functioning of the local production systems european countries … · the marshallian concept of...

Functioning of the Local Production Systems

in Central and Eastern European Countries

and SiberiaCase Studies and Comparative Studies




Edited byMariusz E. Sokołowicz

Mariusz E. Sokołowicz – University of Łódź, Faculty of Economics and SociologyInstitute of Spatial Economics, Department of Regional Economy and Environment

90-214 Łódź, 36 Rewolucji 1905 r. St.

REVIEWERAdam Polko

PUBLISHING EDITORBogusława Kwiatkowska

TYPESETTINGAGENT PR

COVER DESIGNStämpfli Polska Sp. z o.o.

Cover photo: © Shutterstock.com

Monograph financed under a contract of execution of the international scientific project within 7th Framework Programme of the European Union, co-financed by Polish Minis-try of Science and Higher Education (title: “Functioning of the Local Production Systems in the Conditions of Economic Crisis (Comparative Analysis and Benchmarking for the EU and Beyond”))

Monografia sfinansowana w oparciu o umowę o wykonanie projektu między narodowego w ramach 7. Programu Ramowego UE, współfinansowanego ze środków Ministerstwa Nauki i Szkolnictwa Wyższego (tytuł projektu: „Funkcjonowanie lokalnych systemów produkcyj-nych w warunkach kryzysu gospodarczego (analiza porównawcza i benchmarking w wybra-nych krajach UE oraz krajach trzecich”))

© Copyright by University of Łódź, Łódź 2015

Published by Łódź University PressFirst Edition. W.06764.14.0.K

Ark. wyd.10,7; ark. druk. 14,375

ISBN 978-83-7969-491-4 (p)ISBN 978-83-7969-492-1 (online)

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CONTENTS

M. E. Sokołowicz – Foreword

PART I. CASE STUDIESK. Borseková, K. Petríková – Creative local production systems (the case of building a creative city Košice) N. A. Kravchenko – Regional production system driven by innovation develop-ment: case of Siberia, Russia I. Slavova-Georgieva – The competitiveness of cluster “Srednogorie med”: precon-ditions and limitations Y. Tsvelodub – Coal mining areas: environmental issues and solutions (on the exam-ple of Kuzbass) R. Radev – Business strategies of companies and local production systems in Bul-garian dairy industry

PART II. COMPARATIVE STUDIESM. Kalisiak-Mędelska – Self-government in Poland and Russian federation – intro-ductory remarks B. Gontar – Email inquiries in hotels. Comparative study of Łódź and NovosibirskI. Bednarska-Wnuk – Mobile behaviors of generation C in the local labor Mar-ket: A case study of Poland and Russia K. Januszkiewicz – A career model under the conditions of change and economic crisis – a comparative study conducted in Poland and Russia Z. Gontar – Perspectives of Integrated “Next Industrial Revolution” Clusters in Poland and Siberia M. Marks-Krzyszkowska – Polish and Russian rural areas in transition. Land and demography

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FOREWORD

Interest in territorial forms of organization of production seems to be today at its peak, both among researchers and practitioners, representatives of authorities, entrepreneurs or experts involved in developing the idea. Many studies, which consider this phenomenon, are conducted by diffe-rent research teams and cover various, often economically and culturally distant areas, which results in a variety of ideas.

Referring to a range of territorial forms of organization of produc-tion as the emanation of the agglomeration economies’ mechanism, we should refer to their roots, represented by the concept of industrial district, introduced by Alfred Marshall.1 This Author was the first who introduced this concept as a tool of explaining systematically the rea-sons of effectiveness, derived from the geographical proximity of en-terprises. Thanks to joining together economical, social and cultural re-sources of a given territory inside the framework of industrial district, a new important production factor appears. This factor is an alternative to the basic production factors and from this moment – a concentration of enterprises is not only a simple geographical agglomeration of en-terprises, but rather an economic and social network built on mutual interrelations.

The Marshallian concept of industrial districts has also formed a strong conceptual basis for many other models of territorial organization of pro-duction. Among the most recognizable one can indicate neomarshallian

1 A. Marshall, Principles of Economics, Macmillan, London 1920.

M. E. Sokołowicz8

industrial districts (knew also as Italian industrial districts),2 new industrial spaces,3 French concept of innovative milieux,4 the idea of learning re-gions,5 and finally the Porter’s concept of clusters6 having, however, many critical counterparts.7

Finally, one of the most fruitful strands of economic though on the mechanism of territorial concentration of economic activity can be identified in the works on local production systems (LPS).8 Local pro-duction systems (LPS) are undoubtedly one of the most important factors of competitiveness and innovativeness. Due to their philosophy of func-tioning (partnership and cooperation of various types of milieus), they cre-ate a platform for joining the worlds of economy, public sector and science – hitherto isolated.

In the contemporary literature one can also find critical approach to the local production systems. It refers strongly to the cognitive aspect

2 G. Becattini, The Marshallian Industrial District as a Socio-economic Notion, [in:] F. Pyke, G. Becattini, W. Sengenberger (eds.), Industrial Districts and Inter-firm Co-operation in Italy, International Institute of Labour Studies, 1990, p. 37–51.

3 A. Scott, New Industrial Spaces: Flexible Production Organization and Regional Development in North America and Western Europe, Pion, London 1998.

4 Ph. Aydalot, Trajectoires technologiques et milieux l’innovation, [in:] Ph. Aydalot (ed.), Milieux innovateurs en Europe, GREMI, Paris 1986; R. Camagni, D. Maillat, Milieux innovateurs. Theorie et politiques, Oconomica Anthropos, Paris 2006.

5 B. Asheim, Industrial Districts as Learning Regions. A Condition for Prosperity?, “Studies in Technology, Innovation and Economic Policy”, University of Oslo, Oslo 1995; R. Florida, Toward the Learning Region, “Futures” 1995, Vol. 27, No. 5, p. 527–536.

6 M. E. Porter, Clusters and the New Economic Competition, Harvard Business Review, November–December 1998, p. 78; M. E. Porter, The Competitive Advantage of Nations, The Free Press, New York 1990.

7 E. J. Feser, Old and New Theories of Industry Clusters, [in:] M. Steiner (ed.), Clusters and Regional Specialisation, Pion, London 1998; A. Hamdouch, Innovation Networks and Clusters: A Critical Review of the Recent Literature, Proceedings of the 19th EAEPE Conference: Economic Growth, Development and Institutions, Porto 2007, www.fep.up.pt/conferencias/eaepe2007/Papers%20and%20abstracts_CD/Hamdouch.pdf. Accessed 02.08.2014. R. Martin, P. Sunley, Deconstructing Clusters: Chaotic Concept or Political Panacea?, “Journal of Economic Geography” 2003, Vol. 3(1), p. 5–35.

8 C. Courbet, Les systemes productifs locaux:de la definition au modele, [in:] Reseaux d’entreprises et territories. Regards sur les systemes productifs locaux, DATAR. La documentation Francaise, Paris 2001.

Foreword 9

of theirs functioning, as despite semantic similarities between defini-tion of various territorial forms of organization of production (including LPS), they still remain ambiguous. It refers both to the basic concepts and the scale of analysis (there is no agreement to which scale geographical proximity this concept should refer).9 This ambiguity challenges the pos-sibility of building grounded and internally coherent theory of local pro-duction systems and other forms of territorial organisation of production.10 In this context, regional and local case studies can contribute significantly to the stock of knowledge about local production systems. However, in or-der to ensure their comparability and to elaborate a common “research code”, a creation and development of platforms for collaborative research is necessary.

Such research platform has been created within the framework of the project Functioning of the local production systems in the conditions of economic crisis (comparative analysis and benchmarking for the EU and beyond) (acronym FOLPSEC), financed by the European Union’s 7th Framework Programme. A project that aimed at exchange knowledge on re-search approaches in studying LPS, and making use of knowledge gained through the international cooperation, concentrated primarily on identify-ing both common features and territorial specificities of local production systems’ functioning in Bulgaria, Poland, Russia, Slovakia and Ukraine.

This book is a collection of the most empirical part of the studies conducted during this project and consists of two parts. First is devoted to the case studies of local production systems functioning in Bulgaria, Russia, and Slovakia, while the other presents the results of valuable com-parative studies made in chosen cities and regions in Bulgaria, Poland, Russia, Slovakia and Ukraine. First part opens the work of K. Borseková and K. Petríková, analyzing the case of building a creative city Košice,

9 T. G. Bunnell, N. M. Coe, Spaces and Scales of Innovation, “Progress in Human Geography” 2001, 25(4), p. 569–589.

10 F. Moulaert, F. Sekia, Territorial Innovation Models: A Critical Survey, “Regional Studies” 2003, Vol. 37.3, p. 289–302; M. E. Sokołowicz, Territorial Context in the Research on the EU Cohesion. One-Speed or Multi-Speed Europe?, [in:] T. Markowski, M. Turała (eds.), Territorial Cohesion Policy in Poland – Issues in Impact Assessment, “Studia Regionalia” 2012, Vol. 33, p. 9–28.

M. E. Sokołowicz10

Slovakia. Its lecture can reveal that creativity as a source of future devel-opment can be a solution for some cities not only in western European and Northern American, but also in transforming economies. Similarly, writing of N. Kravchenko shows that the concept of regional innovation systems can be applied in Russian Siberia, on the basis of the geographic concentration of technological potential of Novosibirsk companies, uni-versities and research centers.

Next three papers are the case studies of local production systems from different industries. Chapter by I. Slavova-Georgieva is a case study of Bulgarian mining cluster “Srednogorie Med” (made with the usage of widely recognizable “Porter’s diamond” method) and can be compared with the deep analysis of the environmental issues of Kuzbass coal mining area in Russia, made by Y. Tsvelodyb. First part of the monograph closes work of R. Radev on business strategies of some companies and local pro-duction systems operating in Bulgarian dairy industry.

Comparative studies being the second part of the monograph leave aside the presentation of particular LPS, but concentrate on the compa-risons of the economic, social and technological conditions of their func-tioning. Showing the similarities and differences in the establishment and functioning of self-government in post-communist times in Poland and Russian federation, is the subject of the work conducted by M. Kali-siak-Mędelska. It is followed by the comparative study of e-mail inquiries in hotels of Łódź (Poland) and Novosibirsk (Russia), as technological driv-ers of business trips (B. Gontar).

Another two chapters refer to the aspects of human capital devel-opment as one of key factors of the functioning of economies and local production systems as well. Paper of I. Bednarska-Wnuk is a study on the needs, attitudes and competences of the generation of youngsters (university leavers) from Łódź and Novosibirsk just before entering the la-bor market while work of K. Januszkewicz is an attempt to depict a more general career model of the young generation on Polish and Russian labor markets.

Last two papers also refer to the Polish-Russian comparisons. Z. Gon-tar presents the mapping of potential next industrial revolution clusters in Poland and Siberia within the framework of economic deindustrializa-

Foreword 11

tion processes, and M. Marks-Krzyszkowska depicts the social and eco-nomic aspects of rural areas transformation in both countries.

The main idea of this monograph was to present the case studies and comparative studies of countries classified as part of Central and East-ern European economies. Additionally, in case of Russia, also Siberian part of this country was taken into account. In all the above countries and their cities and regions, one can identify many similarities, but also differences. Within last twenty years, all of the countries where research was made, have been transforming their economies from post-socialist into market-based. Thus, one of the axes of the comparison went naturally in this direction. The other similarity – a particular geographical location – resulted in ana-lyzing business strategies of LPS concentrated mainly on CEE markets.

On the other hand, also many differences between these countries have been identified. Some of them can be observed on the national econ-omies level, but undoubtedly most of them were of local and regional cha-racter – the main geographical scope of LPS studies. These studies always underline that every “territory” should be considered not only as a subject of analysis, but a variable itself, having its own historical, social and eco-nomic development trajectories. With no doubt, identifying them can con-tribute significantly to deepening the knowledge about local production systems functioning in this part of the world.

Mariusz E. SokołowiczPh. D. Coordinator of the FOLPSEC project in Poland

PART I.CASE STUDIES

Kamila Borseková*, Katarína Petríková**

CREATIVE LOCAL PRODUCTION SYSTEMS (THE CASE OF Building A CREATiVE CiTY KOŠiCE)

1. introduction

Creativity has become a motive power of economics. Nowadays, the development of creative industries significantly influences the growth of GDP and declares its importance in regional and local development.

The aim of the paper is to identify the main trends in formation of cre-ative local production systems and to characterise its operating in regions on the base of the description of selected best practices. The first section of the paper contains the theoretical basis of creative local production systems – creativity, creative industries and creative economy. The main components of such economy are creative industries based on human cre-ativity. Human creativity and new ideas are the movers of the economic development and innovation. In the second section of the paper we pay attention to the most common types of creative local production systems – creative clusters and creative cities.

* Ing., PhD., Institute of Economic Sciences, Faculty of Economics, Matej Bel University.

** Ing., PhD., Department of Public Economics and Regional Development, Faculty of Economics, Matej Bel University.

K. Borseková, K. Petríková16

2. Theoretical foundations of creative local production systems

Currently, intangible resources have become more important than tangible resources. They are unlimited and their distinctive advantage is inexhaustibility. One of these resources is creativity, which is also the most important input for creative industries. Human creativity and new ideas are the movers of the economic and especially innova-tion-based development. Creativity is a process of generating ideas, ex-pressions and forms, either when looking for new ways of tackling ex-isting problems, of re-interpreting existing realities or searching for new opportunities.1 The framing, nurturing and ethical and sustainable ex-ploitation of human creativity has become a key focus for economic de-velopment, linking it to concepts concerning innovation, design and en-trepreneurship.

The importance and role of creativity and innovations for the eco-nomy has been highlighted by the European Union in strategic docu-ments, for example, “The Treaty of Lisbon and Strategy of EU 2020”.2 To achieve the key aims of the European Union by 2020, three main prio-rities in the Europe 2020 Strategy were identified, namely smart, sustain-able and inclusive growth. Seven incentives that support the progress of each priority were furthermore identified. Smart growth should broaden the values of the EU through growth based on knowledge using education, research, innovations and creativity. This is why the ambitions of the EU are aimed at the strengthening of knowledge and innovation, based on cre-ativity, improving the education system, research, supporting and spread-ing innovations and knowledge, thus transforming ideas into new products and services. The inevitable role of innovation, partnership and network-

1 Council Conclusions on Culture as a Catalyst for Creativity and Innovation, 12 May 2009.2 European Commission, 2010, Europe 2020 – Strategy of smart, sustainable

and inclusive growth, http://ec.europa.eu/eu2020/pdf/1_SK_ACT_part1_v1.pdf (accessed 13.07.2013); European Commission, 2007, Treaty of Lisbon, http://www.consilium.europa.eu/showPage.aspx?id=1296&lang=en (accessed 13.07.2013).

Creative local production systems… 17

ing is outlined also by the European Commission in the document State of the Innovation Union 2011.3

Creativity can provide a source of economic and social resilience espe-cially in times of economic down-turn. Consider the situation in the USA in November 2008, where the unemployment rate was nearly 9.4% while unemployment in the creative sector was significantly lower.4 According to Eurostat, between 2008 and 2011, employment in the cultural and cre-ative sectors proved more resilient than in the EU economy as a whole.5 Regions with high concentrations of creative and cultural industries have Europe’s highest prosperity levels.

There are several types of creativity which are closely interconnected: technological creativity (or invention), economic creativity (entrepreneur-ship) and cultural-based creativity (cultural creativity). Without creative thinking and actions, there would be no evolution or development. Creati-vity is a key ingredient of innovations.6 A creative environment rests on four basic pillars. The first pillar consists of people who make up the knowledge labour force. Location is also an essential point in the area of creativity and this for two reasons particular. Geographic location has an influence on the allocation of companies and the labour force. In addition, the ac-tual cultural-social equipping of the locality also plays an essential role. The support of local government can serve to support the development of an institutional environment, create a suitable business environment

3 European Commission, 2010, Communication from the Commission to the European Parliament, the Council, the European Economic and Social committee and the Committee of the Regions Regional Policy contributing to smart growth in Europe 2020, http://ec.europa.eu/regional_policy/sources/docoffic/official/communic/smart_growth/comm2010_553_en.pdf (accessed 13.07.2013).

4 M. Ch. Suciu, M. Ivanovici, 2009, Creative economy and macroeconomic stability during the financial crisis, 10th International conference, Bucharest: Finance and economic stability in the context of financial crisis. http://www.ectap.ro/documente/suplimente/Finantele%20si%20stabilitatea%20economica_Finante_en2010.pdf (accessed 13.07.2013).

5 Et al. 2013. V4 – Creative Incubators, Guide to Places and Spaces of Creative Incubation in Central Europe, http://www.creativeincubators.eu/about-project/news/home/get-inspired/121-v4-creative-incubators-guide-to-places-and-spaces-of-creative-incubation-in-central-europe (accessed 23.08.2013).

6 J. Kloudová et al., Kreativní ekonomika, EUROKÓDEX, Bratislava 2010, p. 216.


and monitor the area of intellectual property which plays a key role within the framework of a creative economy. The final pillar consists of a qua-lity educational system as creative centres cannot merely draw from their own potential which is able to attract creative companies and employees but have to be also able to create these companies themselves.7

Figure 1. The system of economic growth in developed regions

Source: J. Kloudová, O. Chwaszcz, Transformation of 3T Model towards the Comparison of Creative Centres within the European Union, “Economics and Management” 2012,

Vol. 4, p. 58

The presented scheme indicates that creativity contributes significantly to the development of competitiveness. However, it should be pointed out that creativity cannot evoke economic growth itself. Contemporary com-pany cannot function without the basic establishment of the institutional framework. When a company functioning on the basis of freely elected institutions, creativity and potential which will be capable of transforming new ideas into innovation and consequently also into general production,

7 J. Kloudová, O. Chwaszcz, Transformation of 3T Model towards the Comparison of Creative Centres within the European Union, “Economics and Management” 2012, Vol. 4, p. 56–70; A. Nowakowska, Z. Przygodzki, M. Sokołowicz, Region in knowledge-based economy. Human capital, innovation, transnational corporations, Difin, Warsaw 2011, p. 87–100.

Institutional Environment

People

Place

Local Government

School system

Rate of Development

Factor of Production

Implementation

Economic Growth

Creativity

Innovations

Production


need to be developed. These realities are ignored by a number of econ-omists with an interest in the creative economy, since economic growth can never be directly linked with a creative environment; more influencing factors need to always be considered. Supporters of the creative industry often try to do so when attempting to argue that an increase in support of the creative industry will lead to the development of the region. The cre-ative industry is without a doubt a growing branch, but the growth stems from the growth to the living standard, which is caused by the increase in the creative and innovation potential of the area. Arguments voiced con-cerning marked support for the creative industry are thus in the interests of certain lobby groups, as opposed to an interest in supporting the growth of economically mature industries. The creative economy cannot be de-fined by a border which would distinctly measure its field of activity. The creative economy is based on new ideas, which make up the added value for inputs and contribute to the increase in effectiveness on the side of outputs. The creative economy unites the creative ideology or the cul-tural industry, creative cities and the creative class.8

According to investment theories, creativity requires a confluence of six distinct but interrelated resources: intellectual abilities (the synthetic, analytical and practical skills), knowledge, styles of thinking (how to de-ploy the skills), personality (willingness to overcome obstacles, willingness to take sensible risks, willingness to tolerate ambiguity, and self-efficacy), motivation, and supportive and rewarding of creative ideas environment.9

Creativity is a main input of creative industries. There are several definitions of creative industries. We are inclined to definition of Depart-ment of Culture, Media and Sport (DCMS) in UK that defines creative industries as “those industries which have their origin in individual cre-ativity, skill and talent and which have a potential for wealth and job cre-ation through the generation and exploitation of intellectual property”.10

8 J. Kloudová, O. Chwaszcz, Transformation of 3T Model... 9 R. G. Sternberg, The Nature of Creativity, “Creativity Research Journal” 2006, Vol.

18, No. 1, p. 87–98, http://www.tandfonline.com/doi/pdf/10.1207/s15326934crj1801_10 (accessed 13.07.2013).

10 P. Higgs, S. Cunningham, H. Bakhshi, 2008, Beyond the creative industries: Mapping the creative economy in the United Kingdom, http://www.nesta.org.uk/library/documents/beyond-creative-industries-report.pdf (accessed 23.08.2013).


