Abstract

Strategic deviation—the degree to which firm strategy differs from industry norms—is an essential component of entrepreneurial endeavors as it allows existing firms to differentiate themselves from competitors and adapt to new models of doing business (Haynes and Hillman, 2010). Despite a growing need to examine entrepreneurial activities in the informal economy (Ketchen et al., 2014; Webb et al., 2009), extant research on strategic deviation has been limited to businesses that operate within the boundaries of formal institutions (e.g., laws, regulations). In the context of impoverished settings and developing countries, formal institutions are less salient and informal institutions such as norms, values, and beliefs, define socially acceptable behaviors and play a major role in dictating organizational behaviors (Schneider, 2002). They provide legitimacy and encourage conformity with social groups’ shared behaviors (Aldrich and Baker, 2001). As a result, informal businesses tend to comply with informal institutional pressures by adopting mimetic behaviors in order to gain legitimacy (DiMaggio and Powell, 1983). The resulting lack of strategic differentiation is reinforced when firms are formed out of necessity—because of a lack of alternative employment opportunities (Block et al., 2015). The dominance of isomorphic behaviors in the informal and necessity environment, coupled with the potential competitive advantage offered by strategic deviation, makes understanding the origins of strategic deviation that does exist of utmost importance. This study addresses this gap.

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