IDEAS home Printed from https://ideas.repec.org/a/eee/jbvent/v40y2025i4s0883902625000254.html

Ethnic fractionalization and informal entrepreneurship: An institutional logics perspective

Author

Listed:
  • Mallon, Mark R.
  • Fainshmidt, Stav

Abstract

Research is needed to uncover the sociocultural influences of informal entrepreneurship, or starting a legally unregistered but otherwise legitimate business. Using the institutional logics perspective, we posit that ethnic fractionalization increases the likelihood that entrepreneurs will not register their ventures because it fosters a clan logic and embeddedness in one's ethnic group. Entrepreneurs may not readily access knowledge regarding registration because the ethnic group can provide some of the benefits associated with registration. However, the clan logic is mitigated for entrepreneurs who receive advice from lawyers or businesspeople because these advisors are associated with the state or market logics, respectively, making knowledge of registration more accessible to entrepreneurs. We find support for these arguments using a sample of over 5000 entrepreneurs in 29 countries.

Suggested Citation

  • Mallon, Mark R. & Fainshmidt, Stav, 2025. "Ethnic fractionalization and informal entrepreneurship: An institutional logics perspective," Journal of Business Venturing, Elsevier, vol. 40(4).
    • Handle: RePEc:eee:jbvent:v:40:y:2025:i:4:s0883902625000254
    DOI: 10.1016/j.jbusvent.2025.106497
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0883902625000254
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jbusvent.2025.106497?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Howard E. Aldrich & Martha Argelia Martinez, 2001. "Many are Called, but Few are Chosen: An Evolutionary Perspective for the Study of Entrepreneurship," Entrepreneurship Theory and Practice, , vol. 25(4), pages 41-56, July.
    2. Sefa Awaworyi Churchill, 2017. "Fractionalization, entrepreneurship, and the institutional environment for entrepreneurship," Small Business Economics, Springer, vol. 48(3), pages 577-597, March.
    3. B. Mathias & Sean Lux & T. Russell Crook & Chad Autry & Russell Zaretzki, 2015. "Competing Against the Unknown: The Impact of Enabling and Constraining Institutions on the Informal Economy," Journal of Business Ethics, Springer, vol. 127(2), pages 251-264, March.
    4. Elizabeth M. Moore & Luis Alfonso Dau & Jonathan Doh, 2020. "Does Monetary Aid Catalyse New Business Creation? Analysing the Impact of Global Aid Flows on Formal and Informal Entrepreneurship," Journal of Management Studies, Wiley Blackwell, vol. 57(3), pages 438-469, May.
    5. Esther Salvi & Frank-Martin Belz & Sophie Bacq, 2023. "Informal Entrepreneurship: An Integrative Review and Future Research Agenda," Entrepreneurship Theory and Practice, , vol. 47(2), pages 265-303, March.
    6. Boudreaux, Christopher J. & Nikolaev, Boris N. & Klein, Peter, 2019. "Socio-cognitive traits and entrepreneurship: The moderating role of economic institutions," Journal of Business Venturing, Elsevier, vol. 34(1), pages 178-196.
    7. Colin C. Williams & Alvaro Martinez–Perez & Abbi M. Kedir, 2017. "Informal Entrepreneurship in Developing Economies: The Impacts of Starting up Unregistered on firm Performance," Entrepreneurship Theory and Practice, , vol. 41(5), pages 773-799, September.
    8. Williams, Colin C. & Shahid, Muhammad S. & Martínez, Alvaro, 2016. "Determinants of the Level of Informality of Informal Micro-Enterprises: Some Evidence from the City of Lahore, Pakistan," World Development, Elsevier, vol. 84(C), pages 312-325.
    9. ., 2024. "Understanding multilevel governance," Chapters, in: Rethinking Multilevel Governance, chapter 2, pages 14-31, Edward Elgar Publishing.
    10. John M Luiz, 2015. "The impact of ethno-linguistic fractionalization on cultural measures: Dynamics, endogeneity and modernization," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 46(9), pages 1080-1098, December.
    11. Kistruck, Geoffrey M. & Webb, Justin W. & Sutter, Christopher J. & Bailey, Anastasia V.G., 2015. "The double-edged sword of legitimacy in base-of-the-pyramid markets," Journal of Business Venturing, Elsevier, vol. 30(3), pages 436-451.
