a simplified view of society and how entre-

preneurs act within it. This is because societies are

Keywords: informal economy; special issue; institutional

theory; developed economy; developing economy

*Correspondence to: Justin W. Webb, Spears School of Busi-

ness, Department of Entrepreneurship, Oklahoma State Univer-

sity, 104 C. Business Bldg., Stillwater, OK 74078, U.S.A.

E-mail: justin.w.webb@okstate.edu

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Strategic Entrepreneurship Journal

Strat. Entrepreneurship J., 8: 1–15 (2014)

Published online in Wiley Online Library (wileyonlinelibrary.com). DOI: 10.1002/sej.1176

Copyright © 2014 Strategic Management Society