This brief is part of the Insights @ Center for Emerging Markets, a publication focused on cutting-edge ideas and advice for global leaders about emerging markets.
By Robert Nason (McGill University, Canada), Siddharth Vedula (Miami University), Joel Bothello (Concordia University, Canada), Sophie Bacq (IMD, Switzerland), and Andrew Charman (Sustainable Livelihoods Foundation, South Africa).
In Short: In informal economies, visibility is both a necessity and a risk. Entrepreneurs must be seen to attract customers and partners, yet exposure also invites scrutiny from authorities or criminals. Drawing on fieldwork in the township of Delft, Cape Town, this study examines how informal business owners balance these competing pressures through “selective visibility,” strategically revealing themselves to certain audiences while remaining hidden from others. The findings show that “social embeddedness”—i.e., connections through age, gender, or nationality—shapes how entrepreneurs navigate visibility. Policymakers and development practitioners can use these insights to design more nuanced, context-sensitive support for informal entrepreneurs.
Across many emerging markets, informal businesses sustain local livelihoods yet operate in environments of uncertainty and limited regulation. For these entrepreneurs, visibility presents a paradox. Being visible helps attract customers, suppliers, and community trust, but it can also bring unwanted attention from tax authorities, law enforcement, or criminals. Drawing on a small-area census in Delft South (Cape Town, South Africa), the research shows visibility is not a yes-no choice but a calibrated practice. While a substantial share of firms choose a path of remaining “invisible”, others practice one of two paths of “selective visibility”: either to the state (“authority-oriented visibility”) or to local customers and networks (“community-oriented visibility”).
Who chooses which path? Social “embeddedness” (local roots) matters. Highly embedded entrepreneurs—typically older, domestic, and female—can leverage their trust and reputation to remain off the radar of formal authorities while sustaining sales via word-of-mouth. By contrast, less embedded entrepreneurs—often younger men or recent migrants—lack deeper local ties. They tend to pursue community-oriented visibility to win legitimacy and demand, accepting higher exposure to risks as a trade-off.
Performance is configurational, not a one-size-fits-all. The study's qualitative-comparative analysis indicates no universal “win” from full visibility. Paths to better performance tend to involve: (a) low-embedded entrepreneurs practicing community-oriented selective visibility, or (b) partially embedded entrepreneurs succeeding via invisibility or authority-oriented selective visibility, depending on age, gender, firm age, and local competition.
What this Means for Policy and Practice
Visibility in the informal economy isn't inherently good or bad: it's shaped by context. What often looks like “invisibility” is better understood as a risk-management strategy, not necessarily evasion. Policy can meet people where they are: make low-stakes registration simple, create safe first steps through amnesties or grace periods, and favor trust-building over punitive sweeps. When channels into formality are co-designed with community intermediaries, gradual engagement starts to feel credible and safe.
Programs on the ground benefit from seeing how deeply entrepreneurs are embedded in their communities. Those who are highly embedded (frequently women and older locals) tend to value quiet growth: a steadier flow of customers, fairer supplier terms, small upgrades to home-based production. Others (often younger workers or recent migrants) may need pathways to public legitimacy: help choosing compliant locations, straightforward guidance on basic rules, and links to dispute resolution that don't require insider status.
Managing the “visibility paradox” means balancing protection with opportunity. If we recognize selective visibility as a rational strategy, we can design phased, trust-first interventions that strengthen (rather than expose) the informal firms that sustain local livelihoods.
Original Work
Nason, R., Vedula, S., Bothello, J., Bacq, S., & Charman, A. (2024). Sight unseen: The visibility paradox of entrepreneurship in an informal economy. Journal of Business Venturing, 39(2), 106364. Journal of Business Venturing Best Article 2024
Contact
If you are interested in learning more about this work, contact Professor Robert Nason at robert.nason@mcgill.ca.
