Thriving Through Informality: Multidimensional Capital and Growth Resilience of Informal Micro and Small Enterprises in Bangladesh.

Abstract

Informal micro and small enterprises are central to livelihood generation, local production, and labour absorption in Bangladesh, yet their growth trajectories remain poorly explained by conventional SME frameworks and finance-centred assumptions. This study advances the understanding of informal enterprise growth by examining how multidimensional capital, specifically economic, human, social, and cultural capital, shapes growth resilience and determines enterprise movement across stages of decline, stagnation, and growth. A quantitative cross-sectional design was employed, drawing on survey data from 550 informal micro and small enterprise owner-managers selected through stratified random sampling. Growth trajectory was operationalised as an ordered dependent variable, and capital dimensions were measured using multi-item constructs. Generalised Ordered Logistic Regression was used as the primary analytical technique, with Ordinal Probit Regression applied as a robustness check to confirm the stability of the estimates. The results establish human capital as the most consistent and statistically robust predictor of growth trajectory, significantly increasing the probability of moving beyond decline and reaching the growth stage. Economic capital produces a positive coefficient but does not show a statistically significant independent association after the control variables are included. Personal savings and owner age also register significant associations with growth outcomes. These findings contribute to informal entrepreneurship theory by demonstrating that resource possession alone is a limited predictor of growth; what matters more decisively is the owner-manager’s capacity to mobilise and convert available resources into productive outcomes.