Goal of research: Evaluation of new data on the structure and factors of entrepreneurial activity related to the influence of the policy of regional and local authorities. Collection and generalization of new data on embeddedness of integration and cooperation processes in economic activities and of their impact on industrial competitiveness of manufacturing SMEs. Identification of externalities affecting the changing approaches to design of SMEs support policies in developed market and transition economies. Complex analysis of information capacity of entrepreneurship and the SME sector statistics of Rosstat to develop proposals on improvement of the methodology of statistical observation of small business entities in the context of the information needs of business and public administration.
Methodology: When examining the effectiveness, sustainability and competitiveness of enterprising units in the context of budgetary policies and activities of the executive bodies to create a supportive environment for creating new businesses at the level of the Russian regions, a combination of quantitative and qualitative data analysis (including microdata), cross sectional comparison and longitudinal analysis was used. In examining the factors and conditions of competitiveness of Russian industrial SMEs quantitative analysis (descriptive statistics, regression, discriminant and cluster analysis) was developed. When examining trends in policies to promote SMES in several countries and contributing factors desk-research, as well as a survey of national experts was used.
Empirical base of research: database Georating 2011, RUFIGE2014, official statistics by the Rosstat, the database of the own survey of experts in related CEE and CIS countries.
Results of research: In a situation where the main competitors are domestic producers, a set of standard managerial decisions aimed at increasing markets and scale the business contributes to the competitiveness of Russian industrial SMEs.
In the contest with foreign manufacturers operating in the territory of the Russian Federation, the most competitive are those Russian manufacturing SMEs, which are actively investing in fixed assets and technological innovations on the market. On the contrary, such measures as the establishment of strategic partnerships in Russia, of sales management/procurement (CRM-system), or the creation and support of websites in Russian or English languages are correlating with meaningful results in terms of competition with foreign producers (both manufacturing their products on the territory of the Russian Federation, as well as importing products to Russia).
Organizational or financial support from the authorities did not show a significant relationship with the level of competitiveness of manufacturing SMEs. Thus, the State SME support policy by the authorities is either generally ineffective, or is not implemented properly, as exemplified by the representative sample.
A small bias in support of the authorities toward weaker SMEs was not significant. Thus, the importance of the activities of federal, regional or local authorities for creating competitive advantages for industrial SMES with low competitiveness was close to zero.
With the increase in the size of the enterprise, the proportion of SMEs managers involved in various kinds of supporting public authorities grows. However, a meaningful connection between the degree of involvement in such kind of relations with the authorities and the level of competitiveness of SMEs is not detected. Apparently helping authorities, is rather a form of enforced participation in important projects of the authorities, which does not guarantee to such sponsors any additional benefits in business, and serves only as a form of demonstration of their personal loyalty. More competitive SMEs showed a higher proportion of staff with high human capital: the level of qualification and higher education matters. The influence of the different proportions of the engineering personal in 2013 is statistically significant, suggesting a direct impact of this category on the competitiveness of industrial SMEs.
Also, significant influence and direct relationship between wages, as well as the share of labour costs in the cost of production, and the probability of respective manufacturing SMEs to belong to the category of industry leaders were identified. The level of wages is a significant factor of motivation, which has a direct impact on enhancing the competitiveness of manufacturing SMEs. The fact that the increase in the percentage of value added by living labour into the price of production is a factor of improvement of the competitiveness of manufacturing SMEs, is maybe the most unexpected result of this survey, and requires to be checked using other empirical data.
As a result of a complex analysis of information capabilities of Rosstat on assessing the effectiveness of entrepreneurship support policy in the Russian Federation and regions of Russian Federation, a system of indicators of the availability and effectiveness of activities in support of small businesses-small enterprises and individual entrepreneurs, suitable to be used in cross-country and cross-regional comparisons, was developed. Implementation of the proposed methodology for statistical observation of small business entities relevant to information management of:
- the activities of the State support of small business survival and development of entrepreneurship;
- the assessment and forecasting of business opportunities in Russia;
- the SMEs interaction with the executive authorities;
- measures to establish and develop the State infrastructure to support individual entrepreneurship;
- public credit, credit guarantees, credit monitoring and mediation, the development of microfinance;
- measures to support innovative individual entrepreneurship (including organizational and tax benefits);
- measures to support the nascent and fast-growing small companies on a full circle of economic entities;
- measures to support export-oriented individual entrepreneurs;
- creating of favourable conditions for the acquisition and/or leasing of modern manufacturing equipment and facilities;
- municipal entrepreneurship development programmes, including programmes of diversification of production in mono-cities.
Improving of information effectiveness of the federal surveys concerning the state and development of entrepreneurship in the regions of the Russian Federation should be organized in two ways:
- expanding the list of indicators to be published which are formed as a result of statistical surveys (on taxation of small business entities),
- the development of additional indicators (business demographics and key demographic indicators of entrepreneurial activity, formed as a result of the pilot project of business demography in 7 subjects of the Russian Federation), their distribution on the totality of enterprises and the constituent entities of the Russian Federation.
