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Research Highlights—Why some entrepreneurs choose to remain hidden?

  

Research Highlights—Why some entrepreneurs choose to remain hidden? 

(posted on behalf of @Julian Riano)

We often assume (and teach) that entrepreneurs need maximum visibility. Struggling startups are encouraged to promote themselves widely because anyone could become a customer, investor, or stakeholder capable of catalyzing their business. So, why might some entrepreneurs choose to remain hidden?

In their recent study, Robert Nason, Siddharth Vedula, Joel Bothello, Sophie Bacq, and Andrew Charman challenge our latent assumption by exploring entrepreneurs in the informal economy who deliberately hide rather than seek visibility. Their research, set in the township of Delft South in Cape Town – South Africa, highlights what they call the “visibility paradox.” Entrepreneurs need to attract customers and suppliers, but they also have to avoid attention from authorities and criminals who could harm their businesses. In their paper, “Sight Unseen: The Visibility Paradox of Entrepreneurship in an Informal Economy,” the researchers introduce the concept of ‘selective visibility.’ This idea captures the delicate balancing act entrepreneurs must perform—being visible to resource-granting stakeholders (customers, suppliers) while staying hidden from resource-extracting ones (authorities, criminals).

The informal economy comprised of socially legitimate businesses that are unregistered with the government. Beyond the classic issues faced by any venture, entrepreneurs in the informal economy face a myriad of additional issues such as pernicious effects of poverty, weak government support systems, and threats of violence. A growing body of research is shedding important insight into how informal entrepreneurs navigate this fraught institutional environment. However, when Professor Robert Nason travelled to South Africa and first saw the way that Dr. Andrew Charman, Co-Founder of Sustainable Livelihoods Foundation, and his team were approaching and documenting the informal economy, he was blown away. SLF has pioneered a micro-area census approach which goes street by street within a defined township border to document all businesses there – 90% of which are unregistered.

This kind of detailed fieldwork presents challenges of course. Many entrepreneurs were hesitant to speak with researchers, fearing exposure. Field researchers quickly learned that appearances mattered—showing up in business suits and cars raised suspicion. Instead, they adopted informal attire and bicycles to blend in and gain access to the community. As trust built, entrepreneurs opened up, allowing the team to see the complexities of informality. For example, some entrepreneurs operated in legal grey areas, such as selling alcohol without a license, while others disguised their businesses by mixing unrelated products, like hair salons also selling hardware. These tactics made it difficult to categorize and track businesses, complicating efforts to quantify informal economies. They had to develop new industry types – far different from classic north American SIC codes.

For each business they found, the team did a short survey, took a picture, and took the GPS coordinates (originally using a Garmin devise ostensibly designed for fishermen!). After collecting the data and sharing it with his academic counterparts - the team faced a major hurdle. As Professor Nason put it - “we found this amazing, but kind of had no idea what to do with funky data like photos and GIS that management researchers aren’t used to using.” This led the research team to connect with Professor Siddharth Vedula, who was well known for his empirical expertise and love of creating cool maps. Reflecting on the process, Professor Vedula noted that data alone tells only part of the story—understanding context is key, especially in management research where secondary data can be vital. To develop a stronger sense of the context, both Profs Bacq and Bothello spent part of their recent sabbaticals in Cape Town and having Andrew and his team as a practitioner partner on the ground was vital in this regard.

To this point, when developing the study’s framework, Professor Robert Nason emphasized the challenge of developing theory on a phenomenon that is far afield from traditional entrepreneurship and management research. The research team was adamant that they did not want to be doing deductive hypothesis driven research but faced push back from reviewers and struggled to find a compelling “inductive” approach to their primarily quantitative data. Ultimately, the team followed an abductive approach: beginning with insights from the field, trying out theory, testing based on the more comprehensive database, seeking local feedback, and then refining the presentation of the paper. Still, this process presented challenges -- causing many fits and starts as well as iterations along the way.

The study revealed that some informal entrepreneurs, by necessity, exist in the shadows. They need to hide from criminals seeking untraceable money and from authorities who want to enforce regulations. This dynamic drives them to engage in a ‘hide and seek’ game—staying hidden from danger while building visibility with loyal customers. The concept of ‘selective visibility’ captures this tension. While developed in the informal economy – they believe it may be applicable to a broader range of firms who often seek to avoid the attention of stakeholders that may harm them – activists, regulators, or competitors.

Regarding the publication process, the team acknowledged the importance of collaboration and knowledge-sharing. The study’s findings underscore the fact that, in the real world, entrepreneurship is rarely a matter of strict formality or informality—it’s a blend of both, shaped by necessity, creativity, and survival. They are currently focused on developing creative and impactful dissemination projects. Prof. Joel Bothello has developed a graphic novel based on insights (and featuring artists) from the townships and the team has ambitions to create a mini documentary showcasing selective visibility in practice in the townships.

For other researchers tackling similar studies, this project offers key lessons. First, theory and fieldwork should interact in an iterative process, not a linear one. Second, gaining trust in sensitive environments takes time, and researchers must adapt to the context on the ground, whether that means dressing down or using unconventional data collection methods. Third, the team is key – to take advantage of complementary skills but also to have an enjoyable set of humans that are fun to work with. Lastly, data is more than numbers—context brings it to life, and networking across disciplines can yield valuable insights.

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