Factors that Influence the Transition from Entrepreneurship to the Formal Business System, Case: Entrepreneurship in the Province of Chimborazo

Abstract

Entrepreneurship encounters several hurdles during its transition into the formal business sector, including challenges related to capital costs, securing financing, bureaucratic processes, and overreliance on a single consumer market. Within developing countries, there exists a certain degree of confusion surrounding the conceptual distinctions between entrepreneurship and enterprise. The primary objective of this study was to identify the critical factors influencing the evolution of a startup into a formalized company within the province of Chimborazo. The methodology employed encompassed both documentary research and field studies, pinpointing essential variables that play a role in decision-making and the approval of business endeavors. The findings of the research indicate that various factors contribute to the complexities of establishing a formal company from a startup in Chimborazo. These factors include a lack of awareness about the benefits and prerequisites of formalization, challenges encountered within the legal and logistical processes, as well as the pressing need for technical guidance and operational support. A noteworthy highlight of the study is the exceptional potential exhibited by entrepreneurs in Chimborazo, particularly within the age bracket of 25 to 35. This group is propelled by the scarcity of employment opportunities and a determination to generate income to support their families. Despite this motivation, participation in trade fairs and entrepreneurship events organized by the province's Decentralized Autonomous Government remains low. This limitation subsequently constrains the avenues available for showcasing their products and establishing vital market connections.In summation, this research effectively underscores the array of challenges that enterprises confront as they endeavor to formalize their operations. It emphasizes the criticality of considering key factors integral to the formalization process within the context of Chimborazo province.