Harnessing the hidden enterprise culture : Supporting the formalisation of off‐the‐books business start‐ups

Purpose – Providing support to off‐the‐books business start‐ups to help them make the transition to legitimacy could be a novel and effective method of creating new legitimate business ventures. The purpose of this paper is to advance understanding of why some business start‐ups operate off‐the‐books so as to explore how public policy might facilitate their transition towards formalisation. Design/methodology/approach – To do this, a survey is reported of 120 business start‐ups in West Cornwall, UK, of which 48 were operating wholly or partially off‐the‐books. Findings – This study inductively reveals that entrepreneurs' rationales for trading off‐the‐books and the consequent barriers to formalisation differ according to whether the business start‐up is wholly off‐the‐books, a registered business start‐up conducting a portion of their trade off‐the‐books with no intention of further formalising, or a registered business start‐up in transition to legitimacy. The outcome is that policy measures to facilitate formalisation need to be tailored to tackle the varying reasons for each type of business start‐up trading off‐the‐books. Research limitations/implications – Given the limited data, more extensive research across varying populations is required to evaluate the wider validity of the reasons for off‐the‐books trading of these different types of business start‐up. Practical implications – The paper reveals that the support required to help entrepreneurs to make the transition to legitimacy needs to vary according to the degree to which their venture presently operates off‐the‐books and whether they display any intention to move towards formalisation. Originality/value – This is the first paper to identify the reasons business start‐ups trade off‐the‐books and the different resultant policy measures required to support their formalisation.