ENTRY INTO AND EXIT FROM INFORMAL MICROENTERPRISE ENTREPRENEURSHIP IN A SOUTH AFRICAN MUNICIPALITY: A TALE OF RESILIENCE

Darma Mahadea and Samukelisiwe Khumalo
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Darma Mahadea: School of Economics and Finance, University of Kwazulu-Natal, Pietermaritzburg Campus, South Africa
Samukelisiwe Khumalo: School of Economics and Finance, University of Kwazulu-Natal, Pietermaritzburg Campus, South Africa

Journal of Developmental Entrepreneurship (JDE), 2020, vol. 25, issue 03, 1-23

Abstract: Although research on entrepreneurship in the micro and small firms has been the subject of much scholarly attention, it has been mostly on the formal rather than informal economy. Drawing on the push and pull theory, this paper uses Principal Component Analysis to examine the motivations influencing entrepreneurs to venture into informal sector entrepreneurship in a specific South African municipal context. Against a background of addressing their constraints to growth, the prospects of formalization were considered, using logistic regression. The results, based on a sample of 160 entrepreneurs, show that even in the informal economy, pull factors are the uppermost motivations, apparently stronger than push factors, in influencing individuals to partake in microenterprise entrepreneurship. The logistic results indicate that even when some internal and external growth constraints are addressed, the likelihood of the entrepreneurs’ formalizing their business is not encouraging. Although alleviation of the growth hurdles may assist in enhancing entrepreneurial competence, it does not necessarily favor formalization, but enables a lock-in contentment effect to the informal sector. Against this inertia, implications for policy makers are presented.

Keywords: Entrepreneurship; informal sector; constraints; regulations; formalization (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1142/S108494672050020X

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