Three studies on institutional entrepreneurship in the informal economy: a grounded theory approach
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The informal economy represents a large segment of the economic activities in emerging economies but still remains a puzzling phenomenon. In particular, research emphasising the organising processes of firms within the informal economy is scant. Weak formal institutions, conflicting institutional centres and large levels of economic inequality contribute to the development of informal entrepreneurship in emerging economies. Yet, an understanding of the links between institutional incongruence and economic exclusion as facilitating mechanisms of informal entrepreneurship remains limited. Furthermore, it is unknown how hybrid organisations, combining institutional logics, emerge and function within the informal economy. Despite a large number of empirical and theoretical studies, there is a lack of understanding about the interplay between the institutional dynamics and the creation of informal institutions developed by informal entrepreneurs. To enhance the understanding of informal entrepreneurship, this PhD thesis explores how institutional entrepreneurs embedded in the informal economy respond to economic inequality. This grounded theory study, based on interviews and participant observations conducted at La Salada, South America’s largest black market, conceptualises how institutional entrepreneurs exploit the illegitimacy of formal labour institutions to generate institutional change. This qualitative study has followed a constructivist grounded theory design based on simultaneous data collection and analysis and making systematic comparisons throughout inquiry. In line with grounded theory guidelines, the researcher identified emerging first-order categories and looked-for relations between them, in order to move to a higher level of theoretical abstraction with the aim of generating new theory. The researcher conducted 75 in-depth interviews and semi-structured interviews, non-participant observation, and made use of archival documents. The thesis is organised as three empirical studies which can be read independently, but together constitute an in-depth study of institutional entrepreneurship in the informal economy. The thesis’s theoretical contributions to the field are as follows. The first study reveals the conditions that generated institutional change in the apparel value chain in response to prevailing conditions that were leading to increasing economic inequality. It presents a model that focuses on three social mechanisms which allow institutional entrepreneurs to build new institutions that were inclusive for large segments of society excluded by the formal sector. The second study explores the emergence of new forms of hybrid organisation in the informal economy. Particularly, it focuses on how informal entrepreneurs organisationally respond to institutional complexity by identifying two types of logic - community and market - and a meta-mechanism that facilitates the interaction between the two logics, named normalisation of deviant organisational practices. The study highlights the two key generative mechanisms of the logics at play and suggests that actors embedded in the informal economy are able to dynamically adapt to two types of logic. It also emphasises how informal entrepreneurs exploit institutional arbitrage, which refers to the circumstances where entrepreneurs are provided with opportunities to exploit differences between two dimensions of the institutional environment, formality and informality. The third study explores how various types of actors and organisations such as social movements or hybrid organisations are able to develop alternative institutional arrangements to overcome the liabilities of emerging economies’ institutions in an informal context. The study reveals that informal entrepreneurs entering a polycentric system are able to establish norms and rules of interaction, to exploit brokerage opportunities and multivocality between contradictory networks, and through robust action, generate proto-institutional outcomes. Collectively, these three essays reveal novel knowledge about the organisational mechanisms behind informal economic activities, constituting a theoretical bridge between the fields of institutional theory, inequality and governance and providing fundamental insights for the development of new management theories.