Date of Award
Doctor of Philosophy
Dr. James Butterfield
Dr. Priscilla Lambert
This research explains the factors behind the variation of enterprise creation across countries by looking at the roles of formal and informal institutions and their interactions in the distribution of start-up enterprises in the formal and informal sectors. It tests two competing hypotheses about the individual versus mixed effects of formal institutions (measured by entry regulations) and informal institutions (measured by social capital) on entrepreneurship. The research uses quantitative analysis of data from 48 countries and a qualitative case study of Madagascar.
The findings from the quantitative and qualitative analyses are consistent regarding the independent effects of each set of institutions in the distribution of entrepreneurship in both sectors while controlling for political and economic variables (level of economic development, political stability, and control of corruption). They confirm the hypothesis that the formal institution is inversely related to formal entrepreneurship and the informal institution is positively related to informal entrepreneurship. The findings from the two studies disagree on the role of institutional interaction on entrepreneurship. The quantitative analysis did not find any relationship, whereas the case study finds that the interaction of entry regulations and the informal institutions of fihavanana (Malagasy social capital), tsiny (reproach), and tody (retribution) determines the distribution of entrepreneurship in the formal and informal market. The interaction occurs in the bureaucratic arena, which handles business entry procedures, and is driven by the imbalance between the strength of the two institutions.
The findings from the research help us understand in a better way the mechanism that explains the distribution of entrepreneurship in the formal and informal sector in Africa and especially the predominance of informal sector in the region. They also provide new insights about the ways to handle and promote institutional reforms when formal and informal institutions diverge.
Raveloharimisy, Joël Luc, "Becoming Formal or Informal Entrepreneurs: How Institutions Matter" (2011). Dissertations. 454.