This paper examines the intention of entrepreneurs to remain informal entrepreneurs or exit to wage employment in three African countries. Building on the entrepreneurial cognition, exit and informality literatures, we propose that informal entrepreneurs’ intention to exit to wage employment depends on the extent to which the entrepreneur is involved in searching for new knowledge and information to improve their business activity, as well as the characteristics of the entrepreneur and the nature of the venture. We examine empirically this issue, while accounting for the self-selection of these entrepreneurs into the informal sector, using data from the World Bank Enterprise Survey and the Informal Sector Business Survey for Zambia (2019), Mozambique (2018), and Somalia (2019). Results suggest that intention to exit informal entrepreneurship for wage employment has an inverted u-shaped relationship with the extent of the entrepreneur’s involvement in active search. The results also suggest that the u-shaped relationship between active search and intention to exit is only observed for male entrepreneurs, while for female entrepreneurs search has a linear effect on exit intentions. We also find that the relationship between search and exit is stronger for sole entrepreneurs rather than for entrepreneurs at firms with multiple employees. We discuss the implications of our study for both theory and practice.
