A Proposal for a Standard With Innovation Management System

Oscar Cristi, José Ernesto Amorós and Juan Pablo Couyoumdjian
In short, this influence comes about because of the entrepreneurial nature of informal activities,
although here we must pay close attention to the heterogeneity of entrepreneurial activities. The
motivation to engage in entrepreneurial activities -whether it is motivated by ‘necessity’ or by
‘opportunity’- must be taken into account as the relationship between poor agents and
entrepreneurship is studied. Labeling entrepreneurship as ‘necessity-driven’ has no negative
connotation, but simply denotes the fact that the entrepreneurial activity is not based on the highgrowth
potential of a given business opportunity; it is in this sense that these activities are expected to
be less productive (Cotter, 1996). Focusing on the behavior of individuals, poor agents can thus be
expected to be necessity-driven entrepreneurs, which in most cases correspond to informal activities.
As noted above, the relationship between entrepreneurship and poverty has only recently started to
be considered in the literature. In this respect the empirical evidence indicates that higher levels of
entrepreneurship have a positive effect on poverty reduction trends (Amorós & Cristi, 2011). This
result is consistent with the arguments advanced by Larroulet and Couyoumdjian (2009), who state
that entrepreneurial abilities are not exclusive to wealthy agents or to advanced societies but are
more or less uniformly distributed. Moreover we can argue that under an appropriate institutional
environment, human creativity and inventiveness, that is entrepreneurship, is at the basis of economic
progress (Baumol, Litan& Schramm, 2007).
In all, we expect that informality will be associated with a reduction of poverty levels. In other words,
informality may well have a positive impact on economic development. We are aware, however, that
greater informality also reflects a bad institutional environment at work, and thus has a negative effect
on economic development. This is the relationship we propose to examine empirically.
3. Methods
3.1 Data and variables
When working on the problem of the informal economy, researchers have to face the challenge of
having accurate measurements of the scope of these activities (see Alderslade, Talmage and
Freeman, 2006). Current methods in this sense include indirect estimation (Schneider,
Buehn&Monetegro, 2010); labor force statistical profiles(ILO), as well as direct estimation measures
such as labor force and household surveys.In order to address the problem under examination in the
most exhaustive fashion, in this paper we consider three proxies of the informal economy: data
onnecessity-based entrepreneurs obtained from the Global Entrepreneurship Monitor (GEM) project,
data on self-employment from the LaborSta database of the International Labor Organization (ILO),
and the Shadow Economic Index built by Schneider et al. (2010).
The GEM project provides harmonized, internationally comparable data on entrepreneurial activity at
country level. By the end of 2010, 84 different economies have participated in GEM. The GEM project
estimates the percentage of adult population that is actively involved in starting a new venture as
anemerging entrepreneur or as an owner–manager of a business not more than 42 monthsold
(Reynolds et al, 2005). This rate is referred to as the Early-stage Entrepreneurial Activity Index (TEA).
The GEM methodology disaggregates TEA according to two main entrepreneur motivations, as
examined above. To summarize, the first category is related to opportunity-based entrepreneurs; the
second category is formed by necessity-based entrepreneurs (NECs), who are ‘pushed’ into
entrepreneurship because ‘being an entrepreneur’ is the only option for subsistence.
Although many studies recognize that the majority of entrepreneurial activity is the result of the search
for business opportunities (Kolvereid 1996; Feldman and Bolino 2000; Carter et al. 2003; Hessels,
van Gelderen and Thurik 2008; Bosma et al. 2008), there is a relatively high prevalence of NEC
entrepreneurs starting new endeavors in many low and middle-income countries. The main reason of
this relative high-prevalence of NEC entrepreneurs in less developed countries is because NEC
captures many of the informal activities that (survivalist)entrepreneurs need to accomplish to obtain
sources of subsistence (Shane, 2009). For this reason NEC could be a good proxy of the informal
sector or at least the shadow-economy’s side that is involved in the creation of micro-enterprises.
Data on self-employment (SE)has been used by Saavedra and Tommasi (2007) in their analysis of
informality in Latin America. The specific data we use is obtained from the LaborSta database of the
ILO and it corresponds to the ratio between total self-employment and total workers in the economy.
In order to make our analysis comparable with the previous sources we only consider data for
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