Title: Do small business start-ups test-trade in the informal economy? Evidence from a UK survey

Authors: Colin C. Williams; Alvaro Martinez

Addresses: Management School, University of Sheffield, 219 Portobello, Sheffield S1 4DP, UK ' ICOSS, University of Sheffield, 219 Portobello, Sheffield S1 4DP, UK

Abstract: The aim is to evaluate critically whether small businesses start-up in the informal economy and whether they do so to test-trade the viability of their businesses. Reporting a 2012 survey of 595 small business owners in the UK, 20% report trading informally when starting their business, 64% of whom asserted a main reason was to test its viability. Some 13% of all small businesses therefore start-up test-trading in the informal economy, although multivariate analysis shows that businesses started by men, with low current annual turnovers in particular sectors are significantly more likely to do so. Regional variations are not significant. The outcome is a call for not only similar studies in other countries to determine the proportion of enterprises that start up test-trading in the informal economy but also a discussion of the policy implications of this finding.

Keywords: informal economy; underground sector; shadow economy; nascent entrepreneurship; business start-ups; venture creation; enterprise development; UK; United Kingdom; small firms; small businesses; business viability; test trading.

DOI: 10.1504/IJESB.2014.062127

International Journal of Entrepreneurship and Small Business, 2014 Vol.22 No.1, pp.1 - 16

Published online: 07 Jun 2014 *

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