The importance of entrepreneurship does not only lie in the ability of an individual to develop and organise an enterprise to generate profit. Entrepreneurship should also contribute to improving the economy and creating a business environment conducive to investment. However, the literature on the informal entrepreneurship described the informal economy as the economic dealings practised by the owners of enterprises or workers and is not announced with government agencies. Although informal enterprises can create job opportunities, training and significant profits, they can also have a profoundly negative impact on the global economy. This thesis aims to discover the impact of Saudi environmental institutions on male and female Saudi entrepreneurs who are part of the informal economy. Based on Scott’s institutional theory, this thesis also aims to explore which of Scott’s pillars (the regulative pillar, the normative pillar or the cultural-cognitive pillar) has the greatest influence on the decisions of male and female Saudi entrepreneurs to avoid registering their enterprises with some or all government agencies.
In order to achieve this thesis’s objectives of understanding and addressing the phenomenon of the informal economy in Saudi Arabia, a multiple case-study approach to qualitative research and a thematic analysis approach were applied. In addition, 62 in-depth semi-structured interviews were conducted with Saudi men and women who were all fully- and partially-unregistered entrepreneurs in the city of Jeddah. The results of the study show that government regulations and laws related to employment, enterprise location, penalties and government oversight are the main reasons why entrepreneurs actively avoid registering their enterprises with some or all government agencies. The need for a source of income, ignorance, widespread unemployment, a passion for entrepreneurship, flexibility in informal enterprises and an experimental opportunity for enterprise evaluation, also somewhat motivate entrepreneurs to run their informal enterprises. Social beliefs and norms drive entrepreneurs to hire casual workers and join certain sectors in the informal economy, albeit to the least extent.
This thesis also suggests recommendations and future insights into the scientific literature and for decision-makers. More specifically, this thesis proposes that more studies regarding the informal economy in Saudi Arabia need to be undertaken by using other samples and research methods to generalise the results as well as making suggestions for applying Scott’s institutional theories to discover the most important pillars affecting informal entrepreneurs in a number of countries. In addition, this thesis proposes practical recommendations that will help decision-makers to eliminate informal entrepreneurship by enforcing strict regulations and penalties and enacting supportive decisions to formalise entrepreneurship.