Overall, the analysis found no link between the structure of consolidated regional budgets costs and early entrepreneurial activity. At the same time it is found that subsidies for balancing budgets, subsidies to co-finance of capital investments, subsidies for the implementation of additional activities on the employment market, subsidies to regional budgets to reimburse a part of the interest rates of SMEs borrowings, have a positive effect on entrepreneurial activity at an early stage of the business on long-, medium- and short-term.
The growth of grants attraction in the structure of the sources of funding of consolidated regional budgets has a positive effect on the early stage of entrepreneurial activity. Moreover, the intensity of attraction of grant revenue in the structure of the funding sources of consolidated regional budgets affect early entrepreneurial activity with a 3-year time lag, because of the inertia in the behavior of early entrepreneurs, and the lasting effects of economic policy measures.
‘Georating’ data analysis (2011) showed that regions with high values of the population well-being and dynamic development of small business should be considered as exceptional cases in economic-geographic space of Russia: there are only 6 such regions (Moscow metropolitan area, St. Petersburg, as well as the oil regions of the Ural federal District -13.2%, 3.5% and 4.2% of the economically active population respectively). In disadvantaged regions, in terms of the standards of living and the level of development of small business, the support of entrepreneurial networks or entrepreneurship education are not effective to provide a meaningful impact on improving of the entrepreneurial capacity, because regional problems form there a innovation resistance habitus. In disadvantaged regions with a huge lack of investment any financial support of entrepreneurship (including start-up and non-entrepreneurial groups of population inclined to pursue their business ideas) by the Government, will contribute to the growth of entrepreneurial activity. In disadvantaged regions with huge social problems, to effectively support the entrepreneurial activity, first of all, an increase of the households’ wellbeing is a necessary pre-condition for the expansion of the entrepreneurial activity of the population.
Motivation is particularly important for early business and its specific stages -nascent and novice entrepreneurs. To identify the most significant in the economic, social and institutional factors on the regional level, which predict a opportunity motivation of the population to start and run a new business, regional development indicators published by Rosstat were used. The total number of indicators for each region made 257 basic items, describing the change in the relevant level of indicators for the period of 2000-2011. For the analysis, the nonparametric linear discriminant Fisher’s model was used.
Opportunity based novice entrepreneurs are more dependent on external factors than opportunity based nascent entrepreneurs: for the novice entrepreneurs, a more complex model of the dependence of motivation from barriers and incentives on regional level is fixed.
Both the prevalence of opportunity based nascent as well as of opportunity based novice entrepreneurs is most strongly affected by the dynamics of average per capita income and their relationship with the amount of the subsistence level, which can be interpreted as independence of decision on business. Along with the business-cycle extension, the role of financial risks evolves: the growth of the average size of ruble-denominated bank deposits of individuals is a catalyst for novice, but not for nascent entrepreneurs. Improving of the quality of life of the population is an incentive for opportunity motivation of both nascent and novice entrepreneurs. Worsening of the social environment has a push-effect on the adult working-age population’s opportunity based entrepreneurial activity.
The factor of State financial support of entrepreneurship is not significant for novice entrepreneurs.
To estimate the inertia of population regarding the decision on starting of a new venture, the analysis of predictors with a time lag was conducted. A set of indicators that affect the decision on starting of a new venture with long-, medium- and short-term time lag for nascent and novice opportunity driven entrepreneurs was found.
Non-entrepreneurial segments of the population in clusters of weak regions were more dependent on internal factors than the population in more successful (rich) cluster of regions.
The influence of socio-economic context is manifested not only in a different number of factors, but in their multidirectional impact on intensifying the non-entrepreneurial segments of population in the clusters of problematic and successful regions.
In problematic regions, for non-entrepreneurial groups of population, particularly in older age, high self-evaluation of knowledge, skills and experience required to start a new business, as well as the second employment with high salary and acquaintance with a person who started a new venture over the past two years, are incentives to engage in entrepreneurial activity. In more successful regions, on the contrary, these factors are discouraging individuals to engage in business activities, because in stable socio-economic conditions hired employment is a good alternative for persons aware of skills and social experience. In addition, it came out that in successful regions access to formal sources of financing for start-ups, availability of property as a source of income and availability of loans to start a venture contribute to the growth of entrepreneurial activity at different stages of the business cycle, but reduce the likelihood of non-entrepreneurial groups of population to start-up, possibly due to a more dense competition among the nascent and new entrepreneurs, resulting from their big numbers in the respective region.
Providing funds for establishment of a new business; presence of business angels are significant stimuli in problematic regions but have no meaningful impact on entrepreneurial activity in the cluster of successful (rich) regions.
Insufficient informational support of State support for SMEs forms a constraint of the entrepreneurial activity due to the engagement of the non-entrepreneurial part of population. Under the circumstances of a popularization of entrepreneurial activity among the population, propaganda of personal qualities and achievements should become one of the priorities of the entrepreneurship activity support programme.
The identified composition of external factors and related time lags lead to the conclusion that a targeted approach to the formulation of the agenda of entrepreneurial activity support programmes in the short and medium term for specific regions is needed, taking into account the varying set of institutional conditions in related subjects of the Russian Federation.
