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Evasive entrepreneurship: Circumventing and exploiting institutional impediments for new profit opportunity in an emerging market

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  • Nnaoke Ufere
  • James Gaskin

Abstract

Evasive entrepreneurship (circumvention and exploitation of institutions by entrepreneurs) is a prevalent practice in many developing economies. Extant literature on the topic falls short of providing adequate theories to explain its triggers, mechanisms, and consequences. Leveraging extensive survey data from the World Bank, we used structural equation modeling to examine the relationship between evasive entrepreneurial behavior—tax evasion and bribery—and the relative payoff of such practices. Of the 2599 Nigerian entrepreneurs in our sample, the majority admitted to engaging in evasive entrepreneurship. The data suggest that institutional factors thought to constrain entrepreneurship in emerging markets are counter-intuitively perceived by founders as opportunities to earn large rents and improve firm performance. Our results emphasize the urgent need to eliminate institutional constraints that paradoxically enable the growth of evasive entrepreneurship in emerging economies. Our results also suggest that prevailing local conventions involving evasive behavior may motivate nascent entrepreneurs to imitate bribery and tax evasion, normalizing malfeasance as ‘best practice.’

Suggested Citation

  • Nnaoke Ufere & James Gaskin, 2021. "Evasive entrepreneurship: Circumventing and exploiting institutional impediments for new profit opportunity in an emerging market," PLOS ONE, Public Library of Science, vol. 16(2), pages 1-22, February.
    • Handle: RePEc:plo:pone00:0247012
    DOI: 10.1371/journal.pone.0247012
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    References listed on IDEAS

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    1. Niklas Elert & Magnus Henrekson, 2016. "Evasive entrepreneurship," Small Business Economics, Springer, vol. 47(1), pages 95-113, June.
    2. Christopher J. Coyne & Peter T. Leeson, 2004. "The Plight of Underdeveloped Countries," Cato Journal, Cato Journal, Cato Institute, vol. 24(3), pages 235-249, Fall.
    3. Baumol, William J., 1996. "Entrepreneurship: Productive, unproductive, and destructive," Journal of Business Venturing, Elsevier, vol. 11(1), pages 3-22, January.
    4. Fadahunsi, Akin & Rosa, Peter, 2002. "Entrepreneurship and Illegality: Insights from the Nigerian cross-border Trade," Journal of Business Venturing, Elsevier, vol. 17(5), pages 397-429, September.
    5. Ufere, Nnaoke & Perelli, Sheri & Boland, Richard & Carlsson, Bo, 2012. "Merchants of Corruption: How Entrepreneurs Manufacture and Supply Bribes," World Development, Elsevier, vol. 40(12), pages 2440-2453.
    6. Bylund, Per L. & McCaffrey, Matthew, 2017. "A theory of entrepreneurship and institutional uncertainty," Journal of Business Venturing, Elsevier, vol. 32(5), pages 461-475.
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    Cited by:

    1. Ashford C. Chea, 2021. "Doing Business in Emerging Market Economies: Challenges and Success Strategies for Western Multinational Corporations," International Business Research, Canadian Center of Science and Education, vol. 14(9), pages 1-82, September.

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