New businesses are substantial sources of innovation, value and job creation. However, data suggests that there has been a significant increase in the failure rate of new ventures in the last two decades.
Existing research has suggested that examining new venture liabilities is a means of understanding new venture survival. Within these liabilities, the most examined is liability of newness (LON). However, other liabilities have received limited research attention, including liability of informality (LOI). Studies that have explored LON have done so predominantly from a Western-centric, formal perspective. Thus, research that unpacks the evidence and generates new insights in the consideration of liabilities in different contexts is urgently required, as scant empirical research to date has explored LON-mitigating approaches from an informality perspective by considering LOI. This study addresses this gap by exploring the home-based business (HBB) industry, where such a context dominates. HBB is a substantial segment of the informal economy and self-employment. Despite its social and economic significance, and it being characterised as an increasingly critical practice of entrepreneurial action, the HBB phenomenon is not well understood; it is under-researched and overlooked within academic literature and theory-building.
This study follows the critical realism paradigm and employs an abductive approach and a qualitative methodology. It explores in depth the struggles that HBBs experience during their start-up period and the approaches employed to mitigate these liabilities. 59 in-depth semi-structured interviews were conducted with HBBs in different sectors, customers and staff in Riyadh. Data was analysed thematically using the template analysis technique.
Exploring new venture survival through LON and LOI, with a particular focus on the home-based entrepreneurship context, yields robust theoretical and practical contributions to institutional logic theory, organisational theory, LON, the emerging LOI discourse and home-based entrepreneurship literature.