It is proposed:
- for a very small group of regions with proficient budgets, a high proportion of educated urban population, well-functioning industrial economy, relatively efficient system of representation and protection of interests of businesspeople, a model of holistic policies with some reservations, could be offered - at the expense of own resources, which should be expanded (inspiring!) by translating to them the additional tax revenues – on the conditions of (a) providing of tax loans from the federal budget, while the interest on which could be diminished, if (b) an independent system of monitoring and evaluation of the impact and effectiveness of the implemented policies is granted. The latter should combine support to the SMEs and start-ups (including financial mechanisms) and measures aimed at strengthening the entrepreneurial activity of the population, combined with active support of infrastructure and procedures to facilitate the rapidly growing high-tech start-ups, as well as networks (around major high-tech companies and medium-sized "gazelles") and enterprise ecosystem (consisting of incubators and technology parks of leading universities, associations of business angels and venture entrepreneurs, etc.);
- in regard to the relatively limited group of subjects of the Russian Federation with moderate budget deficits, a high proportion of educated urban population, stagnating industrial economy, a weak system of representation and protection of the interests of SMEs the policy should focus on "niche" policies to promote entrepreneurship combined with elements of policy to support the creation of new firms. Such a policy could be co-financed by the Centre and the regions 1:1 and combine elements of start-up financial support for infrastructure development business incubation and support networked forms of interaction of certain target groups with potential investors (MFOs, etc.). Monitoring and evaluation should be delegated to business associations, or industry chambers, providing them with grants from the federal budget. If no key indicators of efficiency and effectiveness in the regions were been achieved, sanctions should be applied – for instance, diminishing the share of the federal budget in the funding of related policies in the next period (e.g. 1:2, instead of 1:1) and engaging of a Federal authorized body to the monitoring procedures and evaluation;
- for a large group of regions with acutely scarce budgets, low proportion of well-educated population, living mainly in small settlements, with fragile economic development and weak industrial infrastructure, missing of a system of protection of the SMEs interests, a "niche" policy to promote entrepreneurship may be offered, to be realized, under the condition of co-financing from the federal budget in proportion 1 (region): 4 (Federal Center) - with clearly defined performance criteria. In case of mismatch, the regions should be de-stimulated by increasing regional budget share (up to 50%) in the financing of appropriate policies in the next reporting period. Monitoring and evaluation should be carried out only by the authorized federal body;
- for a large group of Russian regions with chronically and acute budget deficits, in which subsidies, subventions and other federal transfers exceeds half of the revenue side, with a predominantly rural population, living from subsistence economy, fisheries, etc., a low percentage of well-educated population, an absence of industry, a very tiny presence of existing SME, a policy agenda should be offered to encourage the creation of new firms – with all usually used appropriate measures and instruments, which should be implemented purely for federal funds on a Treasury basis by a federal body responsible for SME support policies.
Reassessment of tools used by the SME support policy is needed, in general. First of all, the stimulating of the SMEs involvement in the State procurement. Along with the fact that this sphere is eminently corrupt, it increases the risk of "failure": if the respective State enterprise or corporation would implement a short-sighted strategy posing growing structural imbalances, the strategy to involve SMEs in the procurement system might "infect" those small vendors and diminish their competitiveness on the open market. Secondly, on the basis of the study results, a renunciation of "duplicating" the federal State policy matrix to form a regional SME support programmes is required, since such an approach does not take into account the diversity of initial conditions and prerequisites. Thirdly, the system of monitoring and evaluation of the results of policy implementation should be seriously reorganized, to avoid conflict of interest, thus enhancing the role of business associations and expert community in monitoring actual results of SMEs and entrepreneurship policies at the Federal and regional levels, as well as forming of a system based on representative surveys, monitoring of the status of the SME sector and infrastructure support which should be performed by independent analytical organizations. Fourthly, at the federal level a coordination of policies to promote entrepreneurship, innovation and industrial policy, educational and scientific policy, etc. should be achieved. Fifthly, at the federal level, it is necessary to formulate and implement long-term educational and cultural system of entrepreneurship support in the form of development of integrated system of standard educational products at all levels of secondary, tertiary and higher education, entrepreneurial competencies among students of engineering, as well as training and professional development of teachers; a system of competitions of entrepreneurial ideas and business plans, starting from below, at the municipal level; competitions for the mass media for the best coverage and the formation of a positive image of entrepreneurship among readers/users. Sixthly, the discourse about policy to support SMEs and promoting entrepreneurship in developed economies and in the former socialist countries in Europe should be carefully monitored.
Level of implementation, recommendations on implementation or outcomes of the implementation of the results:
The results of NIR can be implemented:
- in teaching activities (entrepreneurship courses, statistics, data analysis methods of sociological research, world economy);
- by the Agency of Strategic Initiatives, the Ministry of Economic Development and the relevant bodies of executive power of the Russian regions when developing approaches to ranking and typology of regions by the level of entrepreneurial activity and the choice of forms and instruments for its support.