According to UNESCO, the term creative industries „encompass a broader range of activities which include the cultural industries plus all cultural or artistic production, whether live or produced as an individual unit”.11 UNCTAD defines creative industries as: the cycles of creation, produc-tion and distribution of goods and services that use creativity and intel-lectual capital as primary inputs; a set of knowledge-based activities, fo-cused on but not limited to arts, potentially generating revenues from trade and intellectual property rights; comprise tangible products and intan-gible intellectual or artistic services with creative content, economic value and market objectives; are at the cross-road among the artisan, services and industrial sectors; and constitute a new dynamic sector in world trade.12

Creative industries are dependent on creative class and creative class will be concentrating in places, where on one hand there is a free and open environment, a lot of ideas, culture and art experience, but on the other hand also the same thinking community. According to Florida, Creative Class include individuals whose create meaningful new forms. The su-per-creative core of this class includes scientists and engineers, universi-ty professors, poets and novelists, artists, entertainers, actors, designers, and architects, as well as the thought leadership of modern society: non-fiction writers, editors, cultural figures, think-tank researchers, analysts, and other opinion-makers. Beyond this core group, the Creative Class also includes creative professionals who work in a wide range of know-ledge-intensive industries such as high-tech sectors, financial services, the legal and healthcare professions, and business management. These people engage in creative problem-solving, drawing on complex bodies of knowledge in seeking innovative solutions. What they are required to do regularly is to think on their own. They apply or combine standard approaches in unique ways to fit the situation, exercise a great deal of judg-ment, and at times must independently try new ideas and innovations on their own.13 Krätke who critiques Floridaʼs concept of creative class divides creative individuals or member of creative class into the basic five

11 UNESCO, 2009, Understanding Creative Industries, p. 3.12 UNCTAD, 2008, Creative economy report 2008, 357 p., http://unctad.org/en/

docs/ditc20082cer_en.pdf (accessed 23.08.2013).13 R. Florida, Cities and Creative Class, Routledge, New York 2005, p. 207.


groups: scientifically and technologically creative workers (occupational groups in the fields of R&D, scientific education, as well as skilled techni-cians and health care professionals); artistically creative workers (occupa-tional groups of the cultural economy); the dealer class (finance and real estate professionals); the economic management class (executives, busi-ness consultants); the political class (members of legislative bodies, poli-ticians, public administrators)14. In contrast to Florida’s approach, Krätke argues that only first and second groups have specific relevance for re-gional innovative capacities. The rest three groups have no specific impact on prospects for regional growth within the scope of innovation-driven de-velopment paths. We incline more to the opinion of Florida and according to our mind all groups of creative class influence regional growth and in-novation process in the regions. All these groups within creative class can be consider as important stakeholders involved in the process of economic and social growth and development of the localities. We agree with Vaňová that representatives of creative class thanks to their talent and skills come on more new ideas, knowledge and innovation and there is a higher possi-bility, that they help to create new companies or they will start their own businesses, which will support the territorial development.15

Creative individuals need to share their ideas and for their realization they need the wide public. Localities and regions which want to attract creative class, have to offer free environment and understanding for differ-ent solutions, enabling creative individuals to come with new ideas. There will be places with high cultural background and non-corrupt environment, where individuals will be provoked and inspired to creation, and where their success will depend only on their creative abilities.16

14 S. Krätke, The creative capital of cities, Blackwell Publishing, Wes Sussex 2011, p. 259.

15 A. Vaňová, Kreatívna ekonomika a rozvoj územia (z pohľadu marketingu územia), [in:] J. Kloudová et al., Kreativní ekonomika, EUROKÓDEX, Bratislava 2010, p. 59–84.

16 Creative abilities are determined to a large extent by the quality of the environment and by characteristics of the local milieu also in the dimension of the quality of public spaces (see: Z. Przygodzki, Creativity and innovation capability of human capital in the context shaping of local milieu quality, [in:] M. E. Sokołowicz, E. Kina (red.), Facets of innovativeness in the region, Acta Universitatis Lodziensis, Folia Oeconomica 290, Łódź 2013, p. 57–61).


Research has shown that the development of creative sectors can mean a new dimension and sources of the territorial development that brings new forms of innovations, creativity, partnerships and networking. Cul-tural and creative industries, which flourish at local and regional levels, are in a strategic position to link creativity and innovation. They can help to boost local economies, stimulate new activities, create new and sustain-able jobs, have important spill over effects on other industries and enhance the attractiveness of regions and cities. Creative industries are therefore catalysts for a structural change in many industrial zones and rural areas with the potential to revive their economies and contribute to a change in the regions’ public image. They should be integrated into regional devel-opment strategies, in order to ensure an effective partnership between civil society, businesses and public authorities at the regional, national and Eu-ropean level.17 In the USA in 2000, there were 38 million people working in the “creative class”, or approximately 30% of the overall labour force, and their incomes amounted to 50% of the overall federal labour income. In comparison, according to the research conducted by the EU the number of people employed in the creative sector in the EU is estimated to be more than 4.7 million, which is 2.5% of the total labour force in the EU.18 This is a signal that the creative potential of EU countries is currently not used enough.

The reason for being concerned with the creative economy at the differ-ent territorial levels follows from the fact, that cities and regions have always been places where human creativity flourished. Here not just the world’s great art and fundamental advances in human thought originated, but also the great technological breakthroughs that created new industries and even entirely new models of production. Ever since cities became large and com-plex enough to present problems of urban management, they also became

17 European Commission, 2010, Communication from the Commission to the European Parliament, the Council, the European Economic and Social committee and the Committee of the Regions) Regional Policy contributing to smart growth in Europe 2020, http://ec.europa.eu/regional_policy/sources/docoffic/official/communic/smart_growth/comm2010_553_en.pdf (accessed 13.07.2013).

18 A. Wiesand, M. Söndermann, The Creative Sector – an Engine for Diversity, Growth and Jobs in Europe, European Cultural Foundation 2005.


urban laboratories, the places that developed the solutions – technological, organisational, legal and social – to their own problems of growth.19

Critical success factors in building creative local production systems in the concrete localities are:

– leadership and cooperation – creative industries are dependent on leaders and visionaries who support active part of all involved stake-holders in the territories (community of artists, cultural industries, private sector, universities and wide public),

– infrastructure – creative industries are developing in suitable, price friendly and strategic located territories which support synergy and cre-ation of new ideas,

– awareness and education – creative activity or activities have trans-formative nature – their improve the quality of life, improve the quality of territory, but primarily they drive the economy as a primary source of wealth and prosperity, the labor market has access to individuals with a wide range of creative skills and talents,

– investments and policy – creative industries require adequate level of public and private investments, which are supported by effective po-licy,20 promoting culture and creativity in the wide scales of government strategies, aimed especially on economic development, urban planning, tourism, heritage, industry, business, public services, social planning and also on art and culture.

We also agree with the opinion of Barrieau and Savoie that it is very important to create connections and relations with universities, busi-ness and creative entrepreneurs.21 Universities play the role of catalyst

19 P. Hall, The Age of the City: The Challenge for Creative Cities, [in:] World Cities. Achieving Liveability and Vibrancy, World Scientific Publishing Co. Pte. Ltd., Vibrancy 2009.

20 See e.g.: M. E. Sokołowicz, 2012, Cluster policy in Europe as a tool of supporting “cooperating entrepreneurs”, [in:] C. Martin, T. Rkibi (eds.), L’Entrepreneur face aux politiques Publiques Européennes, Travaux Scientifiques du Réseau PGV, PGV/ISLA Campus Lisboa, Lisboa 2012, p. 242–259.

21 L. Hamilton, A. Arbic, and G. Baeker, 2009, Building the Creative Economy in Nova Scotia, 19 p., http://www.novascotiacan.ca/pdfs/report.pdf (accessed 13.07.2013), quoted from N. Barrieau, D. J. Savoie, Creative Class and Economic Development: The Case of Atlantic Canada’s Urban Centres, Canadian Institute for Research on Public Policy and Public Administration 2006.


in the creative economy and act as a magnet attracting intellectual activ-ity and innovation. Knowledge produced by universities is transferred to the field of trade and business through partnerships and programs. Through the stimulation of dialogue and exchange of information, univer-sities can play a key role in creating the partnerships necessary for the de-velopment of creative economy.22 We agree with this statement, but we be-lieve that in the development of the creative local production systems, all actors influencing territorial development should be involved – not only private sector but also the public and nonprofit sector (see figure 2).

Figure 2. Interlinkages among the creative, public, private and non-profit sectorSource: K. Borseková, K. Petríková, Podpora kreatívnej ekonomiky ako zdroj trhovo

orientovaného rozvoja územia, Nové trendy – Nové nápady 2010, Súkromná vysoká škola ekonomická – Znojmo, 18–19.11.2010

Creative industries are a typical phenomenon of modern economies, and “they are moving from fringes to the mainstream economics”.23

22 See also: A. Nowakowska, C. Peyroux, M. E. Sokołowicz, Quelle contribution de l’université au processus entrepreneurial en Pologne?, [in:] C. Schmitt (ed.), Université et entrepreneuriat, Presses Universitaires de Nancy, Nancy 2008, s. 75–90.

23 Department for Culture, Media and Sport: Creative Industries Mapping Document 2001, p. 3.

Private sector

Public sector

Non-profit sector

Creative

sector


The urban nature of creative activities suggests that creative industries are not homogeneously distributed across the territory and such urban lo-cal production system (LPS) as large cities and metropolitan areas should be more specialized than others, showing characteristics of Creative LPS. In order to use an operational definition of the creative production sys-tems, Lazzaretti, Boix, and Capone defined creative LPS as LPS where there is a high concentration of creative industries or LPS with high con-centration of firms or employees in creative industries.24 Locality, region and the city are important actors which should play important role in de-velopment and in attracting talent.25 Creative industries tend to concentrate mainly around large and medium cities, forming creative local produc-tion systems.26 There are a few types of creative local production systems, and the two most common should be regarded creative cities and creative clusters.

3. Creative city and creative cluster as the most common creative local production systems

Creativity is progressively becoming a source of competitive advan-tage, not only for firms but especially for local systems, and is also be-coming an important objective for development policies paying particular attention to the territorial dimension of innovative processes.27 The most common and usual way of the creative local production systems are cre-ative city and creative clusters.

24 L. Lazzaretti, R. Boix, F. Capone, Why Do Creative Industries Cluster? An Analysis of the Determinants of Clustering of Creative Industries, Summer Conference CBS Denmark 2008, p. 35.

25 J. Kloudová et al., Kreativní ekonomika – Trendy, výzvy, příležitosti, Grada 2010, p. 218.

26 L. Lazzaretti, R. Boix, F. Capone, Why Do Creative Industries Cluster?..., p. 1.27 L. Lazzaretti, Culture, creativity and local economic development: evidence

from creative industries in Florence, [in:] P. Cooke, D. Schwartz, Creative regions, technology culture and knowledge entrepreneurship, Routledge, London and New York 2007, p. 169–196.


Creative city

According to Kloudová, creative city is a place where person likes to live, where a creative environment is, cultural and sport possibilities are supported by local administration.28 Creative city can be seen as a ter-ritorial unit where economic, social, cultural and political networks de-velop because of favourable conditions that stimulate different forms of cre ativity.29 The urban concentration of firms improves productivity for two reasons: on the one hand, it constitutes a source of competitive-ness as far as it stimulates the spread of specialized products. On the other hand, it strengthens creativity and innovation thanks to the flows of new ideas and know-how.30 This place is characterized by openness, tolerance, cultural background, non-corrupt environment and higher concentration of creative personalities. Among the creative territories one can mention places which build their development on scientific potential (for example Silicon Valley) or places whose success is based on cultural or another creative assumption. Creative city is an urban complex, where cultural ac-tivities of various sorts are an integral part of the functioning of the city’s economic and social life, and including intellectual capital applied to pro-ducts, processes and services.31 Landry proposed basic elements of the con-cept of creative city indicating that people are a key resource of the city. Moreover, their creative abilities are the essential mechanism that drives the dynamics of the city’s development. In that way creativity is treated as a resource of the city. In this concept a key element of creative city is culture that produces a specific ʻclimateʼ, highly valued by creative peo-ple.32 Florida says that regional economic growth is driven by the location

28 J. Kloudová et al., Kreativní ekonomika – Trendy, výzvy, příležitosti, p. 218.29 R. Florida, The rise of creative class: And How Itʼs Transforming Work, Leisure

and Everyday Life, Basic Books, New York 2002, p. 434. 30 A. J. Scott, J. Agnew, E. Soja, and M. Storper, Global city regions, [in:] A. J. Scott

(ed.), Global city regions, Oxford University Press, Oxford 2001, p. 11–30.31 E. S. Deisbury, S. R. Basu, 2010, The Creative Economy Leading Trade

and Innovation, United Nations Conference on Trade and Development, http://www.unece.org/ceci/ppt_presentations/2010/ic/basu.pdf (accessed 13.07.2013).

32 Z. Przygodzki, Creativity and innovation capability of human capital…, p. 54, 58.


choices of creative people – the holders of creative capital – who prefer places that are diverse, tolerant and open to new ideas.33

Today there are a number of successful examples of cities and regions that have managed, through employing suitable innovative stra tegies, to develop a competitive creative industry. The best examples in Europe are: Óbidos (Portugal), Barnsley (UK), Catanzaro (Italy), Enguera and Se-villa (Spain), Hódmezóvásárhely (Hungary), Mizil (Romania), and Mal-mo (Sweden). Elsewhere, good examples include: Chicago, New Orleans, New York and Seattle (USA, with Seattle being the most creative city of 2009), Toronto and Vancouver (Canada), and Taipei, Peking, Singa-pore, Hong Kong (Asia). The development of creative cities and clusters in Europe has become a new challenge for territorial development. Also a few cities in Central and Eastern Europe (e.g. Bulgaria) have programs to develop the creative sector and economy. Talented personalities tend to concentrate in cities, according to European researches, especially in capital cities. Slovak settlement create 2887 municipalities, only 138 have the status of the city, and in European context it includes one big city, several bigger cities and more than 100 small cities. In these conditions, for building creative environment and creative class, all municipalities should support and develop own talent; manifest openness and tolerance to diversity. This approach creates the basis for formulating competitive and creative strategies for the development of places, cities and regions. A serious problem, which needs to be solved regarding to development of talents is a lack of cooperation among self-governments, business sec-tor, universities and cultural institutions.34 One city in Slovakia got really good chance for development of creative industries with aim to become real creative city. It is European capital of culture in 2013 – Košice.

Second biggest city of Slovakia is situated in the eastern part of the country, only 20 km from Hungary, 80 km from Ukraine and 90 km from Poland. The city is an administrative centre of the Košice Re-gion, and is divided into four districts. Košice has a strong economic back-ground, and the city creates employment opportunities for the population of the surrounding region as well as its own. The biggest local employer

33 R. Florida, The Rise of the Creative Class, Basic Books, New York 2004, p. 223.34 A. Vaňová, Kreatívna ekonomika a rozvoj územia…, p. 59–84.


is the U. S. Steel Košice steelworks, and of the total number of registered employees in the city as a whole, the great majority work in the industrial sphere. The education and transport sectors are also strongly represented here. The average age of citizens is 35.13 years, which has led to Košice becoming known as the city of youth. The education system is significant-ly represented in the city, with over 45 basic schools, 10 grammar schools, 4 commercial academies, and 15 specialized secondary schools, covering industrial technologies, agriculture, health care and the arts. There is also the Technical University with 8 faculties, P. J. Šafárik University with 4 faculties, the University of Economics and the University of Veterinary Medicine.35 Based on the characteristic of town and following statistic data, Košice has a great potential to develop the creative industries and to be a creative city.

Table 1. Characteristics of Slovak regions

Year 2009

Are

a (k

m2 )

Num

ber o

f inh

abita

nts

Num

ber o

f stu

dent

s (b

ache

lor a

nd m

aste

r pr

ogra

m)

Creative jobs

Regions

Scie

ntifi

c an

d te

ch-

nica

l act

iviti

es

Educ

atio

n

Art,

ent

erta

inm

ent,

recr

eatio

n

Total

Bratislava region 2053 622 706 73 325 47 892 22 969 11 300 82 161Trnava region 4147 561 525 22 504 4 284 17 743 4 559 26 586Trenčín region 4502 599 214 13 791 3 760 17 286 5 018 26 064Nitra region 6344 705 661 25 126 4 362 19 350 4 576 28 288Žilina region 6809 697 502 18 489 3 613 23 125 5 514 32 252Banská Bystrica region 9454 653 186 19 072 5 660 21 295 4 795 31 750

Prešov region 8974 807 011 15 884 3 964 23 916 5 303 33 183Košice region 6755 778 120 30 987 6 618 23 415 5 972 36 005

Source: Statistical data of Slovak Statistical Office.

35 http://www.kosice.sk/clanok.php?sekcia=vseobecne_info (accessed 05.05. 2013).


In the Table 1 we can see that Košice region has good potential for de-veloping creative industries and for building the creative class. The num-ber of students is the second highest in the Slovakia, as well as the number of representatives of creative class in scientific and technical activities; education; art, entertainment and research. The better conditions has only Bratislava region, which is the seat of the capital city and has inherent bet-ter potential than other regions. The important strategic aim of Košice de-velopment as the creative city should be to retain the representative of cre-ative class in the region and to support their development and activities.

From 1985 European Union every year selects two cities, which carry the title of European capital of culture. The role of capital city of culture is to visible the richness and diversity of European culture and to promote mutual understanding between different member states. European capi-tal of culture is an opportunity for the city to appear on the international stage, to attract more tourists and rethink their development through cul-ture for the benefit of its residents. Title has long-term impact on cities and their regions, not only in terms of culture, but also in socio-economic point of view.36 Košice competed with many other Slovak cities as capi-tal city Bratislava, the seats of regions – Nitra, Banská Bystrica, Prešov or other cities with specific historical or cultural features (e.g. Martin). The city Košice after successful presentation of the project “Košice In-terface 2013” processed by the project team of the city reached the title European Capital of Culture for 2013. Košice beat in the second round cities Prešov, Martin and Nitra. It was decided by the international com-mission consisted from 13 members on the Ministry of Culture in Slovak Republic. The project Interface is the project of long-term transformation of the city through culture, which wants to establish the favourable envi-ronment for culture and creativity. The aim of the project was to drawn into cooperation all stakeholders that can contribute to success – transfor-mation of cultural, social and economic environment, characterized by cre-ativity, new ideas and projects but also by larger and deeper public interest in culture and art. “Supporting creativity” is a main message of the project and a new vision of Košice, which until now has been known for its rich

36 http://www.euractiv.sk/regionalny-rozvoj/clanok/kosice-maju-byt-kreativne-019530#sthash.HRoqq1I5. dpuf (accessed 28.08.2013).


history and well developed heavy industry. Thanks to the project Interface 2013 and the title of European Capital of Culture 2013, Košice become a center of creativity and a new future for young creative people who want to stay, live and work in a city that is their home.37

The main reasons why Košice reached this title were the wide parti-cipation of citizens and independent artists on project creations and formu-lating new vision and philosophy of urban renewal; good developed Eu-ropean cultural cooperation and intensive exchange of experience among the project team, artists and foreign partners; creation of new suitable city spaces for independent art scene and its operationalization; creation of grant system for supporting independent artists, cultural organizations and new culture production in the city; a model value of the project and its parts – innovative global value of the environmental pillar of the project – a new water culture; good cultural, transport and technical infrastructure basis; feasibility of the budget, minimizing investment risks and property rights security of key project infrastructure; personal and expert capacities available; clear institutional arrangements of the project; experience in or-ganizing big events and professional management of the project; cultural value of the city Košice and whole east region of Slovakia; innovative, cultural and economic potential of the suburban area Košice – Prešov; con-tractual cooperation with Prešov (2nd biggest city in east Slovakia) and pro-gram affinity of the both cities.38

By winning the competition, Košice started to prepare the necessary infrastructure for activity’s realisation of European Capital of Culture. It was supported by grants of European Union and subsidies of Ministry of Culture. The activities were aimed at reconstruction of cultural and his-torical heritage of Košice with the use of modern information technolo-gies. The project of European Capital of Culture in Košice has conti-nued by the soft activities involving all important stakeholders of private, non-profit and public sector, and mainly the talented, skilled citizens.

The art and culture program for Košice 2013 is very wide and has different levels – from the highest international level with European di-mension, to national and local level. The program creates 25 key events,

37 http://www.kosice2013.sk/o-nas/projekt-kosice-interface-2013/ (accessed 30.08.2013).38 http://www.kosice2013.sk/o-nas/preco-kosice/ (accesed 30.08.2013).


60 important and around 300 accompanying small scale events. The con-cept of program structure set up to start the long process of development and simulative conditions for cultural operators in the entire region; to sup-port international partnerships and new creative initiatives which have the chance for perspective and long-term existence. The aim of the organ-izers is to create gradually from Košice the creative city. This should bring more work opportunities and faster economic growth for east Slovakia.39 The project Interface includes several partial projects which should help to build from Košice the creative city.

The key investment objective of the project Interface 2013 is a re-construction of buildings of the former barracks and military warehouses in Kukučínova Street and to build new Culture Park. This partial project is a result of active cooperation between three institutions – the University of P. J. Šafárik, the Slovak Academy of Science and the Technical Univer-sity, which is unique in establishing a Faculty of Arts next to its technical faculties. Based upon the expert knowledge of academics and the creative team from the Faculty of Arts, the unusual exhibition is created which draw visitors, mainly children over 7 years, into a factory environment where they can live the “story of steel”, presented in a creative way from mining raw materials, through feeding the scrap into the molten converter, sheet rolling to the final product – cars. The exhibition offers visitors the chance for interactive play with the exhibits – operating an electromagnetic crane, operating a forklift platform or constructing a car on the production line using 3D technology. The aim of the Culture Park centre also include the support of companies, organisations, civil associations and artistic groups involved in various types of creative activities, in order to create area concentration and resulting synergy. With its nature, it should serve as support for small and medium businesses in the creative sector. It also provides space for subjects focusing upon educational activities in the cre-ative industry, contemporary art and new media.

