International Business Strategy by S. Raghunath & Elizabeth L. Rose

Author:S. Raghunath & Elizabeth L. Rose
Language: eng
Format: epub
Publisher: Palgrave Macmillan UK, London

State of Country’s Economic Development

A state’s economic development affects the employment opportunities available for labor to participate in, and it is shaped further by the strength of its institutions. One of the critical determinants of entrepreneurial activities is the availability of funds and labor. With underdeveloped or inefficient intermediaries in the underdeveloped economies, formal entrepreneurial activities are rendered costly (Krishnan, 2010). Hence, entrepreneurs in underdeveloped or developing economies resort to informal means of gathering funds, labor, and market access (Maloney, 2004).

In a study of entrepreneurial activities in Russia, Ukraine, and England, Williams (2008) identified that in these three countries, 100 percent, 90 percent, and 77 percent of entrepreneurs operate in informal economies, respectively. Interestingly, even in developed countries, such as England, one in five entrepreneurs operates on an entirely informal basis, with other entrepreneurs having varying levels of regulatory control. The study also shows that a significant portion of informal entrepreneurs is clustered around the lowest and the highest income quartiles, contrary to the view that informal economy mostly engages people from lower income groups.

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