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Empirical Analysis of Disguised Relationships between Formal Economy Firms and Informal Economy Enterprises



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Park, Hyun Kyu 


Scholarly interest in the informal economy has burgeoned in recent years, in anticipation of expanding our knowledge beyond the easily observable organizational life that takes place within the formal economic system. In line with this research endeavour, the present work represents a focused study of what I have labelled 'disguised relationships'. These ties result in repeated transactions between informal economy enterprises, which fail to comply with certain elements of the laws and regulations applying to their operations, and formal firms, which operate within the state-sanctioned formal economy.

Drawing on an abductive reasoning process and grounded theory approach, I conduct a case study that captures the interactions between two leading cosmetics firms (i.e. formal firms) and ten daigou enterprises (i.e. informal enterprises) between 2013 and 2017. The examination of multiple data sources (i.e. interviews, news articles and social media observations) suggests that the organizational landscape under study differs considerably from the one in which formal firms are portrayed as rational choosers of best-performing partners or exploiters of subordinate actors within the informal economy. Rather, disguised relationships emerge in a unilateral and disguised fashion following the lead of informal enterprises, and formal firms unintentionally engage in the unexpected ties. Furthermore, disguised relationships create the image of dynamism replete with, metaphorically speaking, give-take, push-pull and chase-evade.

More specifically, the emergent model illustrates the interactive practices through four mechanisms: (a) informal enterprises gaining social acceptability from certain society groups and acquiring the necessary resources from the members of identity-based groups; (b) drawing on this momentum, informal enterprises forming unilateral ties with formal firms in a disguised manner; (c) formal firms counteracting the unexpected ties, with temporary compromising on the counteracting efforts; and (d) informal enterprises avoiding the combatting efforts of formal firms through socially learnt tactics and leveraging network brokers (i.e. actors sharing the same ethnic/cultural backgrounds with informal enterprises while at the same time working for formal firms).

This thesis makes contributions to the literature on both interorganizational relationships and the informal economy by overcoming the perennial problem of 'dualism' that is prevalent in the extant work. First, while the subject-object dualism bestows upon formal firms a heroic status such that they are conceptualized as rational actors forming interorganizational relationships, always on the basis of plans and goals, the current work argues that formal firms may participate in unexpected, yet lasting, ties, which requires ongoing situational responsiveness. Second, the structure-agency dualism projects the static image in which formal firms deliberately establish exploitative ties with structurally isolated informal enterprises, whereas the present study suggests that informal enterprises may exercise agency to proactively establish or dissolve connections with formal firms and to strengthen or weaken the relationships at their discretion. As such, dynamism figures prominently in the interorganizational relationships between formal firms and informal enterprises.





Minshall, Tim


inter-organizational relationships, disguised relationships, informal economy, daigou, practice theory


Doctor of Philosophy (PhD)

Awarding Institution

University of Cambridge