Digital Skills and Formalization Intention Among Informal Entrepreneurs: Entrepreneurial Human Capital and Social Capital as Mediating Mechanisms
DOI:
https://doi.org/10.4067/s0718-2724202600024992Keywords:
informal entrepreneurship, informal economy, formalization intention, digital skills, entrepreneurial human capital, social capitalAbstract
Objective: This study examines how digital skills, entrepreneurial human capital, and social capital shape informal entrepreneurs’ intentions to formalize their businesses, conceptualizing formalization as a strategic and intention-driven decision.
Methods: A quantitative, cross-sectional design was used to collect data from a survey of 383 informal entrepreneurs in Chile. The proposed model was analyzed using partial least squares structural equation modeling (PLS-SEM) to assess the relationships among digital skills, entrepreneurial human capital, social capital, and formalization intention.
Results: Digital skills show no direct association with formalization intention but are positively associated with entrepreneurial human capital and social capital. Entrepreneurial human capital, understood as educational background and business experience, is negatively associated with formalization intention, whereas social capital shows a small positive association. Entrepreneurial human capital significantly mediates the relationship between digital skills and formalization intention, with a negative indirect effect. The indirect effect through social capital is positive but only marginally significant.
Conclusions: The findings suggest that digital capabilities are not uniform drivers of formalization intention. Instead, digital skills appear to operate through heterogeneous pathways: they may be associated with entrepreneurial human capital that reduces the perceived need to formalize, while also supporting social capital that modestly increases exposure to institutional information and formal opportunities. Theoretically, the study contributes to informal entrepreneurship and technology management by showing that digitalization may simultaneously facilitate engagement with formal systems and reinforce adaptive informal arrangements. From a practical perspective, the findings suggest that formalization policies should not rely only on digital access, online registration, or technical training. More effective interventions should combine digital public services, capability development, bridging social capital, accessible platform design, and tangible benefits of registration so that formality becomes more valuable than digitally enabled informality.
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