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Women entrepreneurs in the informal economy: Is formalization the only solution for business sustainability?

Author

Listed:
  • Ramani, Shyama V.

    (Brunel University, UNU-MERIT, and STI4Change)

  • Thutupalli, Ajay

    (UNU-MERIT)

  • Medovarski, Tamas

    (STI4Change)

  • Chattopadhyay, Sutapa

    (UNU-MERIT)

  • Ravichandran, Veena

    (IDRC)

Abstract

The existing marketing, strategy and economics literature have little to offer by way of recommendations to promote entrepreneurship in the informal economy, except to advocate that multinationals, local firms, state and public agencies should work together to bring the informal economy into the fold of the formal economy. In contrast, this paper argues that the business sustainability of women entrepreneurs in the informal economy depends upon their engagements or business partnerships with other women (and men) and women-focussed intermediaries. More than formalization, women entrepreneurs need 'spaces' for dialogue with other women (and men) to learn and build business capabilities. Both the State and firms wanting to penetrate the informal economy can create such spaces through partnerships with NGOs and women-focussed organizations. While formalization of entrepreneurial activity is favourable under some circumstances, it can be detrimental under others - necessitating a case by case evaluation rather than a general rule. In order to ensure the business sustainability of women's ventures in the informal economy, any sort of formalization must occur through a gradual process accompanied by intermediaries. These results are formulated through the compilation and analysis of the existing literature and the study of six detailed case studies of women entrepreneurs from developing countries validated by extensive interviews. The results are then used to propose a closed model of linkages between formal and informal economies which has novel organizational implications for firms competing to establish consumer bases and business partnerships in the Base of Pyramid (BoP) markets of developing countries.

Suggested Citation

  • Ramani, Shyama V. & Thutupalli, Ajay & Medovarski, Tamas & Chattopadhyay, Sutapa & Ravichandran, Veena, 2013. "Women entrepreneurs in the informal economy: Is formalization the only solution for business sustainability?," MERIT Working Papers 2013-018, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
  • Handle: RePEc:unm:unumer:2013018
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    File URL: https://www.merit.unu.edu/publications/wppdf/2013/wp2013-018.pdf
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    References listed on IDEAS

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    Cited by:

    1. , Aisdl, 2020. "Sustainability model of Vietnamese women entrepreneurship," OSF Preprints kjmdr, Center for Open Science.
    2. A. J. Knox & H. Bressers & N. Mohlakoana & J. Groot, 2019. "Aspirations to grow: when micro- and informal enterprises in the street food sector speak for themselves," Journal of Global Entrepreneurship Research, Springer;UNESCO Chair in Entrepreneurship, vol. 9(1), pages 1-24, December.
    3. Shova Thapa Karki & Mirela Xheneti & Adrian Madden, 2021. "To Formalize or Not to Formalize: Women Entrepreneurs’ Sensemaking of Business Registration in the Context of Nepal," Journal of Business Ethics, Springer, vol. 173(4), pages 687-708, November.

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    More about this item

    Keywords

    Informal economy; entrepreneurship; gender; business sustainability;
    All these keywords.

    JEL classification:

    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • B54 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Feminist Economics
    • E26 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy

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