Entrepreneurial Political Activity in the Informal Economy

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Author Information : Arielle Badger Newman,Assistant Professor of Entrepreneurship, Whitman School, Syracuse University
Jay Barney, Presidential Professor of Strategic Management and the Pierre Lassonde Chair of Social Entrepreneurship, David Eccles School of Business, University of Utah

Year of Publication : Entrepreneurship Theory and Practice, 2023

Summary of Findings : This paper develops a new concept, entrepreneurial political activity based on corporate political activity to understand when an entrepreneur, representing both the firm and the individual simultaneously, will engage in political activity by using the case study of informal petty traders in Kumasi, Ghana.

Research Questions : When do entrepreneurs, individuals representing themselves and simultaneously their firm, attempt to to influence government policies in a way that improves the context within which she operates?

What we know : Entrepreneurial political action expands current theory on corporate political action theory, originally developed in relatively mature economic and political systems to understand when an entrepreneur, representing both the firm and the individual simultaneously, will engage in political activity. The current literature posits that firms engage in political activities when issues are salient to the firm’s objectives, and that this action is (1) dependent upon the degree of issue saliency, (2) resource availability of the firms, and (3) managerial capabilities to engage in such action and is based on firms operating in Western Developed Concepts. We explore EPA in the extreme context of the informal economy in a developing country, Ghana. Within the informal economy, the entrepreneur and the firm are generally conflated due to the small size of the firm, making it an ideal setting to begin theorizing on the novel concept of entrepreneurial political activity.

Novel Findings : This one of the first studies of political action of informal entrepreneurs in a developing context, Kumasi, Ghana. Despite very real risks, informal entrepreneurs in Kumasi did challenge the government by engaging in political action. Those who had trust in the leadership of the organization, and those who were growth oriented and/or dependent on the venture for household survival engaged in political activity. This unique case led to the creation of a new concept: entrepreneurial political activity and with it, new grounded theory on entrepreneurial political activity for informal entrepreneurs.

Implications for Policy: This new concept allows for the understanding the complexity within the informal sector regarding state leniency for extra-legal behavior, as well as the bind of social reputation in this space. These findings can help bring more nuanced understanding to participants in the informal economy worldwide, and their role in society.

Implications for Society: This new concept allows for the understanding the complexity within the informal sector regarding state leniency for extra-legal behavior, as well as the bind of social reputation in this space. These findings can help bring more nuanced understanding to participants in the informal economy worldwide, and their role in society.

Implications on Research: Further research into the role of reputation and social stratification on engaging in entrepreneurial political activity is needed. Additionally, we call for continued focus on the context of entrepreneurs in examining their decision-making and behaviors.

Full Citations : Newman, A. and Barney, J., Entrepreneurial Political Activity in the Informal Economy. Entrepreneurship Theory and Practice, Forthcoming.

Abstract : This paper develops a new concept, entrepreneurial political activity based on corporate political activity to understand when an entrepreneur, representing both the firm and the individual simultaneously, will engage in political activity. The case of Petty Traders in Kumasi, Ghana generates grounded theory of entrepreneurial political activity. Faced with an existential threat, informal entrepreneurs had to decide whether to try to influence government policy by engaging in political activity. Findings from over 200 interviews demonstrated entrepreneurs carefully considered the state’s willingness to allow for the extra-legal economic activity in the informal economy to continue, and if they had trust in the leadership of the collective action before engaging in political action. Policy saliency motivating action was determined by growth orientation and dependency on the venture for household survival, both driven by the entrepreneur’s social role in the social system.

Arielle Newman
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