Another partial project is a building of the first Kunsthalle in Slovakia – The Hall of Art Košice. The project is aimed on rebuilding old covered swimming pool, which doesnʼt fulfil its aim for a long time. After diverting

39 http://www.euractiv.sk/regionalny-rozvoj/clanok/kosice-maju-byt-kreativne-019530#sthash.suOWi9bI. dpuf (accessed 30.08.2013).


the river bed Hornad which arm flowed near the swimming pool, the build-ing was static disrupted. Therefore, despite the attractive location and size, it was not possible to use it anymore. The aim of reconstruction is not only to save the building, but also take the project further and interior spaces transformed into multifunctional center – Kunsthalle. This will be thanks to its architectural layout used primarily for exhibition aims and organiza-tion of workshops. After several expert discussions it was made the pro-posal to maintain cultural links with the world of water, indoors and out-doors, and to follow up on its original historical function, but at the same time the building will have a significant contribution to the project Košice – European Capital of Culture 2013. This project strengthens the condi-tions for development of culture and tourism.40

Project SPOTs is an unique transformation project of old former ob-solete infrastructure heating exchangers to new culture points that actively ensure distribution of culture from the city to the suburbs and housing es-tates. Exchangers – Cultural edge points will become centers for communi-ty development and civic participation, multi-functional space for the dis-semination of culture. This project will create conditions for expanding the audience, for the creation of new works of art community and personal development of the people through their participation in creative activities.41

The target of partial activities is to attract the domestic and foreign tou-rists to Košice. The special activities are implemented to promote Košice as a tourism destination. In this aim, Košice cooperates also with the inter-esting cities located in the eastern part of Slovakia as Prešov, Levoča, Sabi-nov, Bardejov, Vysoké Tatry, Poprad etc. The localisation of Košice creates also good conditions for developing the cultural program in collaboration with partner’s cities in Poland, Hungary, and Ukraine.

Building of creative city Košice is also supported by Creative Trade Mission. The main aim of this mission is to connect entrepreneurs and en-tities from creative sector, organizing several conferences and events connected with creative economy and creative industries, organizing re-sidencies (program of exchanging knowledge and exploring creative en-vironment and market in the member states of EU). This project includes

40 http://www.kosice2013.sk/projekty/kunsthallehala-umenia/ (accessed 30.08.2013).41 http://www.kosice2013.sk/projekty/projekt-spots/ (accessed 30.08.2013).


the plan of building creative cluster in the region. These efforts lead gra-dually to the creation of an international working group and subsequently developing long-term strategy and plan of activities for support cultural and creative industries.42

Košice cooperates in activities also with the France, where the se cond European Capital of Culture 2013 – Marseille, is. The platform for in-volving the foreign artists is established known as international residential programme, K.A.I.R. It organises exchanges between artists with part-ners in several countries such as Ukraine, Moldova, France and Germa-ny. Artists also hold lectures, projections, seminars and they open ateliers for the public.43

All described activities suggest, that Košice has great potential to be-come the real creative city. Conceptual approach chosen for developing creative industries and creative economy in the city and the whole region and also unique creative activities and projects should be the proper way for using the creative, culture, historical, economic and social potential of the area. This potential is supported also by prestigious award European Capital of Culture for 2013, which offers very good opportunity for Košice, to become real creative city.

Creative cluster

Across the world, the creative sector is booming. Economic de-velopment agencies everywhere have identified the creative industries as a growth sectors, and most are supporting them through some forms of cluster-based development strategies that understand these sectors in both cultural and business terms. Creative clusters are places to live as well as to work, places where cultural products are consumed as well as made. They are open round the clock, for work and play. They feed on diversity and change and so thrive in busy, multicultural urban set-tings that have their own local distinctiveness but are also connected

42 http://www.kosice2013.sk/projekty/kreativna-ekonomika/ (accessed 30.08.2013).43 http://www.kosice2013.sk (accessed 05.05.2013).


to the world.44 According to Kloudová, creative cluster is very important for development of creative economy. Creative cluster connects private and public activities and help by development of creative city or creative region and is also able to enforce creative idea.45 The results of creative cluster initiatives confirmed their meaning and now is this approach also used regarding to creation and enforcement of new and creative initiatives, creative cities and products.

Conceptual basis of creative clusters can be found in work of Porter, who is probably the most important and influential author of cluster theory. He defines cluster as “a geographic concentration of interconnected com-panies and associated institutions and firms, connected in specific areas, which are common as well as complementary”.46

Creative cluster which is able to concentrate relevant actors and to cre-ate an environment suitable for creative ideas enforcement, is undoubtly the important factor which should help to enforce creative products, cre-ative companies, to help creating creative cities and to develop creative economy as an important sector of economics.

According to De Propris, creative cluster is a place that brings to-gether a community of creative people, who share an interest in novel-ty but not necessarily in the same subject; a catalysing place where peo-ple, relationships, ideas and talents can spark each other; an environment that offers diversity, stimuli and freedom of expression; a thick, open and ever-changing network of inter-personal exchanges that nurture indi-viduals’ uniqueness and identity.47

Great Britain is a pioneer in aiming to establish or at least concep-tualizing creative clusters. For the project of NESTA, nine creative “hot-spots” across the UK, apart from London, were identified (Bath, Brighton,

44 S. Evans, 2005, Creative Clusters, http://www.india seminar.com/2005/553/553%20simon%20evans.htm (accessed 13.07.2013).

45 J. Kloudová et al., Kreativní ekonomika – Trendy, výzvy, příležitosti, p. 218.46 M. E. Porter, Local Clusters in Global Economy, [in:] J. Hartley, Creative

Industries, Blakwell Publishing, Oxford 2005, p. 260–261. 47 L. De Propris, L. Hypponen, Creative Clusters and Governance: The Dominance

of the Hollywood Film Cluster, [in:] Creative Cities, Cultural Clusters and Local Economic Development, edited by P. Cooke, L. Lazzeretti, 2008, p. 29.


Bristol, Cambridge, Edinburgh, Guildford, Manchester, Oxford, Slough and Wycombe), that are connected to the creative cluster.48

Unfortunately in Slovakia, there is no real creative cluster yet. There is a plan to build the first creative cluster in Slovakia within the Creative Trade Mission which is the partial project of European Capital of Culture 2013 – Košice.

A good example of creative cluster initiative is a project of Guggen-heim museum in Bilbao. It was an idea of architect Frank Owen Gehry and it is a result of unique cooperation among the Basque territorial self-government, which financed the project, and the owner – foundation of Solomon R. Guggenheim, which manages museum and offers the core of art collection. Thanks to this project, Bilbao has changed from not very attractive harbor on the North Spain to icon of modern Basque region with fixed place on the world map of culture.49 As the most important stakeholders in development could be assumed entities active in creative industries, local and regional self-governments, policy makers, strategic planners on local, regional and national level, R & D institutions including universities, colleges and research centers.

4. Conclusion

In the first section of the paper we analyse the creative local produc-tion systems from theoretical point of view. We deal with creativity, cre-ative economy and creative industries; we have outlined their importance for economic growth and development of places. Development of creative sectors can mean a new dimension and sources of the territorial develop-ment that brings new forms of innovations, creativity, partnerships and net-working. Cultural and creative industries, which flourish at local and re-gional levels, are in a strategic position to link creativity and innovation.

48 Nesta, 2010, The Creative Cluster, http://www.nesta.org.uk/areas_of_work/creative_ industries/geography_of_innovation/assets/features/creative_clusters_and_innovation_report (accessed 13.07.2013).

49 J. Kloudová et al., Kreativní ekonomika – Trendy, výzvy, příležitosti, p. 218.


They can help to boost local economies, stimulate new activities, create new and sustainable jobs, have important spill over effects on other indus-tries and enhance the attractiveness of regions and cities. Creative indus-tries are therefore catalysts for a structural change in many industrial zones and rural areas with the potential to revive their economies and contribute to change in the regions’ public image. Creative economy and creative in-dustries refer to the human potential, talent and creativity as the most im-portant sources of economy growth and development. Creative economy and creative industries can be seen as a sustainable way of development because of the absence of human creativity limitations. Creative industries used to cluster and create creative local production systems. We consid-er as extremely important the development of creative sector in context of cooperation and partnership of public, private and non-profit sector. The cooperation of the public sector, particularly universities and scientific research institutions, with the private sector, which depends on scientific and technological progress and innovation, supported by non-profit organi-zations active in the creative industries, form the basis for the development and successful movement of creative economy.50

In the second section we analyse the most common creative local production systems – creative cities and creative clusters. Creative local production systems have important significance for territorial and regional development and through the synergy effect – also for national and supra-national level.

A special attention we pay to the only one developing creative city in Slovakia – Košice. Conceptual approach chosen for developing creative industries and creative economy in the city and the whole region and also unique creative activities and projects should be the proper way for using the creative, culture, historical, economic and social potential of the area. Košice as the European capital of culture for 2013 got a great chance to be-come real creative city and they can exploit this potential for overall de-velopment the city Košice and the whole region. Partial aim of activities connected with the project Interface Košice 2013 is also creating the first

50 K. Borseková, K. Petríková, Podpora kreatívnej ekonomiky ako zdroj trhovo orientovaného rozvoja územia, Nové trendy – Nové nápady 2010, Súkromná vysoká škola ekonomická, Znojmo, 18–19.11.2010.


creative cluster in Slovakia. In Slovakia there is no real creative cluster yet, and we can state that in Slovakia there are huge gaps in development of creative industries and economy and thus in formation of creative lo-cal production systems. The policy and decision makers on local, regional and national level should consider the importance and significant meaning of creative industries and economy for territorial, regional and national level. The boom of creative industries is a trend, which Slovakia should follow and in Slovak regions there is a huge creative potential which offer a good basis for development of creative industries in all Slovak regions.

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Scott A. J., Agnew, J., Soja, E. and Storper, M. (2001), Global city regions, [in:] A. J. Scott (ed.), Global city regions, Oxford University Press, Oxford, p. 11–30.


Sternberg R. G. (2006), The Nature of Creativity, “Creativity Research Journal”, Vol. 18, No. 1, p. 87–98, http://www.tandfonline.com/doi/pdf/10.1207/s15326934crj1801_10 (accessed 13.07.2013).

Suciu M. Ch., Ivanovici M. (2009), Creative economy and macroeconomic stability during the financial crisis, 10th International conference. Bucharest: Finance and econom-ic stability in the context of financial crisis, Faculty of Finance, Insurance, Banking and Stock Exchange, Bucharest Academy of Economic Studies, Faculty of Econom-ics and Business Administration, West University of Timisoara.

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[in:] Jitka Kloudová et al., Kreativní ekonomika, EUROKÓDEX, Bratislava, p. 59–84.Wiesand A., Söndermann M. (2005), The Creative Sector – an Engine for Diversity, Growth

and Jobs in Europe, European Cultural Foundation.http://www.kosice.sk/clanok.php?sekcia=vseobecne_info (accessed 05.05. 2013).http://www.euractiv.sk/regionalny-rozvoj/clanok/kosice-maju-byt-kreativne019530#st

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Abstract

Paper deals with an issue of creative local production systems with focus on its two main types – creative city and creative cluster. The aim of the paper is to identify the main trends in formation of creative local production systems and to characterise its operating in regions on the base of the description of selected best practices.

First section of the paper is aimed on theoretical background of creative local pro-duction system and defines basic terms as creativity, creative class and creative industries. Second part of the paper contains case good examples of creative local production sys-tems – creative city with focus on Slovak creative city Košice and good examples of crea-tive clusters from abroad. Last part of the paper is dedicated to conclusion and recommen-dations for policy and decision makers in Slovakia.

Key words: creative regions, local production systems, Košice.

Nataliya A. Kravchenko*

REgiOnAl pROduCTiOn SYSTEm dRiVEn BY innOVATiOn dEVElOpmEnT: CASE OF SiBERiA, RuSSiA

1. introduction

Siberia is a vast region of Russia, located to the east of the Urals. At the present time, the Siberian Federal District (SFD) includes 12 regions of the Russian Federation. Its territory makes up 30% of Russia’s territory, and its population – 20 millions of people. The Russia’s main natural resourc-es are concentrated on the territory of Siberia such as: ferrous and non-ferrous materials, oil, gas, coal, timber, gold and diamonds. Its gross regional pro-duct makes up 11% of Russia’s GDP. Minerals and metals, which are mainly produced behind the Urals, make over 3/4 of the Russian export.

However, natural resources are losing their role of main competitive-ness factor in the contemporary world. The ability to create knowledge and to transform new knowledge and technologies into products and ser-vices for the national and global markets is getting the main competitive advantage in the knowledge-based economy.

* Professor of Economic Department, Novosibirsk State University, Russia. Leading Researcher, Institute of Economics and Industrial Engineering of the Siberian Branch of Russian Academy of Sciences.

N. A. Kravchenko42

Recently, considerable efforts have been made to form the Russian innovation system on the national as well as on the regional levels. These efforts were mainly taken from the top, i.e. by the state. At the same time, while the achieved results do not meet expectations in full, the system problems still remain. Moreover, our situation became worse. Some eva-luations of Russia’s situation given by the international community can be found below (table 1).

Table 1. Russia’s position in international ratings

Ranking type 2008 2012

The Global Competitiveness Index 51 67

The Global Innovation Index 54 51

The Human Development Index 73 55

Source: X. Sala-i-Martin (ed.), The Global Competitiveness Report 2011–2012, World Economic Forum, Geneva, www3.weforum.org/docs/WEF_GCR_Report_2011-12.pdf (accessed 20.06.2013); S. Dutta (2011), The Global Innovation Index 2012, INSEAD-WIPO, www.wipo.int/freepublications/en/economics/gii/gii_2012.pdf (accessed 20.06.2013); Human Development Index, 2013.

We can note that our position in this rating is far below the leaders (more than 140 countries have been ranked), and the development is rather slow and uncertain.

The global experience shows that the innovation development is de-termined by the interaction of institutions, organizations and individuals, who create knowledge, ensure the implementation of new knowledge into technologies, and use new technologies to manufacture products and ser-vices. In turn, new products and services are not only the value for con-sumers, but they bring in return for the companies – innovation producers. The character of such interactions, roles and functions of separate partici-pants (the most important of them are the state and the created infrastruc-ture), outline the innovation system, with its national, regional and indus-trial characteristics.

Regional production system driven by innovation development… 43

2. literature review on innovation systems

Last years the conception of national and regional innovation systems is being actively developed and studied in many works.1 A range of inter-national centers, in particular SPRU (Great Britain), CIRCLE (Sweden), UMIC (Great Britain), etc. have focused their research on these prob-lems. Among the Russian researchers, a great contribution has been made by the works of N. Ivanova,2 L. Gokhberg,3 I. Dezhina,4 V. Polterovich,5 N. Kravchenko & G. Untura.6

In the literature concerning the regional innovation systems, main at-tention is given to the description and analysis of relations between the ed-ucational system development, innovation activity and economic results of separate territories. Most works are based on the comparative empirical research of different regions, that lead to the formation of general regu-larities and specific characteristics of regional development. In the work of some examples of such research in Europe and Canada are given.7 The study of regional innovation systems is often related to success stories of regional clusters or regional chains of innovation companies.8

1 B.-Å. Lundvall (ed.) (1992), National Innovation Systems: Towards a Theory of Innovation and Interactive Learning, Pinter, London 1992; F. Block, M. Keller, Where Do Innovations Come From? Transformations in the U.S. National Innovation System, 1970–2006, The Information Technology & Innovation Foundation, July 2008; P. Cooke, Regional innovation systems: competitive regulation in the new Europe, “GeoForum” 1992, No. 23, p. 365–382.

2 N. I. Ivanova, An analysis of innovation policy and the evaluation of its results, “Innovations” 2008, No. 7, p. 44–60.

3 L. М. Gokhberg, Russia’s national innovation system under the conditions of the “new economy”, “Voprosy ekonomiki” 2003, No. 3, p. 26–44.

4 I. Dezhina, Features of the Russian ”triple spiral” relations between the state, the science and the business, “Innovations” 2011, No. 4, p. 47–55.

5 V. М. Polterovich, A problem of forming a national innovation system, “Economics and Mathematical Methods” 2009, No. 2, p. 3–18.

6 N. A. Kravchenko, G. A. Untura, Possibilities and Prospects for Siberia’s Innovative Development, “Regional Research of Russia” 2011, Vol. 1, No. 3, p. 253–258.

7 D. Doloreux, S. Parto (2000), Regional Innovation Systems: A Critical Review, Chaire de recherche du Canada en développement regional, Université du Quebec a Rimouski, http://www.ulb.ac.be/soco/asrdlf/documents/RIS_Doloreux-Parto_000.pdf (accessed 1.02.2013).

8 B. Asheim, M. Gertler, Understanding regional innovation systems, [in:] J. Fagerberg, D. Mowery, R. Nelson (eds.), Handbook of Innovation, Oxford University Press, Oxford 2004.

N. A. Kravchenko44

Another direction of research is focused on the evaluation of institution-al environment influence on the innovation and development of territories. These research results are ground for the development of innovation policy.9

Such research commonly results in the conclusion, that each region has its own combination of success factors and its own set of institutional characteristics and political initiatives, there is no unified model that can explain success in the development of the system of innovation.

3. development of the Siberian innovation system

Scientific and innovative potential of Siberia is represented by a range of world-scale scientific achievements, the well-developed system of ed-ucation and training, and developed production complex, including a knowledge intensive economic sector.

The generation of new knowledge is mostly determined by the aca-demic activity of research institutes, and the system of secondary and high-er education. Currently over 400 organizations are working in R&D sector of the Siberian Federal District (SFD) and the number of personnel in-volved makes up over 58 thousands of people.

At the comparable quantitative indicators of science employment, Si-beria as well as Russia has been dropping behind the world leaders, regard-ing quality indices of scientists’ age structure and scientific effort financing and effectiveness.

The average age of researchers in the SFD is 49 and the share of scientists aged within the age of 50– 70 years is over a half of the re-searchers’ total number. At the same time in the USA, the share of scien-tists of this age does not exceed 25%.10

9 P. Cooke, O. Memedovic (2003), Strategies for Regional Innovation Systems: Learning Transfer and Applications, UNIDO, Strategic Research and Economics Branch, http://www.unido.org/fileadmin/import/11898_June2003_CookePaperRegional_Innovation_Systems.3.pdf (accessed 13.06.2013); S. Mani, Government, innovation and technology policy: An international comparative analysis, “International Journal on Technology and Globalisation” 2004, Vol. 1, No. 1, p. 29–44.

10 Indicators of science and innovations, 2012: stat. collection of works. М., GU-VShE; Regions of Russia. Social and Economic Indicators – 2012 [in Russian], URL:http://www.gks.ru/bgd/regl/b12_14p/Main.htm (accessed 25.06.2013).


The Siberian economy is mixed. Its traditional industries are based on 3–4 technological waves. Some enterprises of the processing industry use the equipment and technologies of 5–6 waves. For example, laser equipment and technologies, accelerating equipment, electron-beam and photochemical technologies; biotechnologies; catalytic technologies; coal deep-processing technologies and coal chemistry; information technologies, etc.

The knowledge intensive sector of the Siberian economy is repre-sented by aerospace industry; production of fuel and power engineer-ing equipment; production of communication facilities including space and telecommunications; instrument engineering; production of medical equipment and some others.

The share of high-tech mechanical engineering (production of ma-chines and equipment, production of electrical equipment, electronic and optical equipment, production of transport vehicles and equipment) in the structure of Siberia’s processing industries is small – 11.4% (in the Russian Federation – 20.2%). In total industry structure, the share of high-tech industries makes up 8% in Siberia (in the Russian Federa-tion – 13%, in the European Union – 16%). For the last 15 years, the lag from the developed countries in high-tech industries has increased.

At the present, Siberia’s traditional industries are not characterized by high innovation activity due to the special features of industry struc-ture as well as a result of many other factors. Innovations in the real sector of the Siberian economy (innovation activity of enterprises, implementation of new products and number of advanced manufacturing technologies in use, exchange of technologies) are developing more slowly than in the Russian Federation. In the SFD, the foreign trade turnover resulted from exporting and importing technologies and engineering services is 6.6% of domestic indicator. Siberia as well as Russia is thus a net importer of technologies.

An incomparable lag of the Russian (and Siberian) enterprises from the foreign ones, judging by the innovation activity indicator can be explained by the fact, that in the developed regions of the world, there are more expanded multi-component innovation systems. In case of Sibe-ria, this system is still being formed.

Business sector demonstrates an extremely low demand for innova-tions. The competition which exists and is increasing is based on other factors – unrelated to innovation. The low demand for innovation is caused

N. A. Kravchenko46

by many problems, for example, inertia of industry structure with the pre-dominance of medium and low-tech industries, engineering backwardness and out-of-date production facilities, lack of qualified personnel, insuf-ficient development of market institutions and infrastructure, and many others. We can assert that innovations are not a competitive advantage un-der the conditions of the deformed competition, when the short-term frame of corporate development is dominating. In fact, the state is almost the only source of internal demand, either direct or by means of the state econo-mic sector. At the present time, the demand for innovations is stimulated by the government, mainly by establishing state corporations and con-straining large companies of the state sector.

