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Why do informal service enterprises remain informal? A RIDIT approach

Why do informal service enterprises remain informal? A RIDIT approach The purpose of this paper is to identify reasons as to why firms operate informally, and to explore the rationalisation of not moving towards formalisation.Design/methodology/approachBuilding on empirical data collected through interviews with the entrepreneurs of the informal service enterprises of Delhi and peripheral areas, this paper presents the results of the survey conducted in 2017. By using the analytical tool developed by I. Bross, the authors have identified the most significant contributing factors to informality.FindingsIn the research, the authors establish that competition and lack of awareness are the most dominant reasons due to which informal firms are hesitant in moving towards formalisation. For successful transition towards formalisation, a “new pact” between the workers, enterprises and governments needs to be developed, based on capacity building, productivity gains, enabling business environment, empowerment and entitlements to social and economic rights.Research limitations/implicationsThe research is limited only to informal service enterprises located in Delhi, the national capital of India, and the peripheral areas.Practical implicationsBy identifying the most dominant factors, focussed steps can be taken to reduce the size of the informal sector.Originality/valueThe informal service enterprises are not a widely explored community by researchers and policy makers. This sector can employ more people with less investment, and hence requires intensive study. The use of RIDIT approach to rank the identified factors due to which the firms do not move towards formalisation is the novelty of this work. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Small Business and Enterprise Development Emerald Publishing

Why do informal service enterprises remain informal? A RIDIT approach

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References (64)

Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
1462-6004
DOI
10.1108/jsbed-01-2018-0009
Publisher site
See Article on Publisher Site

Abstract

The purpose of this paper is to identify reasons as to why firms operate informally, and to explore the rationalisation of not moving towards formalisation.Design/methodology/approachBuilding on empirical data collected through interviews with the entrepreneurs of the informal service enterprises of Delhi and peripheral areas, this paper presents the results of the survey conducted in 2017. By using the analytical tool developed by I. Bross, the authors have identified the most significant contributing factors to informality.FindingsIn the research, the authors establish that competition and lack of awareness are the most dominant reasons due to which informal firms are hesitant in moving towards formalisation. For successful transition towards formalisation, a “new pact” between the workers, enterprises and governments needs to be developed, based on capacity building, productivity gains, enabling business environment, empowerment and entitlements to social and economic rights.Research limitations/implicationsThe research is limited only to informal service enterprises located in Delhi, the national capital of India, and the peripheral areas.Practical implicationsBy identifying the most dominant factors, focussed steps can be taken to reduce the size of the informal sector.Originality/valueThe informal service enterprises are not a widely explored community by researchers and policy makers. This sector can employ more people with less investment, and hence requires intensive study. The use of RIDIT approach to rank the identified factors due to which the firms do not move towards formalisation is the novelty of this work.

Journal

Journal of Small Business and Enterprise DevelopmentEmerald Publishing

Published: May 20, 2019

Keywords: India; Informal economy; Formalization; Service enterprise

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