Differences between Entrepreneurs in Tanzania’s Informal and Formal Sectors
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Date
2020-04-24
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Publisher
Tanzania Institute of Accountancy
Abstract
While small businesses may contribute towards reduction of poverty, studies in least developed
countries (LDCs), particularly in Sub-Saharan Africa, have shown that small businesses often fail
to contribute enough in this regard. One problem may be the informal nature of small businesses
and entrepreneurship. The majority of the entrepreneurs in LDCs are characterized by features of
tax avoidance, low levels of education and failure to keep accounting records. While entrepreneurs
in the advanced economies participate in economic activities in terms of innovation and creative
destruction (Kirzner, 1997; Schumpeter, 1934), entrepreneurs in LDCs such as Tanzania are
mainly sellers of domestic goods, retailers of various goods, food processers and manufacturers,
and tend to be less innovative (United Republic of Tanzania, 2014). This means that entrepreneurs
from LDCs may differ from those in advanced economies in terms of: identification and
exploitation of entrepreneurial opportunities; entrepreneurial competencies; and entrepreneurial
motivation.
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Keywords
Entrepreneurship, Informal Sector, Formal Sector, Tanzania