YOU SAY ILLEGAL, I SAY LEGITIMATE: ENTREPRENEURSHIP IN

THE INFORMAL ECONOMY

BY: JUSTIN W. WEBB, LASZLO TIHANYI, R. DUANE IRELAND, DAVID G. SIRMON

Webb, J. W., Tihanyi, L., Ireland, R. D., & Sirmon, D. G. (2009). You say illegal, I say legitimate:
Entrepreneurship in the informal economy. Academy of Management Review, 34(3), 492-510.

ORIGINALLY FORMULATED FOR OCTOBER 2015 PHD EXAM QURTUBA

UNIVERSITY

1. According to Webb et al., (2009) You say illegal, I say legitimate: entrepreneurship in the
informal, Societies are composed of groups that often have different opinions about what
is___________________________________________________________acceptable
(Socially)
2. According to Webb et al., (2009) You say illegal, I say legitimate: entrepreneurship in the informal
, the norms, values, and beliefs of a larger group in a society may eventually become the basis of
______________________________ (Laws)
3. According to Webb et al., (2009) You say illegal, I say legitimate: entrepreneurship in the informal
, a gap (or variance) between what is legal in a society and what some large groups consider to be
_______________________in that society allows an______________________________ to
emerge. (Legitimate; informal economy)
4. According to Webb et al., (2009) You say illegal, I say legitimate: entrepreneurship in the
informal, Illegal but legitimate entrepreneurs are still abiding by the boundaries of
________________________ (Informal institutions)
5. According to Webb et al., (2009) You say illegal, I say legitimate: entrepreneurship in the
informal, individual’s ability to recognize opportunities is called
____________________________________ Entrepreneurial alertness
6. According to Webb et al., (2009) You say illegal, I say legitimate: entrepreneurship in the
informal, the three types of institutions by Scott (1995) include regulatory,
________________________and _________________________institutions. Normative and
Cognitive
7. According to Webb et al., (2009) You say illegal, I say legitimate: entrepreneurship in the
informal, The boundaries of formal economy can be increased to minimize informal economy in
two ways: _______________________________________ and
Realizations by legislative process;
_______________________________________
Lobbying by interest groups for recognition
8. According to Webb et al., (2009) You say illegal, I say legitimate: entrepreneurship in the
informal, Innovation theory logic suggests that, in general, ____________________are less
imitable because they take place behind closed doors; in contrast to ________________________
 products that are distributed within a market where both competitors and enforcement agents can
study them. (Means; End)
9. The entrepreneurs operating in informal economy rely on_________________________, the
common bond tying individuals to a group. (Collective identity)

10. Stability of formal institutions is a function of surveillance or enforcement power which is costless
to undertake. FALSE

11. Norms, values, and beliefs developed in the collective identity are normally in congruence with
the prescriptions put forth by formal institutions. FALSE

12. Innovation theory logic suggests that, in general, _________________are less imitable as
compared to _________________because the former take place behind closed doors (Means;
Ends)

Q- Define legitimacy

A generalized perception or assumption that the actions of an entity are desirable, proper, or
appropriate within some socially constructed system of norms, values, beliefs, and definitions” (Such
man, 1995: 574).

Q- The growth of ventures in the informal economy creates a paradox. Explain.

On the one hand, growth allows successful entrepreneurs to enjoy gains in wealth; on the other,
growth increases the possibility of detection by enforcement agents. Entrepreneurs pursuing illegal
yet legitimate ends feel greater pressure to fully transition to the formal economy than those
exploiting illegal yet legitimate means.

Q- What is a longer-term approach to managing the informal economy and hat should it target?

 A longer-term approach to managing the informal economy is to modify informal

institutions.

 To be effective, such actions would ideally target specific beliefs that support
entrepreneurial activities in the informal economy, rather than the values and norms
defining collective identities.

 Policies formed and implemented for these purposes should seek additional congruence
between formal and informal institutions.