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Understanding how legitimacy is acquired among informal home-based Pakistani small businesses

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Abstract

The informal business sector has been garnering attention from governments and researchers. In countries where this sector plays a significant role in business activity and employment, policymakers are eager to have entrepreneurs enter or transition to the formal economy. However, with research in its infancy, there is little basis for developing effective policy. In Pakistan, there is a preponderance of informal enterprises, many of which are home-based and invisible. A key challenge for entrepreneurs in this context is gaining stakeholder legitimacy to acquire the resources they need. With the aim of ascertaining and better understanding legitimacy, this qualitative study draws upon the two dominant theoretical perspectives -institutional and strategic - to conceptually guide an exploration of the legitimation process among a cohort of Pakistani informal home-based businesses. Using the institutional lens, the primary influences on action were found to be coercive and mimetic isomorphic mechanisms. For example, the entrepreneurs stressed how essential it was to their customers that societal norms be adhered to when doing business (coercive mechanism). A surprising discovery was that the entrepreneurs deemed action countering prevailing business practice to be the best response to uncertainty (coined anti-mimetic isomorphism). Using the strategic lens, two main strategies were identified – following cultural norms such as those regarding appropriate behavior for women (conforming); and attempting to create new audiences and legitimating beliefs through business activities that advanced women’s rights (manipulating). The interactive influence of pressures from the environment and entrepreneurial action is considered, along with implications for theory and policy.

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Notes

  1. In Pakistan, a business is considered unregistered if it is not registered with the tax authorities for tax purposes (Williams et al. 2016).

  2. Entrepreneurship is defined as the process of creating something new with value by devoting the necessary time and effort, assuming the accompanying financial, psychic, and social risks, and receiving the resulting rewards of monetary and personal satisfaction and independence (Qureshi and Mian 2012).

  3. Here a process definition of social enterprise is used, whereby it involves identifying an opportunity to improve social well-being, then acquiring and employing the resources required to do so (Diochon and Anderson 2009) It should be noted that the terms “social enterprise” and “social entrepreneurship” are used interchangeably.

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Authors and Affiliations

  1. Schwartz School of Business, St. Francis Xavier University, Antigonish, NS, Canada

    Monica Lent

  2. Lancaster University Management School, Bailrigg, Lancaster, LA1 4YX, UK

    Alistair Anderson

  3. Institute of Management Sciences (IMSciences), 1-A, E-5, Phase VII, Hayatabad, Peshawar, Pakistan

    Mohammad Sohail Yunis

  4. Department of Economics, Swedish University of Agricultural Sciences, Arrheniusplan 4, 75651, Uppsala, Uppland, Sweden

    Hina Hashim

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  1. Monica Lent
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  2. Alistair Anderson
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  4. Hina Hashim
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Correspondence to Monica Lent.

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Lent, M., Anderson, A., Yunis, M.S. et al. Understanding how legitimacy is acquired among informal home-based Pakistani small businesses. Int Entrep Manag J 15, 341–361 (2019). https://doi.org/10.1007/s11365-019-00568-7

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