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Early Entrepreneurship in Russia: Regional Dimension

2011
Department: Laboratory of Entrepreneurship Research
The project has been carried out as part of the HSE Program of Fundamental Studies.

Research object:

Entrepreneurial potential and entrepreneurial activity of Russia’s population  in its territorial aspect

Objective of the work:

1. To receive representative data on entrepreneurial potential as well as on running business activity in Russia – in the context of some key economic and socio-demographic signs.

2. To continue the elaboration of some new terms and definitions of the entrepreneurship theory and indicators of entrepreneurial potential development (parallel entrepreneurship, TEA index, entrepreneurial potential turnover index etc.)

3. To characterize the entrepreneurial climate in Russia and its regions and to discover the crucial factors determining the ease degree of the entrepreneurial framework conditions for entrepreneurship from the point of view of prospective entrepreneurs.

4. To prepare practical recommendations on targeted support of prospective groups of early entrepreneurs, as well as on promotion of entrepreneurial activity of population under the regional aspect.

Empirical basis of research:

1. Russian adult population survey on the base of representative sample in line with “Global entrepreneurship monitor” method (number of respondents – 7 500 pers.)

2. Russian adult population survey on the base of regionally representative sample in line with the longitudinal research ‘Georating’ of the Fund of Public Opinion (total sample - 56 900 resp., each 800 respondents in 58 regions of the RF and each 500 respondents in 21 regions of the RF)

Results:

1. As regards theoretic and methodic results, the main achievement is the elaboration of a method of a composite index of entrepreneurial activity on the regional level, enabling an entrepreneurial activity ranking of subjects of the RF.

2. The dynamics of entrepreneurial activity of the Russian population is positive but remains low, as well as the level itself compared with other participating countries in 2011 – among them, two key benchmark groups like BRICS and CEE. Russia has significantly lower data in nearly all indicators of entrepreneurial activity than other BRICS countries, and shows more or less similar indexes with most problematical CEE countries.

3. The tendency toward male dominance in the entrepreneurial sphere is steady in 2011. Men show higher self-efficacy and lower risk perception rates.

4. The average age of potential and early entrepreneurs coincides at 36 years. There are no important differences between different age cohorts of early entrepreneurs towards entrepreneurship. Most sensitive to several factors affecting the perception of entrepreneurial conditions are the potential entrepreneurs.

5. The higher the education level, the higher us the self-efficacy, and the lower is the ‘fear of failure’ rate.

6. The education level does not have any significant impact on involvement in entrepreneurial activity.

7. On the whole, the motivational structure of Russian early entrepreneurs in 2011 can be described as quite favorable in terms of proportions of opportunity-driven and necessity-driven entrepreneurs. The share of opportunity-driven entrepreneurs is much higher than that of necessity. A comparative analysis of opportunity-driven and necessity-driven early entrepreneurs showed that opportunity-driven entrepreneurs are characterized by a higher level of formal education, higher risk appetite, better financial standing, and greater involvement in entrepreneurial networks as compared to necessity-driven entrepreneurs.

8. Considerable differences are observed in the education structure of early entrepreneurs depending on the size of the local community, with the share of early entrepreneurs with higher or incomplete higher education declining as the size of the community becomes smaller (from metropolis to village).

Early starters in smaller communities are the least optimistic about the prospects of starting a business in their local environments, and they are also the least involved in social networks of entrepreneurs and demonstrate the highest rate of fear of business failure. Early entrepreneurs who live in Moscow and St. Petersburg are the most confident of success.

9. The gradual national economic rise is accompanied by a growing share of early entrepreneurs who are ready to  exclusively invest their own money in the developing business. Most people in this group have a permanent source of income from a wage employment job or self-employment, and also are opportunity-driven.

10. The 2011 data show an elimination of crisis tendencies of 2009-2010: 1/5 of early entrepreneurs and 1/4 of established business owners have intentions to establish at least 20 jobs.

11. The key role in innovation activity of  early Russian entrepreneurs is played by their orientation on foreign markets.

12. The median level of the TEA in Russia is 4,8 – 5,2%. The scope of variation of the TEA among regions is 8,8% - from the minimal level of 1,2% in Carelia to the maximal level of 10% in Dagestan.

14. In Russian regions, 12 main types of  entrepreneurial strata reproduction can be selected, among them three are dominant (however only one of them – the “hourglass” – has a progressive structure). Each of them reveals a fundamentally different proportion between entrepreneurial cohorts such as nascent, baby business and established business owners.

15. The most problematical situation with entrepreneurial activity is found in regions of the RF which show regressive reproduction types – “urn” and “growing mushroom”. The “urn” (a clearly expressed downgrade of nascent entrepreneurship compared with the new business) was found in such subjects of the RF as Kursk, Moscow, Ryazan, Kaliningrad oblasts, Saint-Petersburg, Kalmykia, Karachay and Cherkessia, Chuvash republics, Kurgan, Tyumen oblasts, Yamalo-Nenetsk autonomous okrug, Buryat republic, Altay kray, Irkutsk and Kemerovo oblasts, Zabaykalsky and Kamchatskykrays. The «growing mushroom» (extremely low flows of both nascent as well as  baby business owners, when compared with established business owners) shows in Vladimir, Orel, Tula, Leningrad oblasts, Krasnodar kray, Volgograd and Rostov oblasts, republics Tatarstan and Udmurt, Sverdlovsk and Chelyabinsk oblasts, Krasnoyarsk and Chabarovskkrays.

