Imacs 2016 imecs 2016 Proceedings (Preliminary version) of the 4
ENTREPRENEURSHIP AND REGIONAL DEVELOPMENT IN RUSSIA: FACTORS AND TRENDS
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- 314.Introduction
- 315.1 Conceptual framework and hypothesis
- 316. 3 Methodology and research
- 3.2 Objectives and selection of results indicators
- 317.3 Results and discussion
- 318.Conclusion
- 319.References
ENTREPRENEURSHIP AND REGIONAL DEVELOPMENT IN RUSSIA: FACTORS AND TRENDS313.Irina Prosvirina – Galina OstapenkoAbstract In this article the authors examine the performance of socio-economic development of Russian regions in conjunction with a large number of factors. At the level of hypothesis it is a link between the level of socio-economic development of regions and the level of entrepreneurial activity. The hypothesis is based on systematization and analysis of published studies on the nature of entrepreneurship and the factors affecting it. In order to test the hypothesis was treated a large array of objective statistical indicators of Russian regions (N=89) development on the basis of correlation and regression models. The findings revealed that there is a negative correlation between the growth of the Russian regions and the level of entrepreneurial activity. The authors made assumptions about the reasons for this relationship and of indicators and discuss the conditions enhancing entrepreneurial activity in Russian economy. The findings might be relevant in the conditions of economic recession and numerous attempts of the government to increase the level of entrepreneurial activity. Key words: entrepreneurial activity, regional development, Russian regions, factorial system of regional indicators JEL Code: L26, 047, R 58 314.IntroductionEntrepreneurship development is considered from two perspectives: first, as a factor for regional development and, secondly, as a result of regional economy as a whole. The research of entrepreneurship development and entrepreneurial activity from regional perspective is needed due to two reasons. The first reason stems from the fact that entrepreneurship is a phenomenon on a regional scale, in contrast to the levels of national and global economy, which is influenced by factors that are formed at the regional level. The second reason has to do with the different conditions of development of regions, which also requires taking into account the peculiarities of regions development. ¨ The main purpose of this study is to analyze the relationship between the level of entrepreneurial activity and regional development indicators as well as to identify the factors influencing entrepreneurial activity in the regions. The influence of a large number of factors on the effectiveness of regional development is presented. The results of these analyses show the complexity and ambiguity of impact of level of regional development and economic growth on the growth of entrepreneurial activity. 315.1 Conceptual framework and hypothesisEntrepreneurship has been identified by many researchers as a major driving force of a free market economy. However, it was only recently that economists began to synthesize the knowledge about entrepreneurship and analyze its impact on regional economic growth. Several studies have analyzed the complicated relationship between entrepreneurship and regional economic growth. Popli and Rao (2010) argue that the objectives of industrial development, regional growth and employment generation depend upon entrepreneurial development. Audretsch and Keilbach (2004) argue that a region must be endowed with entrepreneurship that enables the channeling of innovation into the market and thereby contributes to economic growth. González et al. (2009) argue that this process could trigger a virtuous cycle of development: «while region’s innovation capital and entrepreneurship capital may affect the achievement of higher levels of productivity, competiveness and economic welfare, it is also true that the level of prosperity may as well affect the enrichment of innovation capital and entrepreneurship capital». Precisely, this phenomenon can explain in part the persistence of the disparity among regions in their respective levels of welfare as well as the impact of certain regional capabilities (such as innovation and entrepreneurial success). It is also a distinctly spatially uneven process, reflecting path dependence in industry structure, institutions and culture (Saxenian, 1994), … that vary widely across regions and countries (Stam, 2010). The entrepreneurial activity, particularly the activities of small and medium-sized enterprises create a significant part of gross domestic product and is considered as a basis for the development of national economies, maintain social and economic stability in both developed and developing countries (Amini, 2004; Peters, 1982; Radam, 2008). Governance is an issue for all regions but it is in particular critical for those regions where coordination (and co-operation) is weakly developed and where more or less unregulated competition prevails (Scott & Storper, 1992). Especially the last group of regions face many problems and predicaments that compromise and threatens long-run viability and development. The relationships and interdependence of entrepreneurship and regional development was studied in the works of Russian researchers. For example, Basareva V.G. (Basareva, 2010) on the basis of modeling and simulation proved the dependence of small business development level on supply and demand`s equilibrium in the regional labor market; the direct dependence of the region's residents propensity for risk (the willingness to accept new ideas and democratic transformation generates a demand for labor in the small business sector). The conclusion made by Panshin I.V. (Panshin 2008) is between the level of entrepreneurship development and regions welfare: the less developed the region, the lower the level of entrepreneurship development. In economic research, entrepreneurial resources in different contexts are identified either with labor resources or managerial resources or represented as an independent resource. In general we defined the regional entrepreneurial resource as the totality of living in the region people who are able to understand the risks to carry out an independent economic activity in order to systematically obtain business income by combining and transforming economic resources to create new products and services that meet public needs, as well as regional infrastructure system, contributing to the development of entrepreneurship. This study is to examine the entrepreneurial activity as a factor, and as a result of regional development. As a research hypothesis we put forward the idea of the existence of a significant correlation between the entrepreneurship development with the results of socio-economic development of the Russian region. The hypothesis is based on systematization and analysis of published studies on the nature of entrepreneurship development and the factors affecting it. We tried to test this hypothesis on the example of Russian regions development.