The problems in the innovation sphere are well known, they are deeply rooted and they affect the economy as a whole. The functional capabilities of the current innovation system turned out to be limited: there is growth (although not always effective) in spheres where the use of state resources and capabilities is possible. According to the domestic statistical data (table 2), while science and innovation costs are obviously going up, the effective-ness of these costs is going down.11 Although the number of patents as well as the number of newly created advanced technologies have considerably increased, the share of companies implementing innovations and the share of innovation products to be implemented remain almost at the same level.

The statistical data demonstrated that there are no significant movements in the innovation development in Siberia and in Russia as a whole.12 Although there is an increasing total volume of expenditures for R&D, its intensity is decreasing. The number of personnel involved in R&D is also decreas-ing, creating a threat for the long-term development perspectives. The results of innovative activities of the corporate sector are not very optimistic.

11 According to publications in the leading scientific journals in the ranking of countries, Russia went down from the 8th position (1997) to the 14th position (2008). For the same period China went up from the 10th position to the 2nd one. In 2008, Russia’s share in world scientific publications made up 2.48% (27.5 thousand publications), but in 1997 it made up 3.77% with 27,9 thousand publications. At the same time, the USA had 29.4%, and China – 9.69%. The export of domestic technologies in 2008 made 0.833 bln $, and in the USA (1st position) it made 91.9 bln $.

12 Indicators of science and innovations, 2012: stat. collection of works. М., GU-VShE; Regions of Russia. Social and Economic Indicators – 2012. [in Russian], URL:http://www.gks.ru/bgd/regl/b12_14p/Main.htm (accessed 25.06.2013).


Table 2. Indicators of Russia’s Siberian and European Union innovation development

Russia Siberia EU-27YearsIndicator 2008 2011 2008 2011 2010

R&D internal costs, % GDP 1.04 1.09 n/a n/a 2Number of personnel involved in R&D, thousand people 761 735 53.9 52.7 1560

Number of granted patents, thousand pcs. 31.5 30.9 2.1 1.8 54.4

The share of organizations im-plementing engineering inno-vations in total number of or-ganizations (industry), %

9.6 10.4 7.7 8.8 52.9

The share of innovation prod-ucts, works, services in total vol-ume of products (industry), %

5.1 6.1 2.1 2.2 Germany – 14.1; Finland – 9.3

Source: Indicators of science and innovations, 2012.

At the same time, the leading European countries demonstrate oppo-site dynamics. The intensity of innovation costs (% GDP) in Russia stands for 1.09%, whereas in Japan in 2008 it is 3.45%, and in European leading countries such as Finland – 3.87%, Sweden – 3.42%, Denmark – 3.06%.13

Compared to the average level of EU countries, Russian enterprises show over five times lag as per the innovation activity level. There are po-sitive trends in innovative development in Russia and Siberia but the pro-cesses are rather slow.

4. The priority innovation projects for Siberia’s development

During last few years, a significant investments were put into the de-velopment of new innovative sector of the Siberian economy. Those projects were supported by different state-owned funds, among which

13 Indicators of science and innovations, 2012: stat. collection of works. М., GU-VShE.

N. A. Kravchenko48

the “ROSNANO” JSC is the largest. The information about the approved investment projects dealing with the production of innovative products and services in summarized in the table 3.

By the end of 2010, seven projects have been supported on the territo-ry of Siberia (3 – Novosibirsk, 1 – Tomsk, 1 – Krasnoyarsk and 1 in Irkutsk region).

Table 3. ROSNANO projects in the Siberian Federal District

Project Investments bln rubles

Implementation period

Actual status in 2013

1. Expansion of nanoink produc-tion for digital ink-jet printing and production of UV-LED-tech-nology based printers

1.36 2010 Production started

2. Production of oxide ceramic coatings 0.355 2010 Production

started

3. Domestic production of state-of-the-art lithium-ion batteries 13.8 2010–2015 Production

started

4. Nanostructured non-metallic coatings 2.44 2011 Production

started

5. Large-scale production of polysilicon and monosilane 29.1 2009–2013 Postponement

6. Collagen-chitosan nanocomplexes 0.76 2010–2011 Postponement

7. The infrastructure of technopark “Academgorodok” development 11.7 2008–2014

In progress according to the plan

Source: ROSNANO projects.

The suggested innovation projects are focused on B2B market, which can cause difficulties for their implementation. For example, plants are re-quired to change their manufacturing and engineering processes to get the commercial result from nanocoatings and it can cause some difficulties.


The implementation of these projects had met a number of problems such as:

– insufficient consideration of the innovation risks, related to the im-maturity of innovative technologies and the uncertainty of market research for new products;

– poor study of alternative innovative projects in the absence or under-development of the domestic market for innovations;

– low willingness of private investors to take high risks associated with in-novative projects in underdeveloped hedging and insurance mechanisms;

– the lack of flexibility of tools and mechanisms of state support and the provision of long-term government support, which leads to delays in time-to-capacity projects.

Noteworthy is the fact, that the timing of the implementation of many projects delayed for several years. During this time, the market conditions, the level of market competition and global prices for similar innovative products can radically change.

The Siberian large-scale business is generally oriented to the purchase of import equipment and at the same time, R&D knowledge is in a great demand abroad. It means, that foreign companies in fact commercialize scientific achievements and transform them into a product which is in de-mand on the market, and it is natural that they get the most part of the add-ed value. So the capitalization of high intellectual resource is performed outside Siberia and Russia, and the considerable means of business sector are eliminated from reproduction processes of domestic R&D sector.

The above-listed projects supported by JSC ROSNANO and being already implemented in Siberia are obviously to be considered as the be-ginning of future Siberian innovation production. It is necessary to em-phasize, that development of the Siberian innovation sphere can not be based only on large projects. Institutional changes aimed at the increase of social and business activity, motivation of competition, and the reduc-tion of transactional costs are required as well.

One of the most significant factors, mostly located within the manage-rial influence of regional authorities, is to form an innovation – favorable institutional environment, to support the development of business initia-tive and small business, to mobilize investors and to lobby for the interests of the Siberian territories.

N. A. Kravchenko50

There are no simple recipes for competitiveness. Creating a “know-ledge economy” is not only a goal but a mean to increase the level and qua-lity of life and it is therefore necessary not only to supplement the targeted parameters by indicators that reflect changes in the system of norms and va-lues, culture, mentality and traditions of the Russian population, but also to develop special programs to achieve the objectives of social innovation.

Bibliography

Asheim B., Gertler M. (2004), Understanding regional innovation systems, [in:] J. Fager-berg, D. Mowery, R. Nelson (eds.), Handbook of Innovation, Oxford University Press, Oxford.

Block F., Keller M. (2008), Where Do Innovations Come From? Transformations in the U.S. National Innovation System, 1970–2006, The Information Technology & Innovation Foundation, July 2008.

Cooke P. (1992), Regional innovation systems: competitive regulation in the new Europe, “GeoForum”, No. 23, p. 365–382.

Cooke P., Memedovic O. (2003), Strategies for Regional Innovation Systems: Learning Transfer and Applications, UNIDO, Strategic Research and Economics Branch, http://www.unido.org/fileadmin/import/11898_June2003_CookePaperRegional_In-novation_Systems.3.pdf (accessed 13.6.2013).

Dezhina I. (2011), Features of the Russian “triple spiral” relations between the state, the science and the business, “Innovations”, No. 4, p. 47–55.

Doloreux D., Parto S. (2000), Regional Innovation Systems: A Critical Review, Chaire de recherche du Canada en développement regional, Université du Quebec a Rimouski, http://www.ulb.ac.be/soco/asrdlf/documents/RIS_Doloreux-Parto_000.pdf (accessed 1.02.2013).

Dutta S. (2011), The Global Innovation Index 2012, INSEAD-WIPO, www.wipo.int/free-publications/en/ economics/gii/gii_2012.pdf (accessed 20.06.2013).

Indicators of science and innovations, 2012: stat. collection of works, М., GU-VShE.Ivanova N. I. (2008), An analysis of innovation policy and the evaluation of its results,

“Innovations”, No. 7, p. 44–60.Godinho M., Mendonca S., Pereira T. (2006), A Taxonomy of National Innovation System:

Lessons from an exercise comprising a large sample of both developed, emerging and developing countries, Report for 2nd GLOBELICS conference.

Gokhberg L. М. (2003), Russia’s national innovation system under the conditions of the “new economy”, “Voprosy ekonomiki”, No. 3, p. 26–44.


The Human Development Index Trends 1980 – 2012, 2013, hdr.undp.org/.../press/.../HDI_Trends_2013.pdf (accessed 20.06.2013).

Kravchenko N. A., Untura G. A. (2011), Possibilities and Prospects for Siberia’s Innovative Development, “Regional Research of Russia”, Vol. 1, No. 3, p. 253–258.

Lundvall B.-Å. (ed.) (1992), National Innovation Systems: Towards a Theory of Innovation and Interactive Learning, Pinter, London.

Mani S. (2004), Government, innovation and technology policy: An international compa-rative analysis, “International Journal on Technology and Globalisation”, Vol. 1, No. 1, p. 29–44.

Polterovich V. М. (2009), A problem of forming a national innovation system, “Economics and Mathematical Methods”, No. 2, p. 3–18.

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Sala-i-Martin X. (ed.) (2011), The Global Competitiveness Report 2011–2012, World Eco-nomic Forum, Geneva, www3.weforum.org/docs/WEF_GCR_Report_2011-12.pdf (accessed 20.06.2013).

Abstract

This paper deals with the problems of development of regional innovation systems. The creation of effective innovation systems, capable to widen and increase the innovation activities, is proclaimed as one of the urgent needs for Russian economy. By now, Russian innovative activities are ranked rather low, when compared to other developed countries. According to The Global Competitiveness Report 2012–2013, Russia is ranked 67th among 144 countries. During the last decade, there were a number of state initiatives focused on in-creasing innovation activity. However, the achieved results were not sufficient. The most dramatic expression of this problem seems to be a low level of demand on innovations from the domestic corporate sector. During the period 2000–2012, not more than 10% of in-dustrial enterprises implemented innovations.

The problems of Siberian innovation system are rather typical for the whole country. In this research, information about the largest innovation projects which are planned to be implemented in Siberia, are accumulated and the process of its implementation is analyzed. This analysis shows that in the medium-term Siberian economy is likely to continue to have the status of the resource-driven economy.

Key words: innovation systems, regional development, Siberia.

Irena Slavova-Georgieva*

THE COmpETiTiVEnESS OF CluSTER “SREdnOgORiE mEd”: PRECONDITIONS AND LIMITATIONS

1. introduction

Bulgaria is a country which abounds in rich and varied mineral re-sources. The huge reserves of copper, iron ore, gold, nickel, lead-zinc ores and others give the country an advantage on which it could build a success-ful mining industry. But the abundance of natural resources does not suf-fice to create a competitive and sustainable economy. In his book “The Competitive Advantage of Nations”, Michael E. Porter outlines four deter-minants that help to describe the effect of their impact on the competitive advantages of the nation, the region or the cluster (figure 1).

In Bulgaria, by a combination of the impact of these determinants an interrelated network of companies and municipalities that form a lead-ing cluster for the mining and processing of copper and gold-containing ores has successfully been developing. “Srednogorie Med” cluster is lo-cated in Central Sredna Gora and was established as the regional industrial principle as the initiative of the large industrial companies in the region:

* Irena Slavova, Assoc. Prof., Ph.D., Department “Marketing and Strategic Planning”, University of National and World Economy, Sofia.

I. Slavova-Georgieva54

“Assarel Medet AD”, “Aurubis Bulgaria AD”, “Elatsite Med AD” and “Chelopech Mining EAD”. The cluster comprises mainly the compa-nies for the mining and processing of copper and gold-containing ores, located in Central Sredna Gora, as wells the companies serving industrial production and local government representatives.1

Figure 1. Porter’s Diamond Model

Source: M. Porter, The Competitive Advantage of Nations, Klasika i Stil, Publishers, Sofia 2004, p. 106

1 In 2005 was registered a non-profit organization, “Srednogorie Med” industrial cluster. The cluster members are “Assarel Medet AD”, “Aurubis Bulgaria AD”, “Elatsite Med AD”, “Chelopech Mining EAD” and “Geotechmin OOD”, “Optix AD”, “Opticoelectron AD”, “Eurotest-Control EAD”, “Erlikit Bulgaria”, “Energeo EOOD”, Panagyurishte Municipality, Pirdop Municipality, Zlatitsa Municipality, Mirkovo Municipality, Chelopech Municipality, Chavdar Municipality, Anton Municipality and Strelcha Municipality. Partners: The Bulgarian Chamber of Mining and Geology, Sofia University “St. Kl. Ohridski”, The university of Mining and Geology “St. Ivan Rilski”.

Factor conditions

Firm strategy, structure and rivalry

съперничество

С

Demand conditions

Related and supporting industries

The competitiveness of cluster “Srednogorie med”… 55

2. Analysis of the competitiveness of cluster “Srednogorie med”: preconditions and limitations

2.1. Factor conditions

The competitiveness of the clusters in the mining industry critically depends on the quantity and quality of underground deposits of miner-als. Bulgaria undoubtedly possesses huge reserves of mineral resources, the largest relative share of total deposits of metal ores being the mining of copper, gold and silver. The copper-porphyry deposits are of major importance of all available resources in Bulgaria, as 91% of the copper in the country is mined from them, in line with world practice.2 The compa-nies which exploit these deposits are the mining cluster companies: “Assarel Medet AD”, “Elatsite-Med AD”, “Dundee Precious Metals EAD”, which shows the leading role of cluster “Srednogorie Med” for the development of the mining industry, as well as for the development of the non-ferrous metallurgy (“Aurubus AD” – one of the leading companies in the cluster is the only copper-processing company in Bulgaria).

By copper production, Bulgaria ranks third in copper mining and fourth in gold mining, which shows the leading role of this country in Euro-pean mining. The companies that carry out mining activities are cluster members, which also allows to qualify the cluster’s position in Europe as leading. By copper mining per capita (11–12 thousand tons) Bulgaria falls within the definition of „a mining country” with an indicator above the average on a worldwide scale.

Bulgaria has traditions in mining, rich and developed ore deposits, experienced miners, highly educated professionals and access to high-tech processes for the mining and processing of copper. All of this are important factors of the production process and are available. However what makes a cluster unique and more competitive than others, is the capacity for fur-ther development and support of the factors of production. According

2 Jubilee Annual Newsletter on Mining and Geology in Bulgaria, 2010/1, Bulgarian Chamber of Mining and Geology, p. 56.


to Porter the set of factors at any given time is less important than the rate at which they develop, improve and specialize in the specific industries. It is not just the access to factors, but the possibility for them to develop productively that becomes important for competitive advantage.3 “Sred-nogorie Med” seems to meet these requirements.

For the development of the factors of production, a decisive role have both public and private sectors. In case of the public educational and re-search institutions, with which the cluster has partnership, contribute to the development of human resources through the training of specialists and applied research. These are the following universities: The University of Mining and Geology “St. Ivan Rilski”, Sofia University “St. Kliment Ohridski”, as well as the Geological Institute of the Bulgarian Academy of Sciences “Strashimir Dimitrov.”

The public institutions play a crucial role for the formation and im-provement upon the factors, no matter if they are qualified human re-sources, fundamental scientific knowledge, and economic information or infrastructure. As an exclusive owner of mineral resources and conceder of concessionary rights the state has an effect upon the admission to invest-ments in the extractive industry. According to Alex Nestor, Vice-President of Bulgarian Chamber of Mining and Geology and Chairman of the Cluster “Srednogorie Med” even the elementary improvement of the communica-tion between the different institutions in Bulgaria, which execute the policy in the area of mineral resources, as well as the simplification of the admin-istrative procedures, can disburden the investments access in this sector.

The amendment to the Law on Mineral Resources of 2010; the estab-lishing of a single authority for the management and control of the mineral resources in the country (Directorate “Natural resource and concessions”, Ministry of Economy and Energy), as well as the draft National Strategy for the Mining (Mining and Raw Materials) Industry in 2012 are the un-dertaken from the government actions in this direction.

The amendment in the allocation of the concessionary remuneration between the state and the local budget – 50:50 (former ratio was 70% for the state budget and 30% for the municipalities) affords further oppor-

3 M. Porter, The Competitive Advantage of Nations, Klasika i Stil, Publishers, Sofia 2004, p. 111.


tunities for better development of one other important element of the fac-tor conditions – infrastructure. Considerably grow the financial means of the municipalities, members of the cluster for investments in the local infrastructure. In 2011, for example, the highest concessionary disburse-ments have obtained the Chelopech Municiplity, where operates the gold extraction enterprise “Chelopech mining” (2,4 mln leva in comparison – the common budget of the municipality for 2012 is 6.2 mln leva); Pana-gurishte, where is “Assarel Medet” (1.9 mln leva); municipality Etropole has received 1.7 mln leva from the “Elacite-med” activities.4

The mayors indicate the ecology, the infrastructure and the health care as a priority field, where the income form the concessionary charg-es should be invested. Typical for this cluster is the state-private partner-ship in the building of local technical and social infrastructure. “The ores and minerals will run out sooner or later, therefore we will use this finan-cial means to create a stable economic environment, which should provide a good standard of level to the local people even after the extractive acti-vities conclude.”5 say Alex Kesyakov, the Mayor of Chelopech.

The specialized government agencies help also for improvement of the factor conditions through information dissemination, policy regu-lation and supervision of safety measures.The creation of fair and equal conditions for all companies can encourage the competition between the participants in the cluster. This in turn can provoke the active operators to improve the factor conditions through investments in human resources, technology and the environment. This way the cluster resources are grow-ing and the factors of production are constantly improving.

As well as the private sector is concerned, particularly the leading companies in the cluster in use different mechanisms for the development of the factors of production. Especially, in-company and external train-ing and internship programmes are aimed at improving the human capi-tal of the companies. Every year the companies increase their investment in personnel training and improvement. For example in 2010 in “Assarel

4 Capital Newspaper, Municipalities have taken 39 million lev. concession for eight months. After the amendments to the Mineral Resources half of the charges are transferred to the local authorities, 1.03.2012.

5 Ibidem.


Medet AD” organized 401 training courses for a total of 3317 participants. A long-standing practice with the companies (“Geotechmin OOD”, “Elat-site Med AD”, “Aurubis Bulgaria AD”, “Dundee Precious Metals Chelo-pech”) is to provide internship programs, which include a large number of students from various universities and high schools, part of them re-maining to work at the company. The mining companies “Dundee Precious Metals Chelopech EAD” and “Aurubis Bulgaria AD” implement joint practical three-year internship programmes with the Vocational School for Mechanical and Electrical Engineering – Pirdop.

Another mechanism for the development of the factors of production are the constant technological innovation and the large-scale long-term in-vestment programs of the leading companies in the cluster. Areas of prio-rity for investment are:

1. The introduction of modern technologies in all areas of production. Copper ores have low metal content (from about 0.5% to 2%) and, as Por-ter points out, the imperfections in some of the factors of production lead to innovation and investment. A great number of the on going investment projects are focused on improving productivity and cutting cost in the mi-ning and processing of copper ores. Investing in equipment and techno-logical innovation improves the efficiency in the mining and processing of raw materials, leads to their full extraction and contributes to the eco-nomic sustainability of the industry.

2. Improving natural environment. Mining companies of the clus-ter implement environmental projects to reduce harmful greenhouse gas emissions, water pollution, etc. and often the technologies that are used are innovative not only for the country (for example the technology for the treatment of waters in the water treatment plant under construc-tion in the “Elatsite Med AD” mine, etc.). Optimization of the production process, improvement of production efficiency, improvement of internal transport infrastructure reduce the negative impact on the environment.

3. Investment in the development of local communities – supporting the building of local infrastructure – transport, social, communication, etc.

The development and implementation of technological innova-tions create know-how and professional potential that develops and re-mains within the country. This favours the formation of an environment


for the development of new mining and metallurgical technologies in ex-perimental and industrial conditions. Thus, the factors of production are improved. Through their investment activities purchase of machinery and equipment and the installation of new production capacities, mining companies promote capital formation in the economy. This leads to high-er factor productivity of resources (labour and capital), which increases the real growth of the economy.

2.2. Demand conditions

Domestic demand for products supports clusters in several ways. Of-ten the buying habits of local consumers help to determine the direction and the level, at which companies satisfy customer demand requirements. The country can increase competitive advantage, when this domestic de-mand puts pressure on the companies to innovate faster, in comparison with international buyers.

In the case of the mining cluster in Bulgaria, however, the trend is al-most reversed. The domestic demand in Bulgaria for copper and copper products is limited and at present it is very tight due to a decline in the in-dustrial development of the country (construction, metallurgical and chem-ical industries). The biggest copper processing plant in Bulgaria is “Auru-bis Bulgaria AD” in Pirdop – a member of the cluster. The company is also the only producer of anode and cathode copper in Bulgaria (its production is intended mainly for the export market). In 2012 – 85.3% of the electro-lytic copper was directed to exports which grew by 2.3% while domestic sales declined.6

The size of the domestic market plays a complex role in the national advantage and stands out as an important aspect in the discussion on na-tional competitiveness, although there is not much agreement on the direc-tion of this cause and effect relationship or reasoning, Porter points out.7 According to some authors a huge domestic market is an advantage due

6 According to the data of the Bulgarian Association of Metallurgical Industry, 2013. 7 Porter M., The Competitive…, p. 130.


to the existence of economies of scale. Others consider a huge domestic market a weakness and point out as the main argument that the limited local demand forces companies to export, which is important for global industries.

