Women entrepreneurs in the informal economy: Is formalization the only solution for business sustainability?
Shyama V. Ramani, Ajay Thutupalli, Tamas Medovarszki, Sutapa Chattopadhyay & Veena Ravichandran
#2013-018
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.
Keywords: Informal economy, entrepreneurship, gender, business
sustainability
JEL classification: L26, B54, E26