3.1 Research methodsThe influence of a large number of factors on the effectiveness of regional development is presented in this research. For this purpose a system of regional development indicators and the important influencing factors of intensive regional development are formed. Factors reflect the objective conditions of Russian regions development as well as the level of entrepreneurial activity in the regions; regional governance efficiency and policy particularly upon small and medium enterprises (SME); management resource and others. In order to eliminate the influence of the size of different regions to research findings the relative indicators, reflecting the efficiency of resource use in the region, are included to the system of factorial indicators. Research is based on a regression analysis of statistical data of the Russian regions. Choice of the year of research caused by necessity to eliminate the impact of economic downturns and crises on the results of the study, so for the calculations was selected data from year 2012, favorable for the economy of the Russian regions. Calculations were carried out in years 2014-2015. For calculations was used only objective data of state statistics, on a basis of which, factor and target indicators for the construction of regression equations were measured. The system of result indicators includes those that reflect the economic, investment, innovative, socio-economic and external economic development of the regions: the ratio of gross regional product to the economically active population (Y1), the volume of investment in fixed assets per 1 ruble of GRP (Y2), the volume of shipped innovative products per 1 ruble of GRP (Y3), per capita income (Y4), the volume of foreign trade (exports) per 1 ruble of GRP (Y5). Verification of these indicators for the presence of cross-correlations showed their full independence, except significant correlation between indicators of GRP per 1 person of economically active population and per capita income (Table. 1). However, due to the importance of per capita income as a result of development of the region, this indicator is saved in the proposed system. Tab. 1: Coefficients of correlation between indicators of economical development of the regions Yj
3.2 Objectives and selection of results indicatorsWhen deciding on the choice of factors to assess their impact on the socio-economic development of regions, we relied on the opinions of scientists, recommending the use of multivariate statistical analysis methods, widely used in such studies. They allow to: a) take into account the impact of a significant number of factors on the development of economic processes in the regions of Russia (Pilasov, 2003); b) identify and justify the overt and hidden patterns of ongoing transformation of regional economies (Drobyshevskiy,2005); в) identify and assess how results of development is dependent on economic indicators of the regions (Zarova,2006). The system of factorial indicators includes 18 indicators that reflect the diversity of regional resources, from the material to the innovative and managerial, while these factors are relative indicators of the efficiency of resource` use. These indicators reflect the full range of resources involved in the process of regional development; characterize the impact of both traditional resources and innovative resources of reproduction. All indicators are objective and available, presented in a database of the Russian Statistic Agency. Indicators of use of traditional resources include the characteristics of the main resources used by regions, with an estimation of the environmental aspects of their use (wherever it is possible): fixed assets, energy facilities, the use of water and air for production purposes, human resources, financial resources (including deposits and loans). Managerial resources are characterized by such basic indicators as the economic return of management resources in the region, the import of technology, business and entrepreneurial climate which primarily affect the intensive and qualitative development of the Russian regions (Table 2). Tab. 2: The system of factorial indicators determining the level of regions development
317.3 Results and discussionIn the system of factorial indicators, the indicator describing the quality of entrepreneurial resources is represented by the share of small and medium businesses in the structure of gross regional product F17 (see Table 2). In the first stage of the study a regression model of dependence of resulting from the performance factor, which meets the reliability requirements is constructed. The model is represented by the following regression equation: R1 = 380 – 16493,5F3 + 134,4F8+ 0,9F10 + 1,42F11 + 8,67F15 – 334,4F17 R2 = 0,14 – 0,014F2 + 10,23F3 – 0,13 F6 + 1,49F12 R3 = 0,028 + 0,016F2 – 11,01F3 – 0,117F6 + 0,009F8 + 0,0008F11+ 0,0005F15 R4 = 26064,0 – 2529883,9F3 – 1,1F4 – 30144,6F6 + 1581,7F8+ 206,6F9– 2,5F10 – 6,5F11 + 0,2F14 + 186,6F15 – 118,9F16 – 5690,3F17 R5 = –0,001+6,797Е-07F4+4,055Е-05F11 + 0,0014F15 A set of factors that determine the performance of the Russian regions is provided with the above equations. Some of the factors in this case fall into several equations, which indicate their connection with several areas of regional development. On this basis the factors are highlighted with the highest and lowest impact on the development of the regions (tab. 3) are