Jaqueline Pels ( University Torcuato Di Tella, Argentina), Luis Araujo (University of Manchester, UK) and Tomas Kidd (UpSocial, Spain).
Challenges informal market sellers encounter in transitioning to formal markets
This paper is about the challenges informal market sellers encounter in transitioning to formal markets as a way to promote inclusive growth for the poor. Historically, mainstream development studies suggested tackling poverty reduction through economic growth, new employment and reduction of income inequality. In the 1990s a radical shift took place. Building on Schumpeter’s notion that entrepreneurial activity drives economic growth, it encouraged a market-based approach to inclusive growth for the poor (e.g., McMullen, 2011). These contrasting approaches, to poverty alleviation, have been labelled top-down and bottom-up. We will argue that the shift to bottom-up approaches adds a level of complexity and brings the topic of market agency to the forefront of efforts to tackle poverty (Araujo et al., 2010). Drawing on a practice-based approach to social science (Callon, 1998), market agency is defined as “the ability to act in and to shape markets” (Lindeman 2014:172). A literature review highlights that the informal seller’s agency to operate in formal markets, has received scant attention. Thus we seek to answer: what are the capabilities required by informal sellers to access and operate in formal markets? Different studies within the micro-credit literature (e.g., Tavanti 2013), the subsistence entrepreneurial literature (e.g., Sridharan et al., 2014) and the entrepreneurial literature (e.g., Shane and Venkataraman, 2000), show that the vast majority of these entrepreneurs lack the cultural and social capabilities required to exploit the opportunities that reside in more affluent formal markets. Based on these insights, we argue that it is necessary to re-diagnose the market access problem. We suggest that Sen’s notion of capabilities (1985, 1999) and Bourdieu’s (1986, 1989) concepts of habitus (a combination of social, cultural and economic capital) and capital conversion (the time and effort required in accessing each type of capital so that it can be transformed from one type into another) are particularly relevant to understanding these capabilities gaps. In summary, we expand the literature base of the bottom-up approach by drawing on the practice-based approach as well as Sen and Bourdieu´s work. We provide a characterization of informal sellers and introduce the concept of market agency capabilities and market agency capabilities gap. Araujo, L., Finch, J., Kjellberg, H., 2010. Reconnecting marketing to markets. Oxford University Press, Oxford. Bourdieu, P. ,1986. The forms of capital. In Handbook of theory of research for the sociology of education. J.G Richardson (ed.). Greenwood, New York. Bourdieu, P., 1989. Social space and symbolic power. Sociological Theory 7(1), 14-25. Callon, M., 1998. The laws of the market. Blackwell, Oxford. McMullen, J. S., 2011. Delineating the domain of development entrepreneurship: a market‐based approach to facilitating inclusive economic growth. Entrepreneurship Theory and Practice 35(1), 185-193. Lindeman, S., 2014. “Until We Live Like They Live in Europe” A Multilevel Framework for Community Empowerment in Subsistence Markets. Journal of Macromarketing 34(2), 171-185. Sen, A., 1985. Well-being, agency and freedom: The Dewey lectures 1984. The journal of philosophy 82(4), 169-221. Sen, A., 1999. Development as Freedom. Oxford University Press, Oxford. Shane, S., Venkataraman, S., (2000). The promise of entrepreneurship as a field of research. Academy of Management Review 25(1), 217-226. Tavanti M., 2013. Before Microfinance: The Social Value of Microsavings in Vincentian Poverty Reduction. Journal of Business Ethics 112, 697–706.