Enhancing entrepreneurial activities in BoP markets: Understanding the influence of poverty

Abstract

This study contributes to our understanding of the influence of poverty on entrepreneurial activities in the informal economy. The informal economy, base of the pyramid (BoP), and subsistence marketplace literatures offer insights on how the BoP market segment could become customers. What this research has not yet addressed is why some potential consumers do not purchase a product. We examine this question using a framework that incorporates a multi-dimensional view of poverty. Using a rich and unique set of survey data collected from the BoP in the informal economy in the developing world, our results indicate that three dimensions of poverty – economic, capability, and relationship well-being – influence the likelihood of purchasing a product. Additionally, the influences of these poverty dimensions can vary, including by income level. These findings demonstrate that incorporating a multi-dimensional view of poverty can enhance our understanding of entrepreneurial activity, capability development, and consumer behavior in the informal economy.