16. The dominating type of reproduction called “hourglass”, showing a structure of reproduction with a high share of nascent and established business owners who might be seen as  progressive, was been found in North-Western federal district  (40% of regions), in Volga federal district  (29% of regions), in the Central federal district  (22%), whilst in Northern Caucasian and Ural federal districts, only one region each. In Southern and Far Eastern federal districts this type of reproduction is absent.

A progressive type of entrepreneurial activity reproduction like “spire” could been found in Smolensk oblast, Dagestan and Bashkir republics, Nizhniy Novgorod and Saratov oblasts, Perm kray, republics Khakassiya and Sakha (Yakut).

17. The qualitative structure of entrepreneurial activity also differs very much among the regions. The biggest portion of regions with the dominance of the opportunity-based entrepreneurship in all entrepreneurial cohorts concentrates in the Sibir federal district (ca. 21% of all regions with such structure of entrepreneurial motivation), and the smallest portion is in the Central federal district (ca. 3%). Regions with prevalence of opportunity-based entrepreneurship in all entrepreneurial cohorts are dominating in the Far Eastern (63%) and Northern Caucasian federal districts (60%). In the Southern, Ural and Sibirfederal districts the share of regions with analogues structure is relatively high, too: 50% in each of them. In Volga and North-Western federal districts the share of such regions is much lower: 36% and 30%, respectively. In the Central federal district, only in Moscow (the single of 18 belonging subjects of the RF) does  opportunity-driven entrepreneurship prevail in all cohorts.

18. On the base of this  analysis, a level of entrepreneurial potential (LEP) of subjects using RF ranking was built; according to this ranking, some regions of Russia which traditionally are considered to be advanced with regard to entrepreneurship development and  supportive strength (for instance, Moscow, Moscow and Kaluga oblasts, Perm kray) proved to be in the cluster of regions with LEP lower than median, whilst most of the regions of the  Central, North-Western and Volga federal districts belong to the cluster of regions with higher than median LEP values.

The level of implementation, recommendations on implementation or results of implementation of the research:

The achieved results should be used to help set up a better entrepreneurship promotion policy on the federal level. In particular:

1. To draw the attention to the fact that if the current tendencies in Russia are preserved, we will face in the mid-term  a definitive lag behind  the group of the most dynamically developing new leaders – such as China, Brazil and some others – as regards the dynamism and ‘quality’ of  entrepreneurial activity. This circumstance requires no more partial improvements, but а major revision of the entrepreneurship and innovation policy;

2. When trying to support youth entrepreneurship, the possibilities of a ‘rejuvenation’ of this entrepreneurial stratum should not be overestimated – with the exception of high-tech clusters.  Specifics of entrepreneurial climate and weakness of development institutions at the regional level are definitively stimulating mid-age entrepreneurial start-up activity;

3. At the same time, in the segment of innovation-driven start-up entrepreneurship, it is exactly the support of the entrepreneurial abilities and intentions of students which becomes the urgent feature of any educational system reform, if Russia seeks to focus on innovative entrepreneurship, i.e. ‘intelligent and knowing’ entrepreneurship in the mid- and long-term future;

4. The situation in cities with more than 1 mill population should be seriously revised. Being mostly regional capitals and possessing a broader asset of possibilities to promote entrepreneurial activity, currently they seem to be the most problematical areas – taking into consideration not so much the intensity of entrepreneurial activity but rather the psychological and motivational specifics of early entrepreneurs there;

5. To diversify the policy concerning different types of regions in Russia, while basing the policy on a complex estimation of the entrepreneurial potential of different locations and municipalities. For instance, it is necessary to realize a balanced set of measures to stimulate the leaders, and to conduct measures to align regions to produce the conditions for early entrepreneurship, because there is a significant disparity of entrepreneurial potential and entrepreneurial activity levels among the regions. Apparently, the federal state will need to co-finance measures to establish more advanced infrastructure objects and institutions of development in leading regions, whilst focusing primarily on forms like promotion of entrepreneurial success, co-funding of entrepreneurship courses etc as well as microfinance organizations in less developed regions.

Publications:


Габелко М. В. Оценка непредпринимательскими слоями населения условий для развития предпринимательства в России // Вестник Университета (Государственный университет управления). 2013. № 17. С. 51-59.
Чепуренко А. Ю. Возможности и перспективы развития предпринимательства в России // В кн.: Современные классики теории предпринимательства / (под ред.: А. Ю. Чепуренко). М. : Издательский дом НИУ ВШЭ, 2013. Гл. 17. С. 497-526.