| Description |
Some informal or unregistered businesses are established to take advantage of business opportunities (opportunity firms) while others are established because the owner cannot find a satisfactory job (necessity firms). Comparing opportunity vs. necessity informal firms in Africa, this note finds that opportunity firms are more efficient and larger. They are also more likely to use external finance, and suffer less from infrastructure bottlenecks such as power outages. However, all these differences apply to the manufacturing sector alone. With the exception of having more educated managers and more businesses located outside than inside household premises, opportunity firms in the service sector are not too different from the necessity firms in the same sector. In short, the motivation behind starting a business influences the performance of informal manufacturing firms but has little effect on the performance of informal service firms. |
