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Emergence of Informal Sector Firms in International Business

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  • Rao Indu

Abstract

This paper highlights the emergence of Informal Sector Firms (ISFs) in international business. Due to increasing size and significance of the informal economy in the global context (particularly emerging markets), we attempt to understand the characteristics and relevance of the ISFs. The globally distributed diamond industry thrives in the atmosphere of secrecy and informality that envelops the diamond trade and has for long been labeled as an unorganized sector of the world economy. However, it resembles a close-knit community, composed of thousands of informal sector firms (ISFs) which exports cut and polished diamonds worth USD 20 billion annually while the collective output of ISFs in an emerging economy (India) enjoys a 95 percent market share of net global exports. It is suggested that due to lack of formal systems, ISFs may be largely influenced by their societal cultures which in turn plays a role in the internationalization of ISFs.

Suggested Citation

  • Rao Indu, 2011. "Emergence of Informal Sector Firms in International Business," IIMA Working Papers WP2011-02-01, Indian Institute of Management Ahmedabad, Research and Publication Department.
    • Handle: RePEc:iim:iimawp:9946
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    References listed on IDEAS

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    2. Jan Johanson & Jan-Erik Vahlne, 2009. "The Uppsala internationalization process model revisited: From liability of foreignness to liability of outsidership," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 40(9), pages 1411-1431, December.
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    4. Simon Johnson & Daniel Kaufman & Andrei Shleifer, 1997. "The Unofficial Economy in Transition," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(2), pages 159-240.
    5. Sethuraman, S. V.,, 1976. "Urban informal sector : concept, measurement and policy," ILO Working Papers 991667413402676, International Labour Organization.
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    Cited by:

    1. Rao Indu, 2015. "When Culture Governs Business Practice…. A Look at Indian Diamond Cutting and Polishing Industry," IIMA Working Papers WP2015-09-02, Indian Institute of Management Ahmedabad, Research and Publication Department.

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