Enterprises in the informal economy operate in an environment defined by social in-groups, hierarchies, and asymmetries – often a cause of misalignment with formal institutions. ‘Self-help groups’ (SHGs) – new forms of quasi-informal organizations – navigate these challenges by acting as an interface between formal institutions, informal institutions, and those engaged in the informal economy. However, a key question remains, what role does social inequality play in determining success in achieving formal institutional goals in the informal economy? We study this in the context of co-creative forest management in India, where forest-fringe communities are facilitated by institutional mentors to form SHGs and develop sustainable business models to leverage forest resources in return for forest management assistance. Results from 220 forest management committees in India show that while negative social asymmetry inhibits attainment of formal institutional objectives, the effect is attenuated by positive social asymmetry. Extending identity theory to hierarchical diversity and social inequality, we conceptualize asymmetry as constructive, obstructive, or destructive. We find that sub-cultural and caste status asymmetry between the (formal) institutional mentors and the SHG participants clogs the institutional interface. Thus, results indicate support for mandated inclusion initiatives as an effective means to ensure formal institutional agency in the informal sector.
Cover Image
