A systematic review of informal businesses, published in the International Journal of Entrepreneurship and Small Business, argues that they should be treated as part of the large entrepreneurial ecosystem rather than as a peripheral feature of the economy.
The team examined 72 research papers published between 2009 and 2025 in order to identify how informal businesses interact with networks, institutions, and resources and how those shape business activity in particular places. Informal businesses are those operating legally but without legal registration.
The scale of the issue is substantial. According to World Bank figures cited by the researchers, the informal economy accounts for about one-fifth of gross domestic product (GDP) and 16% of employment in advanced economies. In emerging and developing economies, it averages about one-third of GDP and 70% of employment. The authors argue that research on entrepreneurial ecosystems, the local systems of networks, organisations, institutions and resources that support entrepreneurship, has tended to concentrate on formal businesses.
The findings have implications for policies intended to formalise businesses. Rather than requiring immediate registration, the researchers suggest staged approaches, including simpler registration, accessible regulatory information and support that recognises alternative evidence of business activity. Such measures could also affect how incubators, accelerators, lenders and mentoring organisations determine eligibility.
The authors say future research should examine how these ecosystem mechanisms shape whether and how informal businesses enter the formal economy.
Naaimy, G. and Messeghem, K. (2026) ‘Informal entrepreneurship and entrepreneurial ecosystems: a systematic literature review and future research agenda’, Int. J. Entrepreneurship and Small Business, Vol. 59, No. 5, pp.1–31.
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