Informal business practices: Exception or the norm?

The paper is an attempt to contribute to the development of a new management theory, which is particularly relevant for emerging markets, where state institutions and the rule of law are still weak. The paper focuses on 'informal business practices' (IBP) which seems underestimated as too much attention goes to formal aspects of business organisation and operation. The paper demonstrates that IBP occur everywhere and are a significant phenomenon in business as evidenced by the size of shadow economies, the size of informal trade in border areas and corruption. An explanation for the widespread prevalence of IBP is found in an economic theory, centred around the minimisation of the costs of doing business, as well as behavioural theory. In conclusion, the paper calls for more recognition of IBP as a central concept to explain firm behaviour in emerging markets and suggests further research, for example by context specific case studies.