In the trade in goods where the product specifications and the quality are similar to global ones, the advantage of the country/nation, the clus-ter respectively, is the result of playing against other large international mining countries and organizations.8 We share this notion with respect to cluster “Srednogorie Med”. Bulgaria exports copper raw materials (cop-per and copper products) for the following leading export markets: Turkey – 21.9% of total exports of copper and copper products; Italy – 16.3%; Ger-many –12.6%; Serbia – 10.1%; Belgium – 8.9%.9 Also export of Bulgaria to China is constantly growing. According to the National Statistical In-stitute in 2011 refined copper and copper alloys stood for 68.4% of Bul-gariaʼs export to China. For the period January–September 2012 the share of refined copper and copper alloys was even greater, or 73.9% of total export to China. Besides these, 10.1% of the countryʼs export is copper ores and concentrates, another 3.8% is waste and copper scrap and 1.3% is copper matte and cement copper. The total share of copper raw materials in Bulgarian export to China is 89.1%.10 This situation is different from pre-vious years when the greater part of these copper products were exported to Western Europe. Their main producer is Aurubis Bulgaria, Pirdop.

The analyses, carried out and based on National Statistical Institute data and reports of the branch organizations – the Bulgarian Chamber of Mining and Geology and the Bulgarian Association of Metallurgical Industry, show that the cluster is predominantly export-oriented and its de-velopment is definitely influenced by the market conditions in internation-al markets (mainly the London Metal Exchange).

The main conclusion that we can make with reference to demand conditions as a determinant of competitive advantage is that with such a huge demand for copper from other countries, Bulgaria with its domestic

8 Socio-Economic Impact Analysis of Dundee Precious Metals’ Mining Projects in Bulgaria, Institute for Market Economics, 2007, p. 22.

9 Export profile of Bulgaria, Ministry of Economy, Energy and Tourism, 2011.10 National Statistical Institute, 2013.


market for metals has a reduced impact on the competitiveness of com-panies of the cluster. The domestic environment is not dynamic and does not abound in challenges. It does not stimulate and encourage companies to improve and extend their advantages over time. What is crucial to the de-velopment of the companies, it is global demand for copper and its pro-ducts. Thus, the key segments of customers develops globally and come such industry as construction, power engineering, automotive, etc. Prices of these products on global commodity markets are very dynamic and de-pend on supply and demand. The prices of copper and gold on international markets over the last decade are characterized by fast growth as a result of the increased global consumption. It should be noted however, that pric-es of copper, as well as of other commodities, follow sinusoidal increases and decreases that carry a major risk for investors.

According to Eng. L. Tsotsorkov, the CEO of “Assarel Medet” and Chairman of the Bulgarian Chamber of Mining and Geology, the risks for the future development of the leading companies in the cluster are most-ly related to market conditions and the EU, as well as the eco standards of the EU. They will largely determine the competitiveness of the compa-nies in the mining sector in the new economic conditions.

2.3. Related and supporting Industries

The third determinant of national advantage in a given industry is the presence in the region of supporting or related industries. A num-ber of studies11 show that every job, created in the mining and petroleum industry, creates jobs in other sectors. (For example, according to an ana-lysis of the major mining companies in Western Australia, each job cre-ated in the mining and petroleum industry, creates three time more jobs in other sectors across Western Australia). And only more jobs are created

11 Research in different countries defines multipliers differently. According to various studies and research, carried out in countries being – leaders in the mining of mineral ores, such as Canada, Chile, Ghana, Tansania, Peru and others, the stimulated employment was between 165% and 250% of the number of the directly and indirectly employed. In the industrialized countries the multipliers of stimulated employment are about 100%.


but also more investments are made in order to create a better and sustain-able infrastructure that supports the industry. Mining companies contribute to the development of the technical and social infrastructure in cooperation with local governments. This has a significant impact on the future eco-nomic growth of the country, regional development and the development of the small municipalities, in which the mining and processing of copper and gold-containing ores is carried out.

The mining industry, as a whole, depends on many suppliers of in-frastructure, access to equipment, scientific planning, labour and export. The specific nature of the production process requires also special ma-chinery, know-how, reagents and chemicals, software and systems for pro-cess management. A number of companies, operating on the Bulgarian market (Bulgarian and foreign producers and importers) offer modern, high-tech equipment and machinery, used in the mining and processing of ores. In the global competitive environment the components, machinery and other investments are available in global markets. Therefore, as Por-ter points out, “more important than access to machinery and other inputs is the advantage that home-based suppliers provide in terms of constant coordination. Their establishment is supported by the fact that the essential activities and senior management of the suppliers are located in the coun-try. Competitive advantage is the result of close working relationships between world-class suppliers and the industry.”12 According to experts, characteristics of mining companies are the good partner relationships with the suppliers of equipment (Atlas Copco, Kirov, etc.) The relation-ships between the value chains of the companies and their suppliers are im-portant for competitive advantage.

Determining role in the clusterʼs development unless suppliers have related industries. According to Porter “related industries are those in which firms can coordinate or separate activities of the value chain when competing, or those, involving complementary products (say computers and software). The separation of operations can be carried out in the devel-opment of technologies, production, distribution, marketing or services.”13

12 M. Porter, The Competitive…, p. 140. 13 M. Porter, Ibidem, p. 144.


In terms of the mining sector the related industries are in the area of de-signing, surveys (geological, geotechnical and hydrogeological surveys and drillings); mining consulting and engineering, construction activities, research, after-sales services of the main machinery and equipment etc.

Much of the activities, related to the mining industry, are provided by companies that are members of the cluster. “Geotechmin” (the group comprises 21 companies with a total number of employees of over 4200 peo-ple), one of the founders of the cluster, provides design and consultancy ser-vices in the area of mining, hydrotechnical, civil engineering and protection of the environment. Among the partners of “Geoptechmin” group are “As-sarel Medet AD”, “Aurubis Bulgaria”. “Geotechmin OOD” designs build-ings, related mainly to the development of “Elatsite” mine14 the ore-dressing factory in the village of Mirkovo, hydrotechnical tunnels among them. Se-veral companies of the “Geotechmin group”, belonging to the business unit Mining, offer a variety of services in the area of mining engineering consult-ing. Among them are the projects of “Helix OOD” for the implementation of geological and hydrogeological drilling of “Elatsite” mine, “Explosivpro-gress – GTM EOOD” as a distributor of the products, manufactured by ex-plosives factory “Elatsite” – waterproof emulsion explosives which since 2007 have had a CE marking, allowing their supply on the international mar-ket. Explosivprogress – GTM provides for the mining companies (“Elatsite mine”) a complete service that includes surveys, design and consulting relat-ed to: the drilling and blasting in the mining of ore, etc.

The conducted research gives us grounds to believe that the related and supporting industries contribute to the competitiveness of the cluster.

2.4. Firm strategy, structure and rivalry

Bulgaria is a parliamentary democracy with a free market economy and firms can freely enter and go out of the mining industry for the pe-riod of the permit/concession agreement, compliance with environmental norms and standards, safe and healthy working conditions, and other in-dustry standards being monitored meanwhile.

14 Elatsite are part of the Geoproject Group.


However, the barriers to entry in the industry are very high, as min-ing industry is capital intensive. The process of mining ore and metals from the earth requires a huge investment in equipment and machinery, transport and often infrastructure improvements to support the local com-munity. In fact, it is difficult for new companies to enter the mining indus-try and to compete with the large companies.

In consequence, domestic competition is weak, even lacking – in the country there are no other companies for the mining and pro-cessing of copper besides the member companies of the cluster. This is the area where government support might be useful. An active policy to encourage the prospecting and exploration of minerals in the coun-try will lead to proving the existence of new deposits and establishing new mining companies. Prognoses has shown that country possesses minerals of all groups and a large number of potential sites for prospect-ing, but there is no national strategy and policy in the mining industry and no policies in the planning of the utilisation of mineral resources.15 To the arguments we have listed so far we should also add the great opposition of some non-governmental environmental organizations to the development of new mineral deposits, including copper ores. In consequence, there is no communication and willingness to discuss controversial issues. Another reason for the lack of competition and new entrants is a number of administrative procedures, limiting the mining of new deposits. The draft of the National Strategy for the Development of the Mining Industry, which is to be adopted by the government, en-visages amendments to several laws which will facilitate the granting of mining concessions. According to the Bulgarian Chamber of Mi-ning and Geology it is also necessary to adopt a roadmap that sets clear deadlines for starting the exploitation of the relevant deposits, and also to set specific deadlines for administrative procedures. “For investors it is important to know when they can begin actual mining as they have their plans and expectations for revenues”,16 experts from the mining companies say.

15 Draft of a National Strategy for the Mining (Minerals and Raw Materials) Industry.16 Mining Industry in Bulgaria, Yearly newsletters 2013, Bulgarian Chamber

of Mining and Geology, www.bmgk-bg.org


Due to these reasons, we can hardly expect domestic competition to in-crease in the future. The current main players on the domestic market still re-main the mining companies, operating till their concession agreement expires.

As far as the rivalry among existing firms is concerned at the moment it seems to be relatively weak, besides creating competition for the best em-ployees and in combating environmental challenges. Metals are commodities with low added value and only higher production generates more revenues. In 2011, the production of the mining companies generated 1.5 billion levs, 25% more than in 2010. At the same time the mined ore increased by 4%, but much of the increase was due to the higher prices of copper and gold on world markets. Despite the economic crisis leading companies in the clus-ter are innovative, well- managed and financially healthy. In 2011 “Assarel Medet” generated revenues of 509.8 million levs, “Elatsite Med” – 492.7 mil-lion levs. In 2011 “Chelopech Mining” marked significant growth. The reve-nues of the gold-mining company rose by more than 65% in 2011, reaching 299.1 million levs. So from making losses in the previous year, it turned out that the company had not only made profits (158.6 million levs), but had also achieved a high profitability ratio – 53%.17 Characteristic of the sustainable functioning of the leading companies in the cluster are not only the revenues, generated by sales, but also the higher yield and the increasing volumes of in-vestment in technologies and the environment.

Success in the mining industry depends on: (1) the size of the company in terms of capital, infrastructure and immovable property; (2) the production program of the company is related to the access to raw materials and the size of the deposit – the quality and quantity of the deposit of mineral resources, the conditions for mining; (3) the cooperation with the Bulgarian government for access to the resources, necessary for mining, production and export.

3. Conclusions

The analysis we have carried out allows us to draw the following con-clusions :

1. A favourable effect on increasing the competitiveness of the cluster lies in the access to the factors of production, as well as their development

17 According to company’s annual reports.


and improvement through investment in technologies and training. How-ever, the research and development activities between the research insti-tutes and universities in Bulgaria, partners of the cluster, and the mining companies, are still insufficient.

2. The role of state institutions does not contribute to the development of the competitive advantage of the cluster. There is a conflict between The Mineral Resources Act and other regulations of crucial importance for the industry. A well-developed policy for the development of the mi ning sector, as well as policies in the planning of the use of mineral resources, are lacking. Access to the available statistical information at the Ministry of Economy, Energy and Tourism and the National Statistical Institute is difficult.

3. The development of the companies in the cluster will continue to de-pend on the market situation on the international commodity exchanges. Insignificant domestic consumption does not create challenges for the com-panies in the cluster. Bulgaria with its domestic metal market has a reduced impact on the competitiveness of the companies in the cluster. The domestic environment is not dynamic and rich in challenges, it does not encourage and drive companies to improve and extend their advantages over time.

4. Related and supporting industries contribute to the creation of com-petitive advantage. Leading companies in the cluster have access to suppliers of machinery, equipment, raw materials on a world level and good business partnerships with their suppliers. Many of the activities of the related and sup-porting industries are carried out by companies, members of the cluster.

5. There is no domestic rivalry, the only companies for the mi-ning and processing of copper and gold-containing ores are the compa-nies of the cluster. The current situation cannot be expected to change in the near future, because of the lack of development of new deposits, as well as the lack of policy in this area.

Cluster “Srednogorie Med” has the necessary preconditions for strengthening its competitiveness. In contemporary economic environ-ment, existing market conditions and the EU eco-standards will determine the competitiveness of the leading companies in the cluster.

However, in our opinion the potential of cluster “Srednogorie Med” to create a sustainable national competitive advantage is limited. Firstly, be-cause the resources are non-renewable and limited to the depletion of the de-


posits, and secondly, because products created in the cluster are of low add-ed value – ores/raw materials are exported, products of higher added value are not created. The government should play a decisive role in this respect.

Figure 2. Advantages and disadvantages of cluster “Srednogorie Med” by the determinants of Porter’s diamond

Source: own composition

Advantages – available ore deposits – a single government body – experience and traditions in mining – skilled workers

– technological innovations Disadvantages – insufficient supply of information – inadequate use of scientific potential

Factor conditions

Advantages – demand on the international market – rising prices of copper and gold on commodity exchanges

Disadvantages – weak contracted domestic demand

Demand conditions

Advantages – suppliers of services – cluster members – good partner relationships with suppliers

Disadvantages – lack of suppliers of world level on the domestic

market

Supporting industries

Advantages – rivalry in technological innovations – environmental and safety challenges

Disadvantages – domestic competition lacking – high barriers to entry – opposition from non- governmental organizations

– low added value products

Rivalry


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Abstract

In the environment of global competition, the role of clusters in creating national competitive advantage is rapidly increasing. One of the first and successfully develop-ing clusters in Bulgaria, with a contribution to the economic development of the country, is mining cluster “Srednogorie Med.” Established on the regional industrial principle, the cluster, as a type of local production systems, brings together the efforts of the compa-nies for the mining and processing of copper and gold-containing ores, located on the terri-tory of Central Sredna Gora, the companies, serving industrial production and the munici-palities on whose territory the companies operate.

This paper aims mainly presenting the level of competitiveness of the local “Sred-nogorie Med” cluster with the usage of M. E. Porter’s diamond model as well as at outlining the preconditions and limitations for the creation of a competitive advantage for the cluster in its future development.

The study is based on secondary information (periodicals and the Internet), as well as personal interviews with representatives of the cluster.

Key words: Porter’s diamond, mining industry, “Srednogorie Med” cluster.

Yuliya Tsvelodub*

COAl mining AREAS: EnViROnmEnTAl iSSuES And SOluTiOnS (On THE EXAmplE OF KuZBASS)

1. introduction

The coal industry was and remains one of the basic sectors of the Rus-sian economy. Although formally the coal industry’s share in the GDP is slightly above 2%, specialists and experts believe that the actual contri-bution of coal to the economy is much higher than expressed in percent-age of GDP. Speaking about coal as one of the elements of sustainable development of the national economy, the importance of coal for other in-dustries cannot be overstated. In fact, coal is one of the elements forming the final product of metallurgy, it has a significant share in the railways’ freight turnover (40%), it is a source of raw material for the chemical in-dustry and the energy production (power stations).

Having survived restructuring period during which the volume of product halved, since 1999 the industry has seen a significant growth of its production. Analyzing the current state of the Russian coal industry, it is possible to emphasize the following positive trends:1

* Senior Lecturer, Chair of Mathematical Methods for Economics and Planning, Novosibirsk State University.

1 A. Tverdov, A. Zhura, S. Hikishichev, Problemy i perspektivy razvitiya ugolnoy otrasli Rossii, “UGOL” 2012, Vol. 8, p. 86.

Y. Tsvelodub72

– significant increase in production from 232 million tons in 1998 to 336 million tons in 2011;

– increase in labor productivity while reducing the workforce – from 88 tons/month in 1998 to 235 tons/month in 2011;

– growth of investments in the renewal of fixed assets and new plant – from 5.1 billion rubles in 1998 to 90 billion rubles in 2011;

– the share of coal exports in the total production increased from 10.2 in 1998 to 35.7% in 2011.

The main share of mined coal field in Russia is concentrated in the fol-lowing basins: the Kuznetsk Basin, the Pechora Basin, the Irkutsk Ba-sin, the Kansk-Achinsk Basin, the Moscow Region, the Eastern Donbass, the Tunguska Basin, the Lena Basin, the Kizelyovsk Basin. The largest of them – the Kuznetsk coal basin (Kuzbass) – is located in the Kemer-ovo Oblast (South of Western Siberia). It is one of the largest coal fields not only in Russia but also in the world (58 mines and 36 pits are operated here2). The total geological reserves of the basin are about 700 billion tons, including about 200 billion coking coal.3

It is appropriate to note that the Kemerovo oblast is one of the largest industrial regions of Russia. The basis of its industrial production includes coal mining and cleaning, iron and polymetallic ores extraction. Manufac-turing industries of Kuzbass are mainly ferrous and nonferrous metallurgy, production of primary chemical products and building materials. In con-junction with energy production and construction industry, this set of in-dustries dominate the economy of the region, making 57.7% of the GRP.4 According to M. E. Porter,5 regional cluster is defined as a group of geo-graphically concentrated companies from same or related industries and supporting institutions located in a particular region, manufacturing

2 Ministry of Energy of the Russian Federation [official site], http://minenergo.gov.ru/activity/coalindustry/coaldirection/982.html (accessed 18.07.2013).

3 The administration of the Kemerovo oblast [official site], http://www.ako.ru/Kuzbass/polezn.asp?n=9 (accessed 18.07.2013).

4 L. Elentseva, E. Volynkina, Analiz vozmozhnostey dlya razvitiya otkhodopere rabatyvayuschey otrasli v Kuzbasse s uchetom mirovogo opyta, “Okhrana okruzhayuschey sredy i prirodopolzovanie” 2010, Vol. 4, p. 40.

5 M. Porter, Konkurentsiya, Williams Publishing House, Moscow 2000, p. 207.

Coal mining areas: environmental issues and solutions… 73

similar or complementary products and characterized by the presence of information exchange between the member firms of the cluster. Thus, Kuzbass can be considered as a kind of “natural” regional cluster.

For 15 years, coal production in Kuzbass doubled, exceeding planned targets. Thus, the Energy Strategy of Russia for the period up to 2030 en-visages an increase in production in Kuzbass in 2030 to 201 – 205 mil-lion tons. However, already in 2012 the Kemerovo region produced 201.5 million tons of coal, including 52.2 million tons of coking coal and 149.3 million tons of steam coal (In 2011, these figures amounted to 48.8 million tons and 143.3 million tons respectively). At the same time, about 40% of coal production, manufactured in Kuzbass, is exported to more than 40 countries, it accounts for 80% of Russia’s coal exports. Coal extrac-tion in 2012 reached an absolute historical maximum – such volumes had not been achieved in the region in the Soviet years. Today, the Kemerovo oblast produces 65% of Russia’s total coal and 75% coking coal volumes.6 Coal production in Kuzbass is compared with production of the leading coal-producing countries, such as Germany (if one includes also the ex-traction of lignite in the latter), and is ranked seventh in the world.

A potential for further growth of coal mining is far from exhausted. For example, in 2013, the Kemerovo oblast will be put into operation three coal mines (“Butovskaya”, “Erunakovskaya-VIII”, “Karaylinskaya”) and two concentrating mills (concentrating mill “Cascade” and concentrat-ing mill named after Kirov). Kemerovo oblast’s Governor Aman Tuleyev sees the future of the coal industry in vertically integrated structures: “My deep belief: the future is not in separate mines, pits, but in associations, clusters of enterprises that implement a full cycle, the entire production chain – from coal mining to its final processing”.7 But at the same time, the head of the region said that the volume of coal mining would not in-crease. In the next few years Kuzbass will probably stabilize coal produc-tion at 200 million tons.

This is due to the fact that growth of coal has its limits both from eco-nomic and ecological points of view. The economic aspect is that the world coal prices are falling. In Europe coal is less attractive than gas, so Western

6 M. Kichanov, Ugolnyy peregruz, “Expert-Sibir” 2013, Vol. 4 (360), p. 11. 7 M. Kichanov, op. cit., p. 15.

Y. Tsvelodub74

European countries prefer to import gas. At the same time, the coal de-mand in China and India is sufficiently high. However, because of large distances and high transport tariffs, Russian coal finds it difficult to com-pete with that from Kazakhstan.

The environmental side of the issue is that the mining and processing of coal will inevitably cause serious environmental problems. Their solu-tion requires a significant capital investment. This naturally leads to an in-crease in the cost of coal, which has a negative effect on the competitive-ness of Russian coal on the world market.

2. Ecological situation in the coal industry

The development of resource-intensive industries, including coal mi-ning industry, entails significant environmental costs. Economic activity causes damage to environment producing emissions of gaseous pollutants in the atmosphere, liquid waste and solid waste. According to the Russian rating of branches of the economy as to the degree of waste emissions in the environment, in 2005 the coal industry took 6th place (by emissions) for gaseous waste (767.3 thousand tons), 9th in the liquid waste (413.8 mil-lion m3), 1st place in the solid waste (1442.9 million tons). The risk level of the coal industry is II (it means “very dangerous”).8

Moreover, it is possible to separate another serious problem of coal industry – withdrawal of lands from land use.