attributed to the factors with the greatest influence F3 and F15 (which are included in the regression equation 4 out of 5), as well as F6, F8, F11 (which are included in the equation 3 out of 5). Factor F17 reflecting the effect of entrepreneurial activity is included in the two regression equations describing indicators R1 and R4 (gross regional product per a worker and per capita income). Thus, the result shows that the entrepreneurial resources are not included in the system of determining factors in the development of Russian regions. These factors now are energy consumption of a person employed in the industry and efficiency of management resources. In the next step the level and direction of the relationship indicators of regional development and factorial indicators (value of pair correlation coefficients are shown in Table3) is examined. As it can be seen, the level of entrepreneurial activity has significant negative correlation coefficients with indicators of the value of GDP per person employed, and per capita income (shown in Table 3). This means that in most regions with the highest rates of GRP per employee and per capita income, entrepreneurial activity is lower than in other regions. Therefore, this study did not only confirm the hypothesis of the presence of significant association of entrepreneurial activity and regional development indicators, but showed the opposite situation. Tab. 3: The coefficients of pair correlation between indicators of regional development and factor indicators
To explain this situation, the authors analyzed the features of activities of the regions with the best values of GRP per employee and per capita income. These regions have well developed machine building, food industry and other industries; as a rule, they have a high rate of employment. Basing on this, the results can be interpreted as follows. 1. The economically active population of the Russian economy is focused, first of all, on working as employees in large companies operating in stable industries. According to the authors, the reasons for such behavior can be, firstly: unfavorable environment for business development. Signs of an unfavorable business environment include the following: volatility and high level of taxation; unavailability of financial resources due to the high interest rates on loans; high competition from big businesses; inability to compete for qualified personnel; other risks. Second, entrepreneurs` incomes are lower than the average wage in stable industries, so people prefer less risky and more profitable forms of employment; 2. The negative nature of the ratio between the indices of the value of GDP per person employed and the proportion of small and medium-sized enterprises in the region can be explained by the lack of human resources, namely: they demand large-scale industries, with the active development of the regional economy, hence with a smaller number of economically active population engaged in SMEs. You can talk about the redistribution of labor resources between big businesses on the one hand, and small and medium businesses - on the other. It is known that big business offers higher wages, good working conditions, social benefits and, therefore, attracts the most qualified workers in the labor market. In the next decade, this problem will only worsen due to demographic factors and the decline in the share of the economically active population; 3. The share of small and medium business is reduced because the large industrial enterprises in Russia practice outsourcing insufficiently or transferring non-profile functions to third-party companies, including small and medium-sized enterprises which occupy, as a rule, the high proportion with the growth of the regional economy. This model is inherited from the former socialist economy, when large enterprises were created as huge conglomerates that cover related functions and the full range of manufacturing processes for the production of any product. Currently, this model is supported by a low affiliate discipline and other similar scourges. Therefore, while creating large enterprises and developing their activities, the resources of small and medium-sized businesses are still poorly used, it means that the share of the latter with the growth of gross regional product falls. As a result a significant level of negative statistical relationship can be seen between the development of entrepreneurship in small and medium-sized businesses and regional development indicators. The nature of these reasons shows that no doubt with high quality of the regional management of the economy this problem could be solved. At the current level of quality of administrative resources in the regions we cannot observe relationship between GRP per executive employee in the regions and the level of entrepreneurial activity: the corresponding correlation coefficient, according to authors` calculations is -0.374. To increase the efficiency of management the following actions for every regional governance (the executive power) are supposed to be appropriate: the tax support for small and medium-sized businesses, the involvement of entrepreneurs in the process of learning and expanding appropriate programs, advice on business efficiency, financial support for the organization of new business entrepreneurs-residents in the region, the creation of a number of small businesses around large enterprises.
