Entrepreneurship, especially informal entrepreneurship, which reduces costs and risks by operating underground, has long been regarded as a means of alleviating poverty. Empirical studies on informal entrepreneurship are, however, primarily based on an economic analysis of maximizing profitability, ignoring the role of social situational factors. Drawing on motivation theory, this study examines the impacts of basic social welfare benefits on informal market entry. We posit that, when social welfare for basic human needs are absent, informal entrepreneurship can be embraced as a survival strategy. Furthermore, this strategy may differ depending on the attributes of individual entrepreneurs, ventures, and countries. In particular, the above relationship is especially stronger for females and solo founders. Additionally, uncertainty-tolerant cultures could counterbalance the deterring role of welfare benefits, while regulatory quality would amplify this effect. With a sample of 14,636 entrepreneurs from 44 countries and regions, our theoretical predictions are strongly supported using a multilevel methodology along with several robustness analyses. This study provides important theoretical and practical implications for the entrepreneurship–poverty relationship.