2.1. Emissions in the atmosphere

The major sources of emissions of air pollutants at the enterprises of coal industry are coal-fired boiler, burning waste dumps, air emissions from mines, surface mining, operation of mining equipment. Particularly

8 Gosydarstvennyy doklad “O sostoyanii i ob okhrane okruzhayuschey sredy Rossiyskoy Federatsii v 2007 godu”. Ministry of Natural Resources and Environment of the Russian Federation [official site], http://www.mnr.gov.ru/regulatory/list.php?part=1101 (accessed 18.07.2013).


dangerous are gaseous substances: oxides of sulfur, nitrogen and carbon, methane, and volatile organic compounds. The largest share of total emis-sions of pollutants is represented by mine methane (up to 90%).9

The main problems in the preservation of the atmosphere in the coal industry are mine methane utilization, prevention of spontaneous combus-tion and burning of waste dumps, installation of purifying equipment at all stationary sources.

Extensive damage to health of the population of the miner’s ci-ties and settlements is caused by burning waste dumps, especially those close to them. Most of these emissions arrive in the atmosphere, bypass-ing gas-purifying installations. The greatest amount of pollutants emitted without treatment is in the Kuznetsk Basin (67.3% of the industry index).10

Degassing of coal seams prior to their exploitation and in the process of mining and extraction of methane gas from vent streams remain rele-vant and challenging scientific and technological problems that need to be resolved.

2.2. Sewage pollution

The situation with wastewater treatment in the coal industry is also un-satisfactory. Characteristic contaminants in mine and quarry waters include suspended solids, oil products, phenols, iron, heavy metals, and some trace elements. The main method of wastewater treatment plants in the indus-try is a mechanical way of using tanks and ponds, which in most cases does not provide treatment for the entire spectrum of contaminants in ac-cordance with existing regulations. Other causes of inefficient opera-tion of treatment facilities are exceeding the actual flow of treated water from their estimated capacity, poor technical conditions of the facilities, and violation of technological cleaning mode.11

9 B. Schadov, Ecologicheskie problemy ugolnoy otrasli na zavershayuschem etape restrukturizatsii, “UGOL” 2007, Vol. 6, p. 33.

10 Ibidem.11 A. Litvinov, A. Kharitonovskiy, Sostoyanie okruzhayuschey sredy v ugolnoy

promyshlennosti, “UGOL” 2012, Vol. 10, p. 74.

Y. Tsvelodub76

As a result, the mass of pollutants released into water bodies is much greater than their self-cleaning ability. This leads to contamination of water bodies, which significantly restricts or eliminates their use in the national economy. Thus, more than 200 rivers in the Kuznetsk Basin have been put out from water use resulting from the disposal of mine and quarry water.12

2.3. Solid waste

As noted, the coal industry takes first place in the production of solid waste. It accounts for about two thirds of the total volume of all solid waste. Most of the accumulation is related to the hazard class V (“prac-tically non-hazardous”). In addition, the extracted coals have become a source of accumulation of around a billion tons of solid waste from its customers.13

As a result of the industry’s transition to a predominantly open pit coal mining has been continuous increase (from 4.2 to 6.1 tons or more) of the amount of waste per 1 ton of coal produced. In the coming years, according to the Energy Strategy of Russia the amount of waste produced each year could exceed 3 billion tons.14

The distribution of annual increase of waste corresponds to the lo-cation of the main coal basins of the Russian Federation in proportion to the volume of coal produced in them. Therefore, the dominant role in the formation of waste belongs to Kuzbass.

The emergent waste is hazardous for the environment and human health, disrupting the ecological balance. On the other hand, certain waste products represent economic value. Large economic effect can be ob-tained by using se condary resources instead of natural raw materials. Much of the waste is man-made or secondary resources which often successfully

12 B. Schadov, op. cit., p. 32.13 V. Kazakov, S. Popov, I. Stoyanova, V. Kharchenko, Metodologicheskie osnovy

otsenki tsennosti uglepromyshlennykh otkhodov dlya rasshireniya masshtabov ikh ispolzovaniya v khozyaystvennoy deyatelnosti, “UGOL” 2012, Vol. 4, p. 50.

14 Ibidem.


compete with the natural resources.15 The overburden and host rocks of pits and mines are very similar to common minerals in their qualitative composi-tion and properties and this creates the preconditions for their industrial use.16

3. Environmental situation in Kuzbass

The environmental situation in Kuzbass in 1992 was defined as an emergency, and to date it has become worse. The area of the Kuznetsk Hollow, where there is a coal basin, is the most aggravated area. It includes the largest cities of the region – Novokuznetsk, Kemerovo, Prokopyevsk, Belovo, Leninsk-Kuznetsk, Tashtagol, Kiselyovsk.

Methods of extraction and coal processing used in the Kuznetsk Basin resulted in substantial transformation of the environment. Pits and dumps formedas a result of human impact violated the natural landscape, the soil cover. This led to degradation of flora and fauna.

Coal processing contaminates surface water and the atmosphere. As a result, none of the rivers of the Kuznetsk hollow is suitable for drink-ing, although clean water comes to the hollow from the mountains. In 2010, such enterprises as OJSC “SUEK-Kuzbass”, JSC “MC” Southern Kuz-bass, JSC “TQM” “Juzhkuzbassugol”, JSC “Severny Kuzbass” accounted for 43% of the volume of contaminated wastewater of the coal industry.17

The situation is exacerbated by the geographic location: Kuznetsk Basin is surrounded by the Mountain Shoria in the south, the the Kuznetsk Alatau in the east and the Salair Ridge to the west. It leads to the fact that harm-ful substances cannot bypass mountains, concentrating exclusively in Kuz-bass. As a result, Novokuznetsk, Kemerovo and Prokopevsk are the cities of the Kemerovo oblast which the highest level of air pollution.18

15 L. Elentseva, E. Volynkina, op. cit., p. 40–42.16 B. Schadov, op. cit., p. 31–36.17 A. Litvinov, A. Kharitonovskiy, op. cit., p. 74.18 Gosydarstvennyy doklad “O sostoyanii i ob okhrane okruzhayuschey sredy

Rossiyskoy Federatsii v 2011 godu”. Ministry of Natural Resources and Environment of the Russian Federation [official site], http://www.mnr.gov.ru/regulatory/list.php?part=1101, p. 259 (accessed 18.07.2013).

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Emissions from stationary sources in Kemerovo oblast were 1,390 thousand tons in 2011 (by 1.5% less than in 2010). The main stationary sources of air pollution in the region are OJSC “EVRAZ Consolidated West-Siberian Metallurgical Plant”, OJSC “West-Siberian Metallurgical Plant”, JSC “TQM” “Juzhkuzbassugol”, Branch of Mine “Esaulskaya”, they had a share of 21% in total emission of pollutants into the air from sta-tionary sources. Emissions from mobile sources (vehicles) accounted for 13.9% of gross emissions in the region.19

Kuzbass is the first in Russia in the amount of waste: 1.8 billion tons per year with the total in Russia of 3.9 billion tons. The bulk of waste is due to the activity of the coal industry (1694.36 million tons, or 98.36%), a sig-nificant amount of waste produced in the ferrous and non-ferrous me-tallurgy (25.16 million tons or 1.46%), in the production and distribution of electricity, gas and water (2.71 million tons or 0.16%), and in the che-mical industry (0.172 million tons or 0.01%).20

Over the past 10 years there was a growth of waste. In 2002 the mass of waste generated in the region amounted to 1.0 billion tons, in 2006 this figure increased to 1.9 billion and decreased to 1.76 billion tons in 2009 as a result of the industry downturn due to the economic crisis.

The bulk of the waste (99.4% of the total) belongs to V hazard class (practically non-hazardous), of which more than 90% are stripping and host rocks. 54% of generated waste are used and disposed.21 About 1 billion tons of waste per year is not utilized and stored.22 The rest of the waste is placed in external waste dumps.

The main ways of waste production use are filling out pits and holes, construction (surface planning, road embankment, dams building, etc.), building materials (brick, concrete, crushed stone, etc.). Waste of I – IV danger class is not specific to the coal industry, as a rule it is transferred to specialized institutions for disposal or placement in special landfills in-dustrial waste.

19 Ibidem.20 L. Elentseva, E. Volynkina, op. cit., p. 41.21 B. Schadov, op. cit., p. 34.22 L. Elentseva, E. Volynkina, op. cit.


In the Kemerovo oblast there are about 3,000 registered waste dispo-sal facilities, occupying an area of over 40 hectares, with a total accumula-tion of more than 20 billion tons.23 A large mass of waste is not processed, and stored in dumps, sludge pits and ponds of processing plants, provid-ing an enormous impact on the environment. The intensification of mining in the region will further increase the amount of waste.

It is necessary to emphasize that the largest volume of generated waste is due to the activities of the coal enterprises of the Kemerovo oblast, namely of JSC MC “Kuzbassrazrezugol” (Prokopievsk region), JSC MC “Southern Kuzbass” (Mezhdurechensk), JSC “Pit Vinogradovsky” (Be-lovo region), JSC “Chernigovets” (Berezovsky), JSC “Mezhdureche” (Mezhdurechensk), OJSC “SUEK-Kuzbass” (Leninsk-Kuznetsk).24

Exploitation of coal fields in Kuzbass is carried out both under-ground and in the open way. Moreover, in recent years preference is given to the most effective and safe method to exploit coal deposits – the open way, that is accompanied by construction of heavy-duty pits. Their con-struction and operation requires solving a set of problems that affect the ef-ficiency and safety of coal mining complexes.

The main tasks of the optimization process of waste management as identified by specialists25:

– reduction of waste production, primarily of overburden and host rocks on the pits by improving the technology of overburden and mining operations;

– selective mining and stockpiling of overburden and host rocks with a view to their subsequent utilization;

– increase of waste processing volumes to produce marketable pro-ducts through creation of relevant industries;

– increase transfer of utilization to specialized organizations.Waste management industry can be considered as one of the most ef-

fective ways to diversify the economy of Kuzbass.

23 Yu. Proshutin, A. Poturilov, O perspektivakh ispolzovaniya tekhnologii podzemnoy gazifikatsii kamennykh i burykh ugley v kachestve instrumenta dlya snizheniya ob’ema tekhnogennykh otkhodov, “Okhrana okruzhayuschey sredy i prirodopolzovaniye” 2011, Vol. 1, p. 43.

24 Gosydarstvennyy doklad “O sostoyanii i ob okhrane okruzhayuschey sredy Rossiyskoy Federatsii v 2011 godu”…, p. 260 (accessed 18.07.2013).

25 B. Schadov, op. cit., p. 35.

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4. problem of land withdrawal in Kuzbass

One of the main factors disturbing the ecological balance of natural systems in areas where are coal enterprises placed, is the removal of lands from the economic land use to accommodate industrial areas, waste dumps, sludge storage, access roads, communication lines and other industrial fa-cilities and land disturbance by mining activities. Land disturbance occurs primarily in the open way by expanding the scope of work and use of land for external waste dumps. By 2001, the total area in Kuzbass, disturbed only by open-pit mining, accounted for 8% of the total area of the region.26 Overall, the share of Kuzbass has 67.5% of disturbed lands throughout the coal industry.27

The problem of land violation in the Kuzbass is exacerbated by high concentration of mining and proximity of coal mines to residential areas. There are places where sections of open-pit mining alternate or are on some planes with coal mining. This is the case, for example, in the areas of Proko-pyevsk and Kiselyovsk.

Annually parts of the disturbed land are excluded from the production process and pass to the category of waste lands. Many companies have considerable areas of waste land that are not involved in the production process and are subject to rehabilitation.

At open mining operations there is destruction of natural landscape, vegetation and soil cover is destroyed. Man-made dump and quarry land-scape is an alternation of pits of various depth (to 100 m) and overburden dumps of different shape and size: many-tier dumps, cone-shaped or ridge-shaped deposit tips of tens meters in height.28 The considerable spaces are occupied by sludge ponds.

The constant increase in specific weight of open method of total coal mining and increasing stripping ratio lead to augmentation in the volume

26 L. Khoroshilova, A. Tarakanov, Problemy narushennykh zemel v Kuzbasse i ikh puti resheniya, “Vestnik Kuzbasskogo gosudarstvennogo tekhnicheskogo universiteta” 2007, Vol. 2, p. 63.

27 A. Litvinov, A. Kharitonovskiy, op. cit., p. 77.28 L. Khoroshilova, A. Tarakanov, op. cit., p. 63.


of overburden and as a result to growth of waste production and an ex-tension of the areas of disturbed lands.

Much of the waste is used for internal dumps formation, filling up holes, remediation of mining and quarrying, relatively small part of wastes is used as construction and building materials. Unused rock is mainly locat-ed in external dumps, which occupy large areas and are a constant source of anthropogenic impact on the atmosphere, groundwater and surface wa-ter, soil land in the adjacent territory.

Underground mining leads to formation of undermined territories. The nature of surface damage from underground coal mining depends on depth, power and angle of incidence of coal seams, structure of coating thickness, and mining technology. At underground mining operations there is a formation of holes, cracks and craters, as well as subsidence of land above the mine. On a part of the work area some soil cover remains, but these lands are in most cases excluded from agricultural or forestry use, as after opera-tions the hydrological regime of the territory changes drastically: groundwa-ter disappears, and atmospheric precipitations quickly seep deep into cracks.

On the other hand, many coal mines have implemented drained fields which led reducing the length of rivers and drained the affected area. Thus, Kuzbass mining operations destroyed more than 200 small rivers, and the process is accompanied by vegetation degradation, up to shrinkage of the forest.29

One of the most commonly used ways to eliminate unprofitable mines is flooding. As a result of quick restructuring of the coal indus-try in Kuzbass in a number of mining towns, standing in the flooded mines, there is a constant threat of collapse of areas and roads, destruc-tion of buildings. They have constantly flooded cellars and basements; from the land gas is emitted squeezed out of the flooded mines. Bogs with a total area of 12 hectares have formed on a number of waterlogged areas in the city of Kemerovo.30 A more promising way environmental-ly and economically is not flooding of mines (i.e., in fact, liquidation), but their conservation.

29 Ibidem.30 Ibidem.

Y. Tsvelodub82

Restoration of disturbed lands and natural landscapes includes a com-plex of mining, farming and other activities aimed at the restoration of their biological productivity and economic value.

In conditions of high land fee reduction of specific land costs of mi-ning, increase in volumes and improvement of quality of land remediation works are economically important, and, of course, require more attention.

A necessary measure to reduce environmental damage to the nature of the activity of mines and quarries is land recultivation. Cultivation works are carried out in Kuzbass, but their rates are low. To date only about 20% of disturbed lands are reclaimed. In addition to severe geolog-ical conditions of the Kuzbass basin (multilayer structure of coal depo-sits, a large depth, mostly external dumps formation and high specific land costs of coal mining), the lack of a regional legislative base for the rec-lamation, which has forced mining companies to restore damaged land, influences rates of reclamation. Existing state standards which are based on the existing methods of restoration of disturbed lands have not been revised since 1986.

The coal mining enterprises have negative impact on all main com-ponents of the environment, causing their unfavorable changes. Natural landscapes are violated and degraded, water bodies, air and soil cover is polluted in solid, liquid and gaseous contaminants. The development and introducing clean, low-waste and non-waste technologies is occurring by slow rates. The industry is trending toward a reduction of investment in environmental protection, which leads to a number of negative conse-quences: an extremely small amount of construction of wastewater treat-ment plants, dust and gas cleaning plants and other facilities for nature protection purposes, the slow update and as a result obsolescence and high degree of wear of environmental protection equipment. Imperfection of the environmental legislation, the country’s system of pollution pay-ment, and environmental disturbance lead to decreased volume and effi-ciency of nature protection activities.

Further sustainable development of the coal industry is inseparably linked with the problem of ensuring environmental safety of production and preservation of a favorable environment for the population, especially in the areas of compact allocation of companies.


5. measures for enhancement of environmental situation

Continuation of the current trend might lead to a sharp aggravation of ecological and as a consequence, social situation in the coal-mining re-gions. As we discussed above, the directions of improving the environ-mental situation in the coal industry, in particular, on the territory of Kuz-bass are the reduction of emissions and dumping of pollutants and volumes of waste production, the ecologization of manufacturing processes aimed at reducing specific land costs of mining.

To solve the complex of environmental issues it is necessary to raise environmental performance to a new qualitative level. That will require more investment in environmental protection, their volume should be in-creased by at least one order of magnitude.31

The projects of construction and reconstruction of the coal enter-prises should be provided a full range of environmental activities to en-sure compliance with current regulatory requirements for the protection of ecological environment, the ecological safety of production, and favora-ble environment for the population of the miner’s cities and settlements. For the whole territory of Kuzbass it is necessary to develop and introduce monitoring natural and technical coal-mining complexes.

It should provide introduction of certified environmental management systems and environmental audit in accordance with international standard ISO 14001, establishment at each enterprise of effective system of envi-ronmental control of production.

5.1. Water and air

The emissions polluting air and water have a serious negative impact on human health.

The main objectives of the coal industry in the field of protection of water re-sources and the atmosphere are the construction and reconstruction of treatment

31 M. Kichanov, op. cit., p. 11–15.

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facilities based on a new technological basis, improving technical conditions and improving the efficiency of existing facilities, in particular, the moderni-zation of inefficient wastewater treatment plants, dust and gas cleaning sys-tems, aspiration systems and other environmental structures and equipment to ensure standard cleaning of industrial discharges and emissions. For sew-age discharged into water bodies without treatment, it is necessary to provide re novation and construction of facilities or transfer these water objects to exist-ing treatment facilities of other companies. Control over the impact on the en-vironment should be carried out by means of systems of tool control of the im-pact on the environment. To diagnose treatment plants of sewage effluent and gas treatment installations enterprises have to attract specialized compa-nies that make the conclusion about the reasons for their poor performance and make recommendations for their modernization, reconstruction, construc-tion of new facilities and the replacement of outdated gas cleaning plants.

One of priority activities of enterprises to improve environmental safety is degassing of coal seams prior to their processing and in the process of mining, utilization of methane as a source of electricity and thermal energy.

Priority is also conducting ongoing efforts to extinguish the burning of waste dumps and measures to prevent their spontaneous combustion.

5.2. Solid waste

There is a problem of solid wastes of the coal industry, which are, on the one hand, man-made accumulation of various mineral resources, on the other hand, are a source of negative impact on the environment.

The practice of using mineral resources of separate accumulation of coal-mining waste began in the first half of the last century. At the same time, despite the increased importance of waste, mainly related to the de-pletion of natural deposits and their remoteness, most of them remained unclaimed. Of all the waste of the coal industry to create marketable pro-ducts used only 3% of the volume.32

32 V. Kazakov, S. Popov, I. Stoyanova, V. Kharchenko, Metodologicheskie osnovy otsenki tsennosti uglepromyshlennykh otkhodov dlya rasshireniya masshtabov ikh ispolzovaniya v khozyaystvennoy deyatelnosti, “UGOL” 2012, Vol. 4, p. 50.


Currently there are known about 60 technological decisions on the use of wastes as mineral resources in the production for the construction industry, agriculture, metallurgy, ceramics, paint industry, chemical industry, consum-ers of secondary fuel resources, etc. However, only a third of their part tested in practice, while the other two-thirds remain only potentially possible.33

At the present stage of development of Russia production of various kinds of mineral resources from the waste in the coal industry, as a rule, can be a collateral activity. Involvement of solid waste in economic activi-ty may present a great interest from both an economic and an environmen-tal point of view. It is necessary to develop and widely to use technology of reusing and recycling of waste; to develop and apply modern techniques of utilization and burial of hazardous wastes.

5.3. Land recultivation

Along with the problem of solid waste disposal, the problem of land re-habilitation is not solved, in particular, rates of recultivation are on the or-der behind the needs of the region.

Elimination of the negative environmental effects of many years of industrial activity (closed mines and quarries) requires a long period to develop detailed designs and implement measures to prevent flooding undermined areas, rehabilitation of industrial sites, waste dumps, cleaning poured on the surface of contaminated mine water, etc. The projected sig-nificant environmental effect from liquidation of unprofitable enterprises can be achieved only after the full implementation of environmental pro-tection measures provided by projects of liquidation.34

Solving problems of land, arising in the coal industry, consists in carrying out large-scale mesures for the rehabilitation of disturbed areas, which should be started after the end of development of coal pit or mine. The complex of these activities includes the restoration of soil fertility, cleaning of rivers, the creation of forest parks, shelterbelts and recreation areas. There have to be especially protected areas to preserve a biodiversity of environment.

33 Ibidem, p. 50–51.34 B. Schadov, op. cit., p. 31–36.

Y. Tsvelodub86

The task is to embed the mining companies in the ameliorated landscape and by that to preserve the biological diversity of the region. Positive ex-amples are emerging35: in the spring of 2012 a new specially protected area was presented in the Belovo area – wildlife sanctuary “Karakansky”. This complex appeared in an industrial area where there is an intensive coal min-ing, thanks to the decision of the Kuzbass Fuel Company to reconsider its plans to develop the area. The assignment of about 1,200 hectares allowed the authorities to take under protection a unique natural complex – Karakan-sky ridge, which is distinguished by richness and diversity of flora and fauna.

5.4. New methods and technology

The next way to improve the coal industry is to elaborate and imple-ment programs for the development of the main production, improvement of technology and technological processes in enterprises taking into ac-count ecological requirements.

