Hustle and influence: the dynamics of illicit small business and political connections

Abstract

Purpose

This study aims to explore the political dimension of social network theory and assess how these connections motivate entrepreneurial activity and enhance postentry stages. The authors take an individualistic approach to the topic of institutional deterioration by uncovering the potential opportunities it can create, as entrepreneurship often arises when a market opportunity is perceived.

Design/methodology/approach

This study used a quantitative approach, using a self-selection sampling method to target private entities that own electric generators (also known as “illicit SMEs”) who are providing electricity services to the community despite the deterioration of the public energy sector in Lebanon. Data was collected through a survey administered electronically to 230 illicit SMEs, using a judgmental sampling method to ensure representation from all Lebanese governorates. The collected data was analyzed using ordinal least squares regression models.

Findings

The findings indicate a significant relationship between institutional deterioration and the reinvestment rate of entrepreneurs, with the moderating effect of political connections suggesting that the impact of institutional deterioration is dependent on the strength of an entrepreneur’s political connections.

Practical implications

The research findings demonstrate the significant influence of social ties and political connections on entrepreneurial activities, particularly in the context of SMEs that are providing services “illegally”. These results shed light on the importance of considering the role of social and political factors in the success and sustainability of entrepreneurial ventures operating in challenging environments.

Originality/value

Entrepreneurial studies typically focus on free market platforms and supply-demand associations, assuming perfect government conditions. However, this study differs from previous research by highlighting the positive impact of social ties on entrepreneurial market access within a socially linked environment. The findings suggest the importance of considering social connections in entrepreneurial studies, particularly in challenging economic and political contexts.

Citation

Al Sayah, M., Salloum, C., Jarrar, H., Salloum, L. and Verdie, J.-F. (2023), "Hustle and influence: the dynamics of illicit small business and political connections", European Business Review, Vol. 35 No. 5, pp. 874-891. https://doi.org/10.1108/EBR-05-2023-0138