LAUSR

Micro, small and medium enterprises (MSMEs) have played a pivotal role in the economy of developing countries. Intriguingly, only a small fraction of MSMEs are legally registered as formal enterprises, and they typically lack entrepreneurial management. Our paper is to test the influence of formality status on entrepreneurial motivation and leadership among active entrepreneurs. To gather data, we surveyed formal and informal entrepreneurs in East Java, Indonesia. Our results show that formal entrepreneurs score higher in all dimensions of the entrepreneurial motivation variable compared to informal entrepreneurs, except for desire for wealth. Yet, only entrepreneurial opportunity is statistically significant among all the entrepreneurial motivation dimensions. Furthermore, while informal entrepreneurs seem to accept more risk and have higher achievement than their counterpart in the formal sector, this does not apply to the other dimensions of entrepreneurial leadership. For this variable, only proactive behaviour is significantly different from zero.