Speaking about the industry and its prospects, it is necessary to point to a considerable potential for further development, including the progres-sive transition to the deep processing of coal with production of marketable products of high added value. The direction of increasing the share of coal undergoing deep processing is quite promising and includes: the transition to the enrichment of all export coal, substitution of coking coal concentrate exports by exports of coke (within certain limits based on market condi-tions), the production of synthetic liquid fuels and synthetic gas, produc-tion of a wide range of chemical products (polymers, etc.) in the processing of coal; generation of electric and thermal energy from the coal, including for export, extraction of high value components from coal and its products.36

Another technological direction is the gasification process. According to a number of experts, the technology of underground coal gasification (UCG) it is capable to compete with modern technologies of the open pit and mine. In the Soviet Union in the 30s of the last century, intensive theoretical and exper-imental studies formulated the basic principles of this technology on the basis of which some pilot plants for underground gasification were commissioned

35 M. Kichanov, op. cit., p. 14.36 A. Tverdov, A. Zhura, S. Hikishichev, op. cit., p. 86–88.


and operated successfully for a number of years, even decades. In total at these stations there were more than 15 million tons of coal and generated more than 50 billion cubic meters of gas. One of such stations – South-Abinskaya station “Podzemgaz” – functioned from May 1955 to 1996.37

As the advantages of the process of UCG experts note the following: obtaining tangible effect in the energy supply of industrial areas in the event of a large-scale use of UCG technology, the lack of waste associated with tra-ditional methods of coal mining and coal preparation; the exception of heavy, harmful and dangerous work of miners in underground coal mining; replace-ment of costly and unsafe transportation processes, discharge and use of coal by less dangerous transport refined petroleum gas in place of its direct use; the exclusion of soil disturbance areas, characteristic of open way of coal mining. However serious shortcomings are also inherent in this technolo-gy: insufficient controllability of processes for the preparation and the actual heat treatment of seams, low chemical and energy coefficient of efficien-cy of the process because of the low calorific value gas and relatively high failure rate of gas and coal in the subsoil; relatively low thermal properties of gas of underground coal gasification, significantly inferior to used natural, coke and semi-coke gases, the probability to filter the gas to the surface.

The broader replication of UCG technology can only be discussed in the future, after appropriate research and testing of the most promising developments.38

A number of environmental problems encountered by enterprises in their activities did not find effective solutions and require a scientific study. Among them are:39

– cleaning technology for mine, quarry and industrial sewage of com-plex chemical composition from a complex of pollutants (oil products, phe-nols, mineral salts, sulfates, iron and other heavy metals, trace elements);

– technology and technical means to clean emissions from harmful sub-stances, especially gaseous, resulting from the burning of coal in the boiler;

– ways of managing mine water spouts on the surface of abandoned mines;

37 Yu. Proshutin, A. Poturilov, op. cit., p. 43.38 Ibidem, p. 43–49.39 B. Schadov, op. cit., p. 36.

Y. Tsvelodub88

– technology accelerated restoration of the natural potential disturbed by mining and of contaminated land without causing the fertile layer, in-cluding the use of bacterial preparations;

– ways of decrease the risk to the environment of overburden and containing rocks and other production wastes classified as I – IV hazard classes;

– elaboration of an innovative financing mechanism of environmental projects;

– organization and procedure of production environmental control at the enterprises of the coal industry;

– monitoring procedure for the thermal state of the waste dumps based on modern methods and technical means.

Solving these problems will create a firm basis for further environ-mentally sustainable development of the coal industry.

The long-term planning of complex development of the Kuzbass region should take into account the environmental component to restore a healthy environment. For Kuzbass, in which the impact of the coal in-dustry on the environment is excessive, the problem is particularly acute. Planning an effective use of investment opportunities for environmental protection requires the use of economic-mathematical tools to model dif-ferent environmental measures under the existing legislation and taking into account the priorities of the coal industry and a healthy environment.

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Tverdov A., Zhura A., Hikishichev S. (2012), Problemy i perspektivy razvitiya ugolnoy otrasli Rossii, “UGOL”, Vol. 8, p. 86–88.

Abstract

Having survived restructuring period during which the volume of production halved, since 1999 the coal industry has seen a significant growth of its production. However, the positive trends are accompanied by negative impacts for the environment. Further growth of coal has its limits both from economic and ecological points of view.

This paper focuses on the environmental side of the issue, particularly on problems of emissions and wastes producing by coal mining and withdrawal of lands from land use. For Kuzbass as the first in Russia coal mining area, the impact of the coal industry on the environment is excessive, and consequently those problems are particularly acute.

To solve the complex of environmental issues, it is necessary to raise environmental performance to a new qualitative level. That will require more financial, technological le-gislative and managerial decisions.

Key words: coal mining, environment protection, Kuzbass region.

Radko Radev*

BuSinESS STRATEgiES OF COmpAniES And lOCAl pROduCTiOn SYSTEmS in BulgARiAn dAiRY induSTRY

1. introduction

The literature on the issues of strategic management gives great atten-tion to the matters related to business strategies and the intensity of com-petition in particular, as its main component.1 However, their examination is performed mainly on a conceptual basis, which prevents their imple-mentation in a particular sector and specific business organization, without taking into acount its inherent characteristics. When considering busness strategies in LPS, the situation is even more specific.

Subject of study in the current paper are the business strategies of com-panies and LPS (to the extent that such are identified) in milk products’

* Assoc. Prof., PhD, University of National and World Economy, Sofia, Bulgaria, e-mail: [email protected]

1 Porter M., Competitive strategy: techniques for analyzing industries and competitors, Free Press, New York 2008; I. Ansoff, Corporate strategy: an analytic approach to business policy for growth and expansion, McGraw-Hill, New York 1965; I. Ansoff, Strategic Management, Palgrave Macmillan, New York 2007; H. Mintzberg, J. B. Quinn, S. Ghoshal, The Strategy Process: Concepts, Contexts, Cases, Pearson Education 2003; P. Kotler, K. Keller, Marketing management, Prentice Hall, New Jersey 2012; Ch. Hill, G. Jones, Strategic Management – Theory: An Integrated Approach, USA: Cengage learning 2009.

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sector. For this purpose, the Porter’s and Ansoff’s concepts for business strategies are adopted. They are widely accepted by scientists and research-ers in the managerial and marketing scientific area.2 Despite this, they need adaptation, aiming at reflection of the specific conditions of this particular industry.

The aim of the paper is to present the results of adapting Porter’s and Ansoff’s concepts for business strategies in respect to the specifics of Bulgarian dairy products sector. Due to the popularity of these concepts, their theoretical aspects are not considered in the paper.

Object of study in the current paper is the milk products’ sector in Bul-garia as a strategic business area. The sector is characterized by intense com-petition and constantly changing environment. Within its boundaries, a wide variety of companies is identified, distinguished by their size, product spe-cialization, market coverage, objectives, strategies, product profile and mar-ket profile. In this sector, also, differet types of LPS can be identified.

The dynamic environment of this industry is determined by:3

– opportunities for entry and exit of competitors in the sector;– continuous change in consumer behavior;– changes in the meaning of different communication channels

and specific means;– restructuring of distribution channels;– development of substitute products;– strong vertical integration with raw material suppliers;– specific regulatory actions and exisiting regulations that affect

the industry;– disloyal competition.2 D. A. Miles, Risk Factors and Business Models: Understanding the Five Forces

of Entrepreneurial Risk and the Causes of Business Failure, Florida: Universal-Publishers 2011; M. R. Grant, Contemporary Strategy Analysis: Text Only, John Wiley and Sons 2010; D. Ahlstrom and G. D. Bruton, International Management: Strategy and Culture in the Emerging World, Mason, ОН: Cengage Learning 2009; H. Simon, Hidden Champions of the Twenty-First Century: The Success Strategies of Unknown World Market Leaders, Springer 2009; G. Johnson, K. Scholes, R. Whittington, Exploring Corporate Strategy, FT: Prentice Hall 2010; A. Henry, Understanding Strategic Management, Охfоrd University Press 2008.

3 Author’s own research onducted within individual university project No. 2-7/2011, UNWE, Sofia: Characteristics of business planning in companies from the FMCG sector in Bulgaria. Completion date: December 2013.

Business strategies of companies and local production systems in Bulgarian… 93

The thesis stated in the paper asserts that business strategies, including these referring to LPS in the selected sector, are characterized by the sec-tor’s specific features. They could be specified only if the product profile of the sector and these of the leading competitors are determined.

As far as data and research methods are concerned, the methodolo-gies of Porter’s and Ansoff’s concepts for business strategies were used. For deepening the results, a variety of other popular methods are also ap-plied in the paper: analysis and synthesis, induction and deduction, struc-tural and comparative analysis, grouping methods, method of analogy, graphical methods, expert assessment, statistical methods, etc.

The scope of the study covers 24 of the leading manufacturers of milk products in Bulgaria which are of national importance. Moreover, primary and secondary information sources are used. For the collection of primary information the author has performed his own research, which includes: analytical review of the websites of companies involved, visiting the com-panies’ stores, interviews with managers and owners.

The secondary data sources that are used are official financial and ac-counting documents,4 analyses of the Ministry of Agriculture and Food (MAF)5 concerning the market of milk products in Bulgaria,6 data from the Bulgarian Association of Dairy Processors.7

The study was carried out by a specially elaborated methodological frame-work (figure 1). It takes into account all of the starting conditions and limita-tions. The methodological framework enables the performance of a reliable analysis of the intensity of competition, even in conditions of information deficit. This makes it suitable for application by large companies, as well as by medium and small ones, experiencing difficulties in the development of management information systems due to lack of experience or financial resources.

4 Bulgarian Trade Register., http://public.brra.bg/ CheckUps/Default.ra?05 Ministry of Agriculture and Food (MAF), ww.mzh.government.bg/MZH/bg/

ShortLinks/SelskaPolitika/ MarketMeasures/Sectors/Milk.aspxh6 Magazine “My Store”, http://www.mytore.bg/n/n%D0%BEvini/2012 /pazarat-na-

paketiran-kaskaval-v-balgaria; http://www.mystore.bg/n/n%D0%BEvini/2012/pazarnopro ucvane-otnosno-pazara-na-sirene-v-balgaria; Magazine “Regal”, http://www.regal.bg/show.php?storyid=2084599

7 Bulgarian Association of Dairy Processors, http://www.milkbg.org/

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Figure 1. Methodological framework of the study

Source: own study

The proposed methodology allows the determination of the sector’s structure and intensity of competition by Porter’s five forces model. It also allows the determination of companies’ product-market profile. This makes possible the introduction of some typical business strategies for companies and LPSs in the milk sector.

2. Analysis of competition intensity and product-market profile in the dairy sector

The identification and analysis of competition is enabled by appliance of industrial and market concepts.8 The first is necessary in order to define the product boundaries in the sector as well as the different product catego-ries, and the second – for the identification of competitors and differentia-

8 P. Kotler and K. Keller, Marketing management, Prentice Hall, New Jersey 2012, 4th edition, p. 16–18.


tion of market segments and strategic groups.9 In order to refine the bound-aries of the sector, the concept of strategic business areas and strategic business units is applied.10

For the aims of the current paper, the industrial concept is consi-dered. Because of this, adaptation of the concepts for business strategies mentioned above requires the introduction of two levels of determination of competition. First level refers to the analysis of competition in the prod-uct class as a whole, and the second – to the separate product categories. The market concept requires the analysis to be conducted in separate geo-graphic markets, market segments and distribution channels. Due to the ne-cessity of a thorough and detailed market research, this paper is limited to the business strategies, which are assumed by the industrial concept.

2.1. Identification of the population of companies

There are many companies operating within the class. They are dif-ferent by size, legal form, product specialization and market coverage. The companies include, in their scope of business activities, manufacturing and trade with milk products, and are approved for trade within the EU.11

Figure 2 shows that this sector is characterized by high intensi-ty of competition throughout the considered period. In 2001 the number of dairy processors in Bulgaria was about 450. In the following years (2002–2007) the competitors’ number has decreased to 229, retaining at this level until 2010. In 2011 there were 252 companies identified, which were included in the list of approved establishments for manufacturing and trade with food products of animal origin.12

9 M. Porter, Competitive strategy: techniques for analyzing industries and competitors, Free Press, New York, 2008, p. 127–152; P. Kotler and K. Keller, Marketing management…, p. 218–232.

10 I. Ansoff, Strategic Management, Classical Edition, Palgrave Macmillan, New York 2007.

11 ww.mzh.government.bg/MZH/bg/ShortLinks/SelskaPolitika/MarketMeasures/Sectors/Milk.aspxh

12 List of approved establishments for intracommunity trade with food products of animal origin, covered by Annex III of Regulation (EC) No 853/2004 of the European Parliament and of the Council.

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Figure 2. Dynamics in the number of dairy processors in Bulgaria for the years 2001–2011

Source: MAF, department “Agrostatistics”

Although the number of competitors is changing over the years, this doesn’t result in reduction of the intensity of competition. Though significantly fewer in number, the operating competitors have a capa-city that vastlyexceeds the current market absorption. In the conditions of shrinking market, the competitors implement more aggressive strate-gies and programs for retention the levels of sales, revenues and profits.

2.2. Determining the main companies (competitors)

Presently one can identify 24 leading companies of national impor-tance in the dairy sector. They are crucial for the existence of intense com-petition in the sector (figure 3). The industry analysis shows that the sector is experiencing high degree of competition, due to several key factors:

– large number of competitors in the sector. According to the MAF (Ministry of Agriculture and Food) their number is 252;

– a decrease in demand for milk products, which is a result of the con-tinuous difficult economic situation worldwide;


Figure 3. Market shares of the leading companies in the milk and milk products sector by revenues

Source: Author’s research, based on data from The Bulgarian Trade Register, 2012

– in these conditions, there is a decrease in the frequency of purchase of milk products; downward pressure on product prices and shrinking of margins, are observed;

– presence of many companies in the sector is an important factor that intensifies the competition in the “Milk products” class and its inher-ent categories and product groups;

– despite the opportunities for differentiation of the companies’ of-fers in the dairy products sector, intense competition is observed within the separate strategic groups formed on the basis of “price-quality-diferen-tiation/positioning” ratio; sometimes such kind of competition also occurs-between the different strategic groups;

– there is overcapacity in the sector, which can not be utilized due to the decline in demand; this causes orientation towards lower product prices;

– worsened economic conditions have adverse effect on the “еqui-librium” of the competition. In search of options for keeping the level

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of revenues and maintaining the desired profitability, competitors act in ac-cordance with the conjuncture, without long-term strategies;

– disloyal business practices are another unfavorable factor; they re-sult in non-payment of VAT (value added tax) and use of low-quality raw materials;

– as a result of the factors with unfavorable impact there is a decrease in companies’ sales and revenues, deterioration of profitability in the sec-tor and poor liquidity;

– increase in trade and bargaining power of the participants in the var-ious trade channels, which put pressure on price levels, promotional condi-tions and the imposition of various fees;

– deficiency of milk as main raw material for the dairy processors;The Bulgarian dairy sector is characterized by a number of features

that create relatively high entry barriers for new competitors. Among the most important one should mention:

– high economic requirements for market researches, initial invest-ments in tangible and intangible assets;

– significant financial resources are required to provide initial working capital;

– requirements for high technological level of manufacturing and need of qualified professionals in manufacturing, marketing and sales;

– in different market segments and strategic groups there are leaders who are “persecuted” by one or more competitors that threaten their lead-ership;

– market entry is hampered by entrance difficulties and penetration in the traditional distribution channels and store chains, which occupy an increasing market share

– various studies show that consumers of dairy products are loyal to one or several brands; this loyalty is a result of creativity, serious com-munication expenses and consistency in the products’ quality;

– entry barriers are also determined by a number of legal requirements related to sanitary, product and other requirements that must be met in or-der to start manufacturing of dairy products;

– economic barriers include also experience curve, economies of scale, access to technology and know-how, specialized transportation require-ments;


– in the current conditions, barriers are even higher, as the market shrinks, and competitors strive to maintain their market position and to oc-cupy new ones.

In contrast to entry barriers, the exit ones are not so high. The decision to exit the sector is related to assessment of the appropriateness and the eco-nomic and financial condition of the particular company. If the company has not declared bankruptcy and has no signed contracts that could prevent the exit of the sector, the decision can be taken at any time.

3. product-market profile and major forms of lpSs in the dairy sector

3.1. Key competitors product-market profile

The thorough study of the above mentioned leading competitors al-lows us to present shortly their porduct-market profile. Its importance is determined by the understanding of the leading role of product-market profile when determining the business strategies. Some of these companies are in the basis of the existing LPSs identified in the dairy sector.

DANONE SERDIKA is a global innovative company which applies a dif-ferentiated marketing with precise segmentation and positioning of the pro-ducts. It is a driver for change in the sector in the following aspects: introduc-tion of new technologies, process, product and marketing innovations.

As leader of the market, DANONE SERDIKA S.A has clearly de-fined product specialization, which focuses on the manufacturing and sale of various types of milk, without including other categories of milk pro-ducts and offering rich assortment. It covers almost all product categories within the product class and drives innovations in the sector. It uses sepa-rate family brands for each product category.

In general, the products of DANONE SERDIKA are oriented towards children, adolescents and young people who are very loyal to the brand and have a serious impact on the purchases. The company aims to take a leadership position in each of the segments covered, as it is the undisput-ed leader in the following categories: fruit milk drinks, fruit yogurts, bifidus.

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DANONE SERDIKA is most active in the marketing support for its products. Due to the highly developed distribution network and aggres-sive advertising, it provides rapid penetration and imposition of its new products on the market. The company implements differentiated marketing and its marketing efforts are aimed at precisely selected target segments. Its brands (“Danone”, “Activia”, “Danonino”, “DZP”, “Na baba”, “Fantasy”) have a precise positioning and leading position in the minds of consumers.

The company has serious financial capabilities exceeding these of the other competitors, enabling it to ensure financial resources for its marketing budgets.

United Milk Company (UMC) S.A. is the second main competitor in the sector. Its product portfolio covers yogurt and fresh milk, including skimmed milk, with calcium, UHT, fruit milk drinks, including flavored and lactic acid, cocktails, cheeses. The company’s yogurts are offered with the following brand names: “Vereia”, “Fibella”, “Hansko”, “Vita-lact”, “Vereia-Calcium”,“Vereia 0%”. A leading brand, which is positioned at the highest price level, having the largest share of the company’s sales, is “Vereia”. It is also one of the most recognizable brands on the market of fresh milk and yoghurt.

UMC is oriented towards product innovation. In recent years, the com-pany introduced fresh milk and yoghurt with zero fat and with calcium, which are offered under the family brand “Vereia-0%” and “Vereia-cal cium”. In respect to technology, the company is one of the leaders in the sector.

UMC has well developed distribution network nationwide, which is accompanied by a well developed system of trade supplies. The compa-ny’s merchandising provides a good presence in the retail stores. In recent years the company is experiencing some problems of financial nature.

TYRBUL S.A. ranks third in the sector. Despite the position occu-pied, it is not given a special attention, because its products are main-ly for export. In Bulgaria its brands could be found in some regions and retail chains that have limited market presence. TYRBUL’s products are in the following categories: yogurt, fresh milk, white cheese, strained yoghurt, cottage cheese. The company owns the family brand “Olimpus” and sub-brands: “Oly”, “Feta”, “Talia”, “Elekton”. In case of an appro-priate strategy, the company has the potential to intervene more seriously on the milk products market in Bulgaria.


CODAP Ltd. ranks fourth in turnover and is also export oriented. CODAP is a subsidiary company of a German company with the same name. The vast majority of the cream produced by the company is intended for export.

The product portfolio of the company includes most of the main ca-tegories dairy products: yogurt, fresh milk, milk drinks, including fruit and flavored, white cheese, yellow cheese, cream for cooking. They are of-fered under the family brand ”My day”. CODAP offers a wide variety of fresh milks with different fat contents, calcium, fitness and for children, respectively, in box and bottle. The company offers a full children’s series under the brand “Mlechko”. The companyʼs products are distinguished by their packaging that attracts consumer attention.

The company offers its products mostly in urban regions and is pre-sented in most of the channels through which the products under the brand “My Day” reach their target markets. The brand products have active marketing support. They are well represented in terms of merchandising and are distinguished by their loyal customers.

The product portfolio of Zorov 97 includes traditional Bulgarian dairy products like: yogurt, white cheese, yellow cheese, cream, butter and also various delicacies. The company’s brand is called “Parshevitsa”. It is one of the milk products brands which are recognizable, liked and preferred on the market. Products with the brand name “Parshevitsa” are distributed through a well-developed distribution network and merchandising support.

It must be mentioned that 2 of the companies having leading position in 2009, with sales of over 20 000 thousand Levs (FAMA SERDIKA S.A., MARKELI S.A.), respectively with 6% and 4% market share, in 2011 were in difficult financial situation. Others, including: MEGGLE Bul-garia Ltd., Mlechen ray – 2 Ltd., LB Bulgaricum S.A., BCC Handel Ltd., MIZIA MILK Ltd., JOSSI Ltd., MAKLER COMMERCE Ltd., Mlechni produkti Ltd., ELITE 95 Ltd., Dyado Liben Ltd., Philipopolis RC Ltd. and CECH 99 Ltd. have approximately equal market shares of the reve-nues. The lowest in this group are the revenues of ELITE 95 and the high-est – of MIZIA MILK.