    12. Webb, Justin W. & Bruton, Garry D. & Tihanyi, Laszlo & Ireland, R. Duane, 2013. "Research on entrepreneurship in the informal economy: Framing a research agenda," Journal of Business Venturing, Elsevier, vol. 28(5), pages 598-614.
    13. Hudson, Valerie M. & Bowen, Donna Lee & Nielsen, Perpetua Lynne, 2015. "Clan Governance and State Stability: The Relationship between Female Subordination and Political Order," American Political Science Review, Cambridge University Press, vol. 109(3), pages 535-555, August.
    14. Colin C. Williams & Sara Nadin, 2010. "Entrepreneurship And The Informal Economy: An Overview," Journal of Developmental Entrepreneurship (JDE), World Scientific Publishing Co. Pte. Ltd., vol. 15(04), pages 361-378.
    15. Marcum, Tanya M. & Blair, Eden S., 2011. "Entrepreneurial decisions and legal issues in early venture stages: Advice that shouldn’t be ignored," Business Horizons, Elsevier, vol. 54(2), pages 143-152.
    16. Johannisson, Bengt, 1988. "Business formation -- a network approach," Scandinavian Journal of Management, Elsevier, vol. 4(3-4), pages 83-99.
    17. Duanmu, Jing-Lin & Guney, Yilmaz, 2013. "Heterogeneous effect of ethnic networks on international trade of Thailand: The role of family ties and ethnic diversity," International Business Review, Elsevier, vol. 22(1), pages 126-139.
    18. Justin W. Webb & Theodore A. Khoury & Michael A. Hitt, 2020. "The Influence of Formal and Informal Institutional Voids on Entrepreneurship," Entrepreneurship Theory and Practice, , vol. 44(3), pages 504-526, May.
    19. Mallon, Mark R. & Guldiken, Orhun & Benischke, Mirko H. & Dong, Feng & Nguyen, Trung, 2022. "Is there an advantage of emergingness? A politico-regulatory perspective," International Business Review, Elsevier, vol. 31(2).
    20. Ilhan-Nas, Tulay & Sahin, Kader & Cilingir, Zuhal, 2011. "International ethnic entrepreneurship: Antecedents, outcomes and environmental context," International Business Review, Elsevier, vol. 20(6), pages 614-626.
    21. Lassen, David Dreyer, 2007. "Ethnic divisions, trust, and the size of the informal sector," Journal of Economic Behavior & Organization, Elsevier, vol. 63(3), pages 423-438, July.
    22. Babbitt, Laura G. & Brown, Drusilla & Mazaheri, Nimah, 2015. "Gender, Entrepreneurship, and the Formal–Informal Dilemma: Evidence from Indonesia," World Development, Elsevier, vol. 72(C), pages 163-174.
    23. Durand , Rodolphe & Szostak , Bérangère & Jourdan , Julien & Thornton , Patricia, 2013. "Institutional Logics as Strategic Resources," HEC Research Papers Series 1004, HEC Paris.
    24. Stelios Michalopoulos, 2012. "The Origins of Ethnolinguistic Diversity," American Economic Review, American Economic Association, vol. 102(4), pages 1508-1539, June.
    25. Marcum, Tanya M. & Blair, Eden S., 2011. "Entrepreneurial decisions and legal issues in early venture stages: Advice that shouldn't be ignored," Business Horizons, Elsevier, vol. 54(2), pages 143-152, March.
    26. Sorin M. S. Krammer & Addisu A. Lashitew & Jonathan P. Doh & Hari Bapuji, 2023. "Correction: Income inequality, social cohesion, and crime against businesses: Evidence from a global sample of firms," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 54(2), pages 401-401, March.
    27. Arent Greve & Janet W. Salaff, 2003. "Social Networks and Entrepreneurship," Entrepreneurship Theory and Practice, , vol. 28(1), pages 1-22, January.
    28. Joseph J. Capuno, 2019. "What drive the local incidence of crime, shadow economy and resource-related conflicts in Mindanao, Philippines? Evidence of spillover effects," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 24(1), pages 42-65, January.
    29. Luis Alfonso Dau & Aya S. Chacar & Marjorie A. Lyles & Jiatao Li, 2022. "Informal institutions and international business: Toward an integrative research agenda," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 53(6), pages 985-1010, August.
    30. Rachana Desai & Ansuyah Magan & Robert A.C. Ruiter & Priscilla S. Reddy & Liesbeth A.G. Mercken, 2024. "Understanding Why Youth Drop Out of School in South Africa," SAGE Open, , vol. 14(1), pages 21582440231, January.
    31. Lee A. Swanson & Vincent Bruni-Bossio, 2019. "A Righteous Undocumented Economy," Journal of Business Ethics, Springer, vol. 160(1), pages 225-237, November.
