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The informal economy presents significant challenges for governments, particularly in developing countries, where it constitutes a substantial portion of economic activities and employment. In the Democratic Republic of the Congo (DRC), this issue is especially pronounced, exceeding the average for Sub-Saharan Africa. Recognising the critical socio-economic implications of this phenomenon, the International Labour Organisation called for enhanced global efforts to address informality in 2020. Despite an increase in research on informality, significant gaps remain in our understanding of informal enterprises. This research aims to broaden the scholarship on informal entrepreneurship by evaluating different levels of informality in enterprises and their relation to the socio-economic characteristics of entrepreneurs, moving beyond the simplistic formal-informal dichotomy prevalent in existing literature. It develops a nuanced framework that views informality as a spectrum. Additionally, this thesis examines the prevailing assumption that informality has a negative impact on business performance (the poorer performance hypothesis), which often lacks robust empirical support, offering original insights into the dynamics of informality in contexts where the informal economy is predominant. The research has four primary objectives: (1) to elucidate the magnitude and prevalence of the informal economy in the DRC using institutional theory, particularly its historical context; (2) to explore and classify the varying levels of informality in business enterprises within the DRC; (3) to assess the socio-economic characteristics of entrepreneurs exhibiting different degrees of informality and how these traits correlate with their levels of formality; and (4) to investigate whether the performance of informal enterprises improves or declines as they transition to higher levels of formality. A mixed-methods approach is employed, incorporating data from the 2019 General Census of Enterprises, a survey of 300 businesses, and 30 in-depth interviews with informal entrepreneurs, public officials, and tax collectors. The research commences by analysing the mechanisms of informalisation, employing descriptive statistics from the survey and thematic analysis from the interviews. It categorises businesses based on varying degrees of informality and assesses the socio-economic characteristics of the entrepreneurs using ordered logistic and generalised ordered logistic modelling. Furthermore, it examines the informality-performance nexus, employing the potential outcome framework to estimate average outcomes using augmented inverse probability weighting estimators. The thesis identifies three groups of informal economy participants — survivalists, profit-makers, and those with mixed motives — each engaging in informal activities to varying degrees based on their socio-economic characteristics. The extensive informalisation of the DRC economy is driven by three mechanisms: the impoverishment of the populace, failures of formal institutions, and the involvement of elites in the informal economy. Consequently, most enterprises remain trapped in a cycle of high informality and low performance, leading to a high failure rate. This research enhances our understanding of the dynamics of the informal economy in the DRC and advocates for targeted policies to address the complexities of informality and improve enterprise performance.