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Determinants Of The Level Of Informalization Of Enterprises: Some Evidence From Accra, Ghana

Author

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  • COLIN C. WILLIAMS

    (Sheffield University Management School (SUMS), University of Sheffield, Conduit Road, Sheffield S10 1FL, UK)

  • KWAME ADOM

    (Department of Marketing and Entrepreneurship, Faculty of Business, University of Ghana, Accra, Ghana)

  • IOANA ALEXANDRA HORODNIC

    (Faculty of Economics and Business Administration, Alexandru Ioan Cuza, University of Iasi, Carol I Blvd., No. 11, 700506, Iasi, Romania)

Abstract

Based on the recognition that enterprises operate at different levels of informality, this paper evaluates the determinants of their degree of informalization. To do so, a 2016 survey of the varying degrees of informalization of 171 entrepreneurs in Ghana is reported. The finding is that only 21% of enterprises were wholly informal and 16% wholly formal. Nearly two-thirds (63%) were neither wholly informal nor wholly formal. Higher levels of informalization are significantly associated with younger entrepreneurs, those with lower levels of educational attainment, lower household incomes and younger enterprises. It is also significantly associated with the wider institutional compliance environment. Higher levels of informality are present among entrepreneurs unaware of the need for registration, who lack vertical trust (i.e., do not believe the state does anything for them, and perceive there to be public sector corruption), view informality as normal (i.e., a normal practice in their family) and view all similar businesses as operating informally (i.e., lack horizontal trust). The paper concludes by discussing the theoretical and policy implications.

Suggested Citation

  • Colin C. Williams & Kwame Adom & Ioana Alexandra Horodnic, 2020. "Determinants Of The Level Of Informalization Of Enterprises: Some Evidence From Accra, Ghana," Journal of Developmental Entrepreneurship (JDE), World Scientific Publishing Co. Pte. Ltd., vol. 25(01), pages 1-24, March.
    • Handle: RePEc:wsi:jdexxx:v:25:y:2020:i:01:n:s1084946720500041
    DOI: 10.1142/S1084946720500041
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