Academic journal article Journal of Applied Management and Entrepreneurship

The Hidden Enterprise Culture: Entrepreneurs in the Underground Economy in England, Ukraine, and Russia

Academic journal article Journal of Applied Management and Entrepreneurship

The Hidden Enterprise Culture: Entrepreneurs in the Underground Economy in England, Ukraine, and Russia

Article excerpt

Executive Summary

In recent decades, the field of entrepreneurship studies has become increasingly permeated by a virtuous ideal-type depiction of entrepreneurs as wholesome and legitimate heroes. This paper evaluates critically this predominant portrayal of entrepreneurs as always conducting their business affairs wholly by the rulebook. To do this, the objective is to assess whether it is common for entrepreneurs to conduct some or all of their transactions on an off-the-books basis in the underground economy. Reporting case study evidence from face-to-face interviews with 91 entrepreneurs in England, 331 in Ukraine and 81 in Russia, the finding is that 77 per cent, 90 per cent and 100 per cent of these entrepreneurs respectively assert that they participate in underground transactions. The outcome is a call to transcend the marked discrepancy between the virtuous ideal-type depiction of entrepreneurs as wholesome and legitimate heroes and the lived practices of entrepreneurship.

Introduction

There is an old English adage that if you scratch an entrepreneur, you will find a "spiv" (Burns, 2001: 4). This reflects a widespread belief in popular culture that entrepreneurs are somewhat shady characters who have a tendency to flout the rulebook. Yet despite this common portrayal of entrepreneurs in everyday culture, the entrepreneurship literature has seldom evaluated this depiction by examining whether entrepreneurs do indeed always conduct their business affairs wholly by the rulebook. In the vast body of literature on entrepreneurship, that is, there has been little, if any, evaluation of whether entrepreneurs sometimes weigh up the risks of detection and penalties if caught against the benefits and decide to conduct some or all of their business off-the-books. The intention in this paper, therefore, is to do so. Analyzing whether entrepreneurs conduct some or all of their transactions on an off-the-books basis in the underground economy, the objective is to evaluate critically the predominant ideal-type depiction of entrepreneurs found in many text-books that represents them as wholesome and legitimate heroes who always play by the rulebook.

Reflecting the strong consensus in the literature, the underground economy, or what has been variously called the "informal", "undeclared", "shadow", "cash-in-hand" or "hidden" economy/sector, is here defined as the paid production and sale of goods and services that are legitimate in all respects besides the fact that they are unregistered by, or hidden from the state for tax and/or benefit purposes (European Commission, 1998; Evans et al, 2006; Katungi et al, 2006; Marcelli et al, 1999; OECD, 2000a,b, 2002; Renooy et al, 2004; Portes, 1994; Thomas, 1992; Williams and Windebank, 1998). Transactions involving illicit goods and services (e.g., drug trafficking, gun-running), therefore, are not part of the underground economy. They are part of the broader criminal economy.

When defining entrepreneurship, however, there has been no such agreement on its scope. Indeed, it has long proven a problematic and elusive concept which Hull et al (1980) likened to "hunting the heffalump". Here, therefore, a working definition is adopted. An entrepreneur will be defined as somebody actively involved in starting a business or is the owner/manager of a business that is less than 42 months old (Harding et al, 2006; Reynolds et al, 2002). This definition, although excluding aspects sometimes included (e.g., intrapreneurship) is fit for the purpose for which it is here intended, namely studying whether those starting-up business ventures participate in the underground economy.

To evaluate critically whether such entrepreneurs engage in the underground economy, this paper will firstly review how despite a common definition of entrepreneurship remaining as elusive as ever, there has emerged a strong consensus when depicting entrepreneurs. A virtuous ideal-type representation of the entrepreneur has emerged in much of the entrepreneurship literature in which entrepreneurs are portrayed as clean, wholesome and legitimate heroes. …

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