    32. Thai, Mai Thi Thanh & Turkina, Ekaterina, 2014. "Macro-level determinants of formal entrepreneurship versus informal entrepreneurship," Journal of Business Venturing, Elsevier, vol. 29(4), pages 490-510.
    33. Ali Ismaeel & Amos P. K. Tai & Erone Ghizoni Santos & Heveakore Maraia & Iris Aalto & Jan Altman & Jiří Doležal & Jonas J. Lembrechts & José Luís Camargo & Juha Aalto & Kateřina Sam & Lair Cristina Av, 2024. "Patterns of tropical forest understory temperatures," Nature Communications, Nature, vol. 15(1), pages 1-10, December.
    34. Erkko Autio & Kun Fu, 2015. "Economic and political institutions and entry into formal and informal entrepreneurship," Asia Pacific Journal of Management, Springer, vol. 32(1), pages 67-94, March.
    35. Jennifer Oetzel & Chang Hoon Oh, 2019. "Melting pot or tribe? Country-level ethnic diversity and its effect on subsidiaries," Journal of International Business Policy, Palgrave Macmillan, vol. 2(1), pages 37-61, March.
    36. Christian Bjørnskov, 2007. "Determinants of generalized trust: A cross-country comparison," Public Choice, Springer, vol. 130(1), pages 1-21, January.
    37. Bennet A. Zelner, 2009. "Using simulation to interpret results from logit, probit, and other nonlinear models," Strategic Management Journal, Wiley Blackwell, vol. 30(12), pages 1335-1348, December.
    38. Sefa Awaworyi Churchill & Michael Danquah, 2022. "Ethnic Diversity and Informal Work in Ghana," Journal of Development Studies, Taylor & Francis Journals, vol. 58(7), pages 1312-1331, July.
    39. Caroline Wigren-Kristoferson & Ethel Brundin & Karin Hellerstedt & Anna Stevenson & Maria Aggestam, 2022. "Rethinking embeddedness: a review and research agenda," Entrepreneurship & Regional Development, Taylor & Francis Journals, vol. 34(1-2), pages 32-56, January.
    40. Terza, Joseph V. & Basu, Anirban & Rathouz, Paul J., 2008. "Two-stage residual inclusion estimation: Addressing endogeneity in health econometric modeling," Journal of Health Economics, Elsevier, vol. 27(3), pages 531-543, May.
    41. Julie M. Hite & William S. Hesterly, 2001. "The evolution of firm networks: from emergence to early growth of the firm," Strategic Management Journal, Wiley Blackwell, vol. 22(3), pages 275-286, March.
    42. Mely Caballero-Anthony & Alistair D. B. Cook, 2024. "Understanding climate security in the Indo-Pacific," Third World Quarterly, Taylor & Francis Journals, vol. 45(14), pages 2039-2046, September.
    43. Sanya Ojo & Sonny Nwankwo & Ayantunji Gbadamosi, 2013. "Ethnic entrepreneurship: the myths of informal and illegal enterprises in the UK," Entrepreneurship & Regional Development, Taylor & Francis Journals, vol. 25(7-8), pages 587-611, September.
    44. Susan L Young & Christopher Welter & Michael Conger, 2018. "Stability vs. flexibility: The effect of regulatory institutions on opportunity type," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 49(4), pages 407-441, May.
    45. Felicitas Hillman, 1999. "A Look at the ‘Hidden Side’: Turkish Women in Berlin’s Ethnic Labour Market," International Journal of Urban and Regional Research, Wiley Blackwell, vol. 23(2), pages 267-282, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Zhu, Jiali & Sun, Shiwei & Li, Peilun & Wang, Yichuan & Mao, Di, 2026. "Gold or gild: Does blockchain attention improve the efficiency of supply chain?," International Journal of Production Economics, Elsevier, vol. 293(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Esther Salvi & Frank-Martin Belz & Sophie Bacq, 2023. "Informal Entrepreneurship: An Integrative Review and Future Research Agenda," Entrepreneurship Theory and Practice, , vol. 47(2), pages 265-303, March.
    2. Wei, Shihao & Boudreaux, Christopher J. & Stenholm, Pekka & Su, Zhongfeng & Zhang, Yiyun, 2025. "Climate risk and informal entrepreneurship in emerging economies: The moderating effects of entrepreneurs’ socio-cognitions," Journal of Business Research, Elsevier, vol. 199(C).
    3. Wei, Shihao & Su, Zhongfeng & Ahlstrom, David & Wu, Zhan, 2023. "State fragility and informal entrepreneurship: The moderating effects of human capital under varying temporal orientations," Journal of International Management, Elsevier, vol. 29(1).
