Mapping potential in the informal sector: profiling innovation capabilities for ‘smarter’ policy

While many businesses in the informal sector are survivalist and micro enterprises, there is some heterogeneity in business size, innovation and capabilities. The diversity necessitates a shift from generalized support to differentiated policy and targeted interventions. In this policy brief, we apply a new indicator framework to distinguish different profiles of innovation capabilities in the informal sector. Four distinct business profiles – skilled emulators, incremental improvers, proactive survivalists and intrinsic innovators – are identified, each of which exhibits a unique combination of competences and strategies to innovate. The classification supports the design of targeted support to unlock growth potential.