The examined main competitors and the remaining more than 200 companies operating in the Bulgarian dairy sector determine growing in-tensity of competition, increased further by the dificult economic situation.

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3.2. Milk sector product profile

The performed analysis outlines the product profile of the sector, which is a result of the diversity of the products offered by the competitors (figure 4). Based on the study of the product profile of 24 leading companies in the milk and milk products sector, a number of characteristics were identified.

The most intensive competition appears to be between the companies offering milk products traditional for the Bulgarian taste – yogurt, fresh milk, yellow cheese and white cheese. Yogurt is offered by 20 companies which are 83% of the ones surveyed, fresh milk is offered by 14 companies (58%), yellow cheese – by 17 and white cheese – by 19 companies, respec-tively 71% and 79%. Usually, for these types of products the companies create and establish family brands.

Lowest number of competitors (3 companies) is identified in the seg-ment of bifidus products and its alternative – probiotics. The situa-tion is similar for strained milk and starter cultures (three companies) and for the children series – four companies. The number of companies offering fresh fruit milk, butter and cream is also small.

Figure 4. Number of competitors by product categoriesSource: Author’s research, 2012 (sample: 24 leading companies from the milk

and milk products sector)


In this paper four basic versions of product specialization are outlined:1. First option refers to business organizations that implement con-

centrated marketing within a particular product category. A typical feature of these companies is that they identify a single basic product-market unit which is intended for a specific target market (mass, target segment or niche).

2. Second option considers the situation where there is selective or com-plete specialization in a particular product category. In this paper, speciali-zation is defined as concentric diversification within the category. Unlike the previous option, this offers a wide variety of products of the same category. There is a reason to differentiate a single product line (main product-market unit), within which two or more basic product-market units (intended for dif-ferent target markets) fall. This option differs from the previous in the greater length of product line. Depending on the specifics of target markets, the main product units may possess lesser or greater depth compared with each other.

3. Third option is determined by the existence of market speciali-zation. It occurs when a business organization offers main product units to the market that meet its specific needs. In this case, the same level of customer value must be offered in order to reach the desired level of cus-tomer satisfaction. These organizations have a greater width of the assort-ment and for the different product lines there is one main product unit with the respective various options.

4. Fourth possible option concerns business organizations that spe-cialize in some or even all product categories within the class. This variant of specialization is evidence for the existence of concentric diversification within the product class. The degree of specialization within the individual categories may vary from product concentration through selective product specialization to full product specialization. Different situations that occur are reflected in the width of the assortment, as well as in the length and depth of each product line. These characteristics are manifested to their maximum extent when a business organization seeks complete market coverage.

The reasoning determines the product characteristics of assortment and product class to be interpreted from a market perspective. A separation of three market levels is generally assumed, that constitute the complex concept of market: 1) geographic markets on which the company operates or plans to expand with its products; 2) target segments for which the pro-ducts are intended; 3) distribution channels which ensure their distribution;

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The attractiveness and market potential must be defined for the product class, product categories and separate product groups by geographical mar-kets, target segments and distribution channels. Along with this, market po-sitions and growth potential by separate main product-market units, product lines of assortment of the business organization as a whole, are established.

3.3. Main kinds of LPSs in dairy industry

The specifics of milk and dairy products industry defines the pre-sence of specific types of LPSs, identified in the sector. From the basic types of LPSs, proposed by Markusen,13 due to the specifics of the sec-tor, such local production syetms that are close to Marshall’s type as well as the “hub and spoke” type were identified. There are also identified var-iations of “satellite platforms” type, because some of the companies oper-ating in the sector have policies and basic supplies performed by related companies localized abroad.

When it comes to geographical positioning, a definite regional speciali-zation is observed that is determined mainly on production basis. In this sense, the manufacturing plants are built in areas that are traditionally chara cterized by specialization in dairy farming or they form a base, on which a number of farms arise.

Training of specialists with higher education is made on a centralized basis in the University of Food Technologies in Plovdiv, while specialists with secondary vocational education are educated in the agricultural colleg-es, which are established on a regional basis. Operation of milk processing enterprises and farms are assisted by specialized institutes and organizations.

According to the classification of Enright,14 which refers to LPS de-pending on the stage of their development, predominantly latent and po-tential LPS in the sector could be identified. The reason for presence

13 A. Markusen and M. Gray, Industrial Clusters and Regional Development, Rutgers University Center for International Business Education and Research, New Jersey 1996.

14 M. Enright, Survey on the characterization of regional clusters: Initial Results, Working Paper, Institute of Economic Policy and Business Strategy: Competitiveness Program, University of Hong Kong, 2000.


of latent LPS lies in the fact that there is a number of cases where there is a critical mass of companies in Bulgaria, but there is no utilization of the potential of the particular LPS and individual organizations with-in it. This is due to the lack of integrated interaction and trust between the parties and therefore absence of vision for their future development. The identification of potential LPS of the policy-driven type, in turn, is de-termined by the fact that the government conducts a particular policy. De-spite the presence of competitive advantages of the companies in the sec-tor, there could not be formed a critical mass of companies which would eventually lead to a better export potential, and this is due to the govern-ment’s policy.

The basic incorporating principle for combining all types of identi-fied LPS is the existence of vertical integration in the value added chain. It is conditioned by the sectoral determination of the considered LPS.

The condition of LPS in the Bulgarian dairy sector at the moment makes it necessary to put emphasis on the examination of LPS, focusing mainly on the development of vertical integration. At the heart of such integration lies the development of a company’s activity, which produces milk and milk products for final consumption. There are many small or a few larger farms gravitating in its orbit. These farms’ dependence on the condition of the com-pany (companies), which buy their products requires emphasis on the issue of its (their) development. Therefore, this paper focuses on product-market business strategies, which can achieve growth and sustainable competitive advantage for the manufacturers and associated suppliers.

4. Business strategies in componie and lpS in dairy industry in Bulgaria

In adapting Porter’s and Ansoff’s concepts for business strategies some of the sector’s important features are considered. The latter are as-sociated with: large product diversity, presence of large number of com-petitors distinguished by size, objectives, strategies, financial resources and product-market profile.

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The product diversity is a matter of particular interest. The milk prod-ucts class includes a variety of product categories such as: yoghurt (sour milk), fresh milk, white cheese, yellow cheese, fruit yogurts, fresh fruit milk, bifidus/probiotics, butter, cottage cheese, sour cream, different chil-drenʼs products, etc. Because of this diversity, the matters related to prod-uct-market profile of the sector and main competitors acquire significant importance.

The comparison of product characteristics for the class (sector, stra-tegic business area) and the characteristics of the assortment is the main instrument for determination of product profile for each particular business unit. It helps to establish direct and indirect competitors according to prod-uct specialization, which is identified within the product class, product categories and specific product groups. The specialization of competitors varies widely. It depends on the characteristics of the sector and the busi-ness organization’s internal conditions.

4.1. Strategies according to market position

When considering a particular business organization the deci-sion-making in this area depends specifically on the characteristics of its product-market profile, as well as of the external and internal conditions. There are four possible options of determining the market position arising from the four basic profiles of product specialization.

The first option requires a decision-making solely based on the market position of the product, compared to its direct competitors in the particular target market segment, taking into account the achieved geographical cov-erage, distribution penetration and other positional parameters.

The second option relates to the position of business organizations that follow the strategy of product specialization. They are offering a varie-ty of products within a particular product category. The aim is to cover sev-eral or almost all market segments. Logically they need to be approached differently in determining the market positions: market positions by var-ious product groups and market segments must be established, and also


by the product category as a whole. In this case we are talking about a lead-er, challenger or follower within the product group and the target segment and product category.

In the third option, when there is a market specialization, the posi-tion of different main product units is determined, which are intended for the target market for which this strategy is set. Usually, different main products which can achieve market specialization are offered under one and the same brand. As the main product units belong to different catego-ries, this suggests also a variety of competitors. This requires the positions of each main product unit to be determined in relation to specific compe-tition conditions.

The fourth and last option, where business organizations apply con-centric diversification within the product class, involves two or more pro-duct lines in companies’ assortment, which correspond to different pro-duct categories within the product class. Issues related to market positions are considered for product lines and main product units falling within their composition, based on market segments for which they are intend-ed and the geographical coverage. If the business organization provides full market specialization, it is not only the determination of the positions of major and main product units that is essential but also the positions of business organization in the product class as a whole as well.

4.2. Product-market strategies

Market penetration occurs differently and depending on product spe-cialization of the business unit as well as market coverage and penetration of the product-market units. The previously adopted four basic variants of product specialization suggest its specific manifestation, while dealing with the issues related to the strategy of penetration.

First of all, for business organizations that implement a strategy of con-centration, are identified opportunities for market development as the only main product unit and its various options which they produce and offer on the market.

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Second, for these business organizations that have chosen a strategy of specialization (concentric diversification), product development is de-termined for each main product unit within the product line. On this basis, the potential development of the product line as a whole must also be de-termined.

Third, in business organizations where there is a strategy of market specialization, the market development is determined for each product unit through which the needs of target market are satisfied.

Fourth, when the business organizations apply concentric diversifica-tion within the product class, the issues of market development are con-sidered for each product line, separate main product units included in their composition and for the assortment as a whole.

When a significant change is not required in the products of marketing and productional point of view, the market development also includes en-tering new market segments.

Product development is the next possible option available to business managers in the dairy industry. Based on the characteristics of each of the four main product specialization variants, their occurrence could be interpreted provided that the variant of undertaking market development is considered.

First of all, because of the specifics of the concentration strategy, the product development considerations refers only to one main product unit.

Second, in the case of product specialization the product development is considered in each of the main product units, included within the com-position of the product line.

Third, when applying market specialization, the issues of product de-velopment are considered for each separate product unit and totally for all of them through which the needs of the target market are satisfied.

Fourth, product development is considered for each product line through the main separate product units which are included in their com-position.

Strategy of concentric diversification in a single product catgory is ob-served in cases when good possibilities are be found through the current product-market profile. They are identified in the frames of the existing product lines (product categories). It consist of creating new products designed for a new market segment, by using the existing technologies and the marketing organization.


First, in the presence of concentration, the concentric diversification takes place by offering new main product units which are in technological synergy with the existing products, the same marketing organization is ap-plied, but using a new brand and specific positioning.

Second, when there is specialization (concentric diversification stra-tegy implemented within the specific category) the additional concentric diversification aims to capture complementary segment within the product category.

Third, when there is market specialization, the concentric diversifi-cation tends towards specialization in terms of new market or launching of additional basic product unit in one of the product lines (categories).

Fourth, when business organizations apply concentic diversification, the additional concentric diversification issues are considered for each product line.

Strategy of concentric diversification in product class borders is the fifth and last possible product-market option for a company in dairy industry. The application of this strategy requires the company to seek new products that are purchased by current and new customers, although technologically they are not related to existing product lines. Concentric diversification strategy is undertaken in cases where they can find good opportunities in the product class by entering new product categories. Such opportunities are determined by the availability of promising product categories which are not technologically related with the existing product lines, but there is marketing and logistical synergy. The entry is determined by the characteristics of the product-market profile and the capabilities of the respective business organization.

First, if there is concentration, the concentric diversification is imple-mented by the introduction to the market of one or several new main pro-duct units which belong to a different product category.

Second, when there is specialization, the horizontal diversification as well as the additional concentric diversification aim to capture a com-plementary segment within the product category.

Third, in the case of market specialization, the concentric diversifica-tion is reflected in the partial or complete specialization in one or several categories.

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Fourth, when the business organizations cover two or more product lines which correspond to certain product categories on the market, the concentric diversification is reflected in the introduction of new product categories.

If full market coverage is achieved within the product class, the hori-zontal diversification allows entry into a new business area.

The strategy of conglomerate diversification is associated with the fact that the company creates or acquires business activities that manufacture or sell products which are not linked to current production, technology and markets. Therefore, this type of strategy is not considered as pro duct-market business strategy.

4.3. Manifestation of competitive business strategies depending on product specialization

While the strategic issue to be decided by the matrix of Ansoff is defin-ing the scope of the business, the competitive business strategies of M. Porter are used to identify the specific competitive approach towards the relevant tar-get markets. The proposed conceptualization of business organizations’ prod-uct specialization, which was stated above, suggests taking into consideration the specific manifestation of competitive business strategies that it entails.

First, in the case of concentration it is possible to apply each of the examined competing strategies. The particular choice is determined by the characteristics of the one target market for which the one main pro-duct unit is intended.

Second, when considering product specialization there are several competing approaches possible. The first approach is associated with se-lective specialization, applying the strategy of differentiation for all main product units included in the single product line. The second approach is also selective, but its products are oriented towards achieving cost lead-ership and combined (mixed) strategy. The third approach involves offer-ing of all possible strategies within the product category.

Third, when considering market specialization only one of the above mentioned competitive strategies is determined, depending on the charac-teristics of the particular target segment.


Fourth, when the business organizations cover two or more product lines which correspond to certain product categories on the market, unity or a different combination of competitive approaches is possible for each of the product lines.

4.4. Implementation of business strategies in LPS

Defining business goals and priorities depends on whether the pro-duct-market strategies that will be adopted in the LPS have an offensive or defensive character. The selection of a specific product-market special-ization defines the boundaries of the battlefield (business area) of LPS. This in turn determines who will be the main competitors, to which LPS and the organizations included should identify the main competing ap-proaches. Some characteristics identify for single business organization could be interpreted taking in consideration the LPSʼs strategies.

First, at the basis of defining the LPS’s strategy/strategies should be the clear definition of the characteristics of LPS; on this same basis shall its typology be conducted. Second, the business strategy of LPS is asso-ciated with the fulfillment of the aim of the leading organization in the LPS and of the other companies included.

Third, the product-market profile determines the scope of activity and defines the competitive approach/approaches. In making decisions about the scope and competitive approach of LPS it should be taken into account its characteristics and those of its constituent organization, as well as the needs of the market and competitive conditions.

Fourth, the issue of resource provision is crucial in making deci-sions related to business strategies within the LPS. The initial stage assess the ability of individual organizations and LPS as a whole to provide the ne-cessary resources. And less important is the evaluation of the economic viability of the strategy. During the implementation, control is recom-mended on the resources being spent, extent of strategy implementation and achievement of objectives.

Fifth, for making decisions, the related product-market business stra-tegies and the identification of the main competing approaches in the LPS cannot rely solely on the intuition of managers of individual organizations.

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Considering the characteristics of the LPS, the implementation and en-forcement of a suitable system for strategic business planning is recom-mended, which is based on the configuration approach. Configuration ap-proach suggests referring to the advantages of the approaches that various schools in the field of strategic management suggest.

Sixh, the most common business strategies in the LPS are classified as offensive and defensive. When LPS organizations strive towards high rates of growth, with increased sales revenue and market share, they apply an offensive strategy. In all cases, offensive strategies are oriented to “size” a better position in existing markets (“territories”) or entering new ones. The defensive strategies, in turn, are oriented to maintain market positions, and hence the values of the main economic indicators of individual organiza-tions and LPS as a whole. They are oriented towards the protection of market positions and weakening the attacks of the competitors which may be other LPSs or individual companies. These types of strategies may require with-drawal from certain markets or of existing products. The aim is concentrat-ing their efforts to protect a limited area’s survival, if appropriate. It is also allowed a complete and controlled withdrawal from the market.

Seventh, the successful implementation of offensive and defensive strategies requires their successful deployment in tactical and opera-tional actions that takes place in the individual participants in the LPS. In this respect, into action should come the ability to successfully manage the value adding chain within the LPS as a whole and the related oper-ations that are performed in the individual organizations. The offensive and defensive strategies imply a different approach to resources distribu-tion and determining the actions of the LPS by defining appropriate strate-gies, policies and mechanisms (marketing, production, innovation, human resources) within the context of value adding chain.

5. Conclusions

Dairy sector is characterized by intense competition and dynamically changing environment; wide variety of companies is identified, distinguished by their size, product specialization, market coverage, objectives, strategies,


product and market profile. In this sector, also differet types of LPS can be identified. All these circumstance make business strategies concepts a ques-tion of present interest. Becase of the fact that milk products class includes a variety of product categories (yoghurt (sour milk), fresh milk, white cheese, yellow cheese etc.), the matters related to product-market profile of the sec-tor and main competitors acquire significant importance.

Due to the current conditions of dairy industry, it can be concluded that the only engine for the development of LPS appears to be the variety of dairy products manufacturers. They are the main reason for product inno-vation in the sector, establishing of farms, their development and expansion.

In this context, the leading role of issues related to product-market business strategies for sustainable development occurs. It concerns both the companies themselves and the LPS to the extent to which they occur and in the sector. The successful implementation of business strategies de-pends on all the individual participants in the LPS. Opportunities for de-velopment of LPS in the dairy sector are rooted in the achievement of hori-zontal cooperation among competitors in Bulgaria, which take place under the umbrella of the state or even better – of one or another of the main pro-ducers. The main role of this collaboration should be aimed at developing export potential for Bulgarian dairy products.

The results in the current paper would be of interest to a number of stakeholders: owners, executives, managers and professionals associat-ed with the companies and LPS’s activity in dairy industry, local and state agencies and others. The results obtained may be used as a basis for further scientific researches.

Bibliography

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Ministry of Agriculture and Food (MAF), http://www.mzh.government.bg/MZH/bg/ShortLinks/ SelskaPolitika/MarketMeasures/Sectors/Milk.aspxh.

Abstract

The following paper examines the issues related to product-market business strate-gies. They are considered in the case of nonbusiness organizations and local production sys-tems (LPS), which operate in the sector of milk and dairy products in Bulgaria. For the pur-pose of estimating the intensity of competition the number of competitors was computated, including these which are of paramount importance for the industry. The paper outlines some basic types of LPS within the industry. It also disscusses the assertion that a presence


of enhanced vertical integration is identified within the sector, where the producers of milk and dairy products have a leading role. On this basis, the product market business strategies for the development of manufacturing companies and for the LPS as a whole appear to play a key role in the sector.

Key words: local production systems, dairy industry, product-market analysis, busi-ness strategies.

PART II.COMPARATIVE STUDIES

Magdalena Kalisiak-Mędelska*

SElF-gOVERnmEnT in pOlAnd And RuSSiAn FEdERATiOn – inTROduCTORY REmARKS

1. introduction

Within last two decades, after a long period dominated by non-demo-cratic, centralised state structures, the countries of Central and Eastern Europe1 experienced significant political and economic transformations.

* Doctor in Economic Science, University of Lodz Assistant Professor Department of Economy of Territorial Self-Government, Faculty of Management of the University of Łódź.

1 There are specific difficulties with unambiguous identification of the area referred to as Central and Eastern Europe. Usually it includes the Visegrad Group countries: Poland, Czech Republic, Slovakia and Hungary; Baltic States: Lithuania, Latvia, Estonia; states that emerged after the breakup of Yugoslavia: Slovenia, Croatia, Bosnia and Herzegovina, Serbia, Montenegro and Macedonia, other Balkan countries: Albania, Bulgaria, Romania and Ukraine and Belarus. Sometimes Russia is also included in the area. There is also a more narrow catalogue of countries which belong to Central and Eastern Europe, i.e.: Bulgaria, Czech Republic, Estonia, Lithuania, Latvia, Poland, Romania, Slovakia, Slovenia and Hungary. According to the classification used in the UN statistics, Poland and Russia are considered countries of Eastern Europe, together with Belarus, Bulgaria, Czech Republic, Moldova, Romania, Slovakia, Ukraine and Hungary. See Kłoczowski J., Europa Środkowo-Wschodnia w przestrzeni europejskiej, http://jazon.hist.uj.edu.pl/zjazd/materialy/kloczowski.pdf, Composition of macro geographical (continental) regions, geographical subregions and selected economic and other groupings, UN, http://unstats.un.org/unsd/methods/m49/m49regin.htm#europe (accessed 11.02.2014).

M. Kalisiak-Mędelska120

Systemic transformation, which in the countries of Central Europe started in 1989, provided an impulse for reassessment of the existence and role of the former structures of the Eastern bloc.2 That permitted countries in this part of Europe launch a series of far-reaching institutional re-forms in all aspects of social life, mostly, however, in the political system and economy. In politics they strived to provide foundations of democratic state structures respecting the rule of law and the ideas of civil society. As a result, deep transformations in governance and economic manage-ment took place. Previous rigid and bureaucratic administration systems of the countries of Central and Eastern Europe were broken up and re-placed with independent self-government structures, which was accompa-nied by the adoption of new regulations, procedures and tasks.

Undoubtedly, restructuring of administrative structures in these coun-tries has become a permanent and irreversible process and, with the benefit of hindsight, we can say the direction of changes was absolutely correct. Local self-government provides evidence of truly democratic governance. However, we must bear in mind that self-government reforms in indivi-dual countries took place at a various rate and scope. They were the end result of many, often complex, problems resulting from political, economic and social reality, lack of trust in the government or intensifying nation-al antagonisms. Unfortunately, despite visible changes and modernisation in this respect, in some Central and East European countries, in particular in those, which in the past suffered from democratic deficit (e.g. Russia), not all democratic values and principles have been completely observed. Nevertheless, they experienced a radical reconstruction of their political and administrative systems, which was the starting point for further re-forms.

Although systemic transformation in countries of Central and Eastern Europe, including Russia