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Do small business start-ups test-trade in the informal economy? Evidence from a UK survey

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  • Colin C. Williams
  • Alvaro Martinez

Abstract

The aim is to evaluate critically whether small businesses start-up in the informal economy and whether they do so to test-trade the viability of their businesses. Reporting a 2012 survey of 595 small business owners in the UK, 20% report trading informally when starting their business, 64% of whom asserted a main reason was to test its viability. Some 13% of all small businesses therefore start-up test-trading in the informal economy, although multivariate analysis shows that businesses started by men, with low current annual turnovers in particular sectors are significantly more likely to do so. Regional variations are not significant. The outcome is a call for not only similar studies in other countries to determine the proportion of enterprises that start up test-trading in the informal economy but also a discussion of the policy implications of this finding.

Suggested Citation

  • Colin C. Williams & Alvaro Martinez, 2014. "Do small business start-ups test-trade in the informal economy? Evidence from a UK survey," International Journal of Entrepreneurship and Small Business, Inderscience Enterprises Ltd, vol. 22(1), pages 1-16.
    • Handle: RePEc:ids:ijesbu:v:22:y:2014:i:1:p:1-16
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    Cited by:

    1. Cavotta, Valeria & Dalpiaz, Elena, 2022. "Good apples in spoiled barrels: A temporal model of firm formalization in a field characterized by widespread informality," Journal of Business Venturing, Elsevier, vol. 37(2).
    2. Abate Andre Modeste & Fouda Ongodo Maurice & Pene Zongabiro Nina Pelagie, 2017. "The Strategies of Staging the Choices of Degrees of Formalization of Business Activities in Cameroon," Applied Economics and Finance, Redfame publishing, vol. 4(6), pages 53-63, November.

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