chapter  2
An Institutionalist Perspective
ByColin C. Williams
Pages 23

The aim of Part I of this book is to set out the theoretical framework being used to understand entrepreneurship in the informal sector and how this book is advancing this theoretical lens. To start to do this, this chapter reviews how scholarship on entrepreneurship in general, and on entrepreneurship in the informal sector in particular, has increasingly adopted the lens of institutional theory to explain entrepreneurial endeavour (Baumol and Blinder, 2008; Helmke and Levitsky, 2004; North, 1990). Institutions are the rules of the game that exist in any society, or the ‘humanly devised constraints that shape human interaction’ (North, 1990: 3), and govern behaviour in society. Structures and mechanisms of social order, institutions or what might be termed governance mechanisms consist of for example governing laws, contracts, property rights and other legal and operational codes, as well as prescribed norms, values and beliefs about what is acceptable. From the perspective of institutionalist theory, moreover, all societies have both formal institutions (i.e., codified laws and regulations) that set out the legal rules of the game as well as informal institutions which are the unwritten, socially shared rules that exist outside of officially sanctioned channels (Helmke and Levitsky, 2004) and are the norms, values and beliefs held by citizens and entrepreneurs reflecting their individual morale about what is right and acceptable (Denzau and North, 1994). In other words, the term ‘institution’ commonly applies to both informal institutions such as customs, or behaviour patterns important to a society, and to formal institutions created by entities such as the government and public services.