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A framework for investigating new firm entry: the (limited) overlap between informal-formal and necessity-opportunity entrepreneurship

Author

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  • Estrin, Saul
  • Guerrero, Maribel
  • Mickiewicz, Tomasz

Abstract

We analyse entrepreneurial entry along the dimensions of informal-formal and necessity-opportunity entrepreneurship, distinguishing between them yet considering them jointly. While the dominant view in the literature conflates necessity with informal entry, and opportunity with formal entry, we hypothesise that informal entrepreneurship may be attractive to higher-income individuals as a testing ground for entrepreneurial ideas. We also explain why higher-income individuals may undertake necessity entrepreneurship. We utilise individual Global Entrepreneurship Monitor (GEM) data from Chile (2019-2021), which identifies informal-formal and necessity-opportunity entrepreneurial entry modes, to test hypotheses on the role of individuals´ income in the four types of entrepreneurial entry. We also consider changes in entrepreneurial entry during a crisis and a non-crisis periods. Our results confirm that the patterns in the data are consistent with hypotheses derived from our proposed theoretical framework.

Suggested Citation

  • Estrin, Saul & Guerrero, Maribel & Mickiewicz, Tomasz, 2024. "A framework for investigating new firm entry: the (limited) overlap between informal-formal and necessity-opportunity entrepreneurship," LSE Research Online Documents on Economics 122663, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:122663
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    File URL: http://eprints.lse.ac.uk/122663/
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    More about this item

    Keywords

    informal entrepreneurship; opportunity; necessity; income; crisis; global entrepreneurship; monitor; Chile; Elsevier deal;
    All these keywords.

    JEL classification:

    • J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General

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