Informal businesses belong in entrepreneurial ecosystems, review argues

A systematic review in the International Journal of Entrepreneurship and Small Business argues that informal businesses should be seen as integral components of entrepreneurial ecosystems rather than isolated entities. The researchers analyzed 72 studies published between 2009 and 2025 to understand how these businesses interact with networks, institutions, and resources within their local environments.

Informal businesses, which operate legally but without formal registration, make up a significant portion of the economy. In advanced economies, they contribute to roughly one-fifth of GDP and 16% of employment, while in emerging and developing nations, they account for about one-third of GDP and 70% of employment. The study highlights that previous research on entrepreneurial ecosystems often focuses on formal businesses, potentially overlooking the role of informal enterprises.

The findings suggest that policies aimed at formalizing businesses need not push for immediate registration. Instead, policymakers might consider staged approaches such as simplified registration processes, improved access to regulatory information, and support systems that acknowledge alternative indicators of business activity.

Such measures could also influence how incubators, accelerators, financial institutions, and mentoring programs assess eligibility for informal businesses. Future research should explore how these ecosystem dynamics affect the transition of informal businesses into the formal sector. The study was authored by Ghita Naaimy and colleagues and published in the International Journal of Entrepreneurship and Small Business in 2026.