The double-edged sword of legitimacy in base-of-the-pyramid markets |
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| Institution: | 1. York University, Schulich School of Business, Department of Entrepreneurship, Toronto, ON M3J 1P3, Canada;2. Oklahoma State University, Spears School of Business, Department of Entrepreneurship, Stillwater, OK 74078, USA;3. Miami University, Farmer School of Business, Department of Entrepreneurship, Oxford, OH 45056, USA;4. The Ohio State University, Fisher College of Business, Department of Management & Human Resources, Columbus, OH 43210, USA;1. Department of Management Programs, Florida Atlantic University, 313 Fleming Hall, 777 Glades Rd., Boca Raton, FL 33431, USA;2. IZA, Bonn, Germany;3. Department of Economics, Boston College, 140 Commonwealth Ave, Chestnut Hill, MA 02467-3806, USA;1. Management Studies, Wageningen University, Hollandseweg 1, 6706 KN, De Leeuwenborch (Building 201), Room 5063, Wageningen, Netherlands;2. Department of Agricultural and Applied Economics, University of Missouri, 125 A, Mumford Hall, Columbia, MO 65211, USA;3. New Analytics LLC and Hutton School of Business, University of the Cumberlands, Williamsburg, KY 40769, USA;1. Innovation and Entrepreneurship Group, D''Amore-McKim School of Business, Northeastern University, 218A Hayden Hall, Boston, MA 02115, USA;2. D''Amore-McKim School of Business, Northeastern University, 209 Hayden Hall, Boston, MA 02115, USA;3. Innovation and Entrepreneurship Group, D''Amore-McKim School of Business, Northeastern University, 212 Hayden Hall, Boston, MA 02115, USA;4. Schulze School of Entrepreneurship, Opus College of Business, University of St. Thomas, 1000 Lasalle Ave., Minneapolis, MN, USA;1. Department of Management and Marketing, Faculty of Business, Hong Kong Polytechnic University, Hung Hom, Kowloon, Hong Kong;2. Institute of Management, Faculty of Economics, University of Lugano, Lugano, Switzerland;3. EM Lyon, Ecully, France;1. Department of Management, Hankamer School of Business, Baylor University, United States;2. Department of Management and Entrepreneurship, Kelley School of Business, Indiana University, United States;3. Initiative for Studies in Transformational Entrepreneurship, Wisconsin School of Business, University of Wisconsin, United States |
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| Abstract: | As compared to developed countries, a much higher proportion of entrepreneurs within base-of-the-pyramid (BOP) markets operate unregistered businesses. Prior research has suggested that the primary cause of such informal activity in these settings is the general failure of ‘weak’ institutions to provide sufficient resources to warrant formalization. We attempt to extend such thinking by deconstructing the discrete and inter-related effects of formal business registration on the level of resources obtained by entrepreneurs from financial, labor, and legal institutions within BOP markets. Using a multi-method approach involving 299 entrepreneurs within Guatemala City, our results suggest that being seen as a ‘legitimate’, registered business can actually lead to both increased resource provision and resource appropriation. More specifically, adhering to the norms and rules prescribed by regulatory institutions within weak legal environments can convey positive signals of stability and profitability that both attract the desired attention from formal institutional actors, as well as unwanted attention from criminals. |
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