    4. Shihao Wei & Christopher Boudreaux & Zhongfeng Su & Zhan Wu & Pekka Stenholm, 2026. "Deviant response: The effect of income inequality on informal entrepreneurship in emerging economies," Small Business Economics, Springer, vol. 66(4), pages 1673-1695, April.
    5. Colin C. Williams & Abbi M. Kedir, 2017. "Evaluating The Impacts Of Starting Up Unregistered On Firm Performance In Africa," Journal of Developmental Entrepreneurship (JDE), World Scientific Publishing Co. Pte. Ltd., vol. 22(03), pages 1-20, September.
    6. Colin C. Williams, 2023. "A Modern Guide to the Informal Economy," Books, Edward Elgar Publishing, number 18668.
    7. Colin C. Williams & Abbi M. Kedir, 2019. "Explaining cross-country variations in the prevalence of informal sector competitors: lessons from the World Bank Enterprise Survey," International Entrepreneurship and Management Journal, Springer, vol. 15(3), pages 677-696, September.
    8. Eunice Maria M. N. Dos Santos & João J. Ferreira, 2017. "Analyzing Informal Entrepreneurship: A Bibliometric Survey," Journal of Developmental Entrepreneurship (JDE), World Scientific Publishing Co. Pte. Ltd., vol. 22(04), pages 1-20, December.
    9. 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.
    10. Colin C. Williams & Brunilda Kosta, 2019. "Evaluating Institutional Theories Of Informal Sector Entrepreneurship: Some Lessons From Albania," Journal of Developmental Entrepreneurship (JDE), World Scientific Publishing Co. Pte. Ltd., vol. 24(02), pages 1-17, June.
    11. Ute Stephan & Lorraine M. Uhlaner & Christopher Stride, 2026. "Institutions and social entrepreneurship: a hierarchy of institutions to revisit institutional voids, support, and configurations," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 57(1), pages 4-25, February.
    12. Colin C. Williams & Abbi Kedir, 2018. "Explaining Cross-National Variations In The Prevalence Of Informal Sector Entrepreneurship: Lessons From A Survey Of 142 Countries," Journal of Developmental Entrepreneurship (JDE), World Scientific Publishing Co. Pte. Ltd., vol. 23(01), pages 1-22, March.
    13. Colin C. Williams & Abbi M. Kedir, 2017. "Starting-up unregistered and firm performance in Turkey," International Entrepreneurship and Management Journal, Springer, vol. 13(3), pages 797-817, September.
    14. Sana Ullah & Colin C. Williams & Babur Wasim Arif, 2019. "The Impacts Of Informality On Enterprise Innovation, Survival And Performance: Some Evidence From Pakistan," Journal of Developmental Entrepreneurship (JDE), World Scientific Publishing Co. Pte. Ltd., vol. 24(03), pages 1-19, September.
    15. Colin C Williams, 2021. "Tackling Undeclared Self-Employment in South-East Europe: from Deterrents to Preventative Policy Measures," Economic Alternatives, University of National and World Economy, Sofia, Bulgaria, issue 2, pages 280-298, July.
    16. Colin C Williams & Abbi M. Kedir, 2016. "Business Registration And Firm Performance: Some Lessons From India," Journal of Developmental Entrepreneurship (JDE), World Scientific Publishing Co. Pte. Ltd., vol. 21(03), pages 1-19, September.
    17. Colin C. Williams & Alvaro Martinez–Perez & Abbi M. Kedir, 2017. "Informal Entrepreneurship in Developing Economies: The Impacts of Starting up Unregistered on firm Performance," Entrepreneurship Theory and Practice, , vol. 41(5), pages 773-799, September.
    18. Prasetyo, Eko Heru, 2024. "Digital platforms’ strategies in Indonesia: Navigating between technology and informal economy," Technology in Society, Elsevier, vol. 76(C).
    19. Gupta, Hardik & Vadlamudy, Raveendra Saradhi, 2025. "From policy to practice: What drives climate orientation in development finance flows?," Journal of Policy Modeling, Elsevier, vol. 47(6), pages 1344-1371.
    20. Teyi, Shelter Selorm & Larsen, Marcus M. & Namatovu, Rebecca, 2023. "Entrepreneurial identity and response strategies in the informal economy," Journal of Business Research, Elsevier, vol. 165(C).

    More about this item

    Keywords

    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jbvent:v:40:y:2025:i:4:s0883902625000254. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/jbusvent .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.