In general, the results refute the statement about the leading role of small business in the Russian economy, unlike other developing countries, which casts doubt on the effectiveness of government measures to revitalize small and medium enterprises in the Russian economy. 319.ReferencesAmini, Amin (2004). The distributional role of small business in development. International Journal of Social Economics, Vol. 31 iss: 4:370 -:383. Audretsch, D. B., and Keilbach, M. (2004). Entrepreneurship Capital and Economic Perform ance, Regional Studies, 38:8, 949-959. Audretsch, D and Keilbach,M. (2005).The Knowledge Spillover Theory of Entrepreneurship in Indiana University and the Division of Entrepreneurship, Growth and Public Policy http://web.mit.edu/iandeseminar/Papers/Fall2005/audretschkeilbach.pdf. Basareva, V. (2010) Russian small business entrepreneurship: modernization of public administration // Регион: экономика и социология. N 3, 2010 г. С. 249–266. Drobyshevskiy S. (2005) Factors of economic growth in the regions of Russian Federation. М.: IEPP, 2005. – 277с.] González, J. L.; Peña, I., and Vendrell, F., (2012). «Innovation, Entrepreneurial Activity and Competitiveness at a Sub-national Level», Small Business Economics,39:3, 561-574. Panshin, I.(2008). Entreprenueral resourse as element of regional resource substitution mechanism // Российское предпринимательство. – 2008. – № 7. Вып. 1 (114). – c. 24-28. – http://www.creativeconomy.ru/articles/4704/ Peters, T.J. and Waterman, R. (1982). In Search of Excellence, Harper & Row, New York Pilyasov, А. (2003) Political and economic factors of the Russian regions. Problems of Economics, iss. 5, 25-38. Popli, G. S. and Rao, D. N. (2010) A Study of Entrepreneurial Orientation & Inclination for Entrepreneurial Career of Engineering Students. Available at SSRN: http://ssrn.com/abstract=1530288 (Accessed 16 January 2010). Radam, Aalias, Abu, Bmimi Liana and Abdullah, Camin Mahir, (2008). Technical Efficiency of Small and Medium Enterprise in Malaysia: A Stochastic Frontier Production Model. Int. Journal of Economics and Management 2(2).. Saxenian, A. L. (1994). Regional Advantage, Cambridge, MA: Harvard University Press. Scott, A.J and Stoper, M.(1992). Regional development reconseded. In H Ernste and V. Meier (eds) Regional Development and Contemporary Industrial Response, 3-24. Stam, E. (2010). Entrepreneurship, Evolution and Geography. In: Boschma, R. & Martin, R. (eds.) The Handbook of Evolutionary Economic Geography. Celthenham, Uk: Edward Elgar Publishing Limited. Zarova, Е. and Kotyakova, M. (2006). The quality of region’s economic growth: methodological aspects of statistical research. Problems of Statistics, iss 5. Contacts Prosvirina Irina, South Ural State University, Lenina prospect, 76, room No 563, Chelyabinsk 454080 Russia iprosvirina@mail.ru Ostapenko Galina, Perm National Research Polytechnic University, Komsomolsky prospect 29, build. 1, room No. 511, Perm 614990 Russia
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