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Informal Investment in Transition Economies: Individual Characteristics and Clusters

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Abstract

This paper investigates the factors driving informal investment in Croatia, Hungary and Slovenia. Using Global Entrepreneurship Monitor (GEM) data, we find that the low rates of informal investment activity and the small amounts of investments in these countries are driven by entrepreneurial behaviors consistent with limited market economy experience. We extend prior studies by investigating the role of business ownership, and identify significant differences between individuals with and without business ownership experience in terms of having start-up skills, knowing an entrepreneur and fearing failure. Cluster analysis identifies seven distinct groups of informal investors, and reveals the heterogeneity in terms of investors’ age, gender, level of education, amount of investment, start-up skills, ownership status, income, opportunity perception and country of residence.

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Acknowledgements

We would like to thank to Gavin Reid, David Storey and other participants at the Second GEM Research Conference for helpful comments. László Szerb acknowledges the financial support of the Bolyai János Research Foundation.

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Authors and Affiliations

  1. University of Pécs, Rákóczi 80, Pécs, H-7622, Hungary

    László Szerb, Gábor Rappai & Zsolt Makra

  2. Brisbane Graduate School of Business, Queensland University of Technology, 2 George St., Brisbane, 4001, Australia

    Siri Terjesen

  3. Max Planck Institute of Economics, Jena, Germany

    László Szerb, Gábor Rappai, Zsolt Makra & Siri Terjesen

  4. Texas Christian University, Fort Worth, Texas, USA

    Siri Terjesen

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  1. László Szerb
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  2. Gábor Rappai
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  3. Zsolt Makra
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  4. Siri Terjesen
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Correspondence to László Szerb.

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Szerb, L., Rappai, G., Makra, Z. et al. Informal Investment in Transition Economies: Individual Characteristics and Clusters. Small Bus Econ 28, 257–271 (2007). https://doi.org/10.1007/s11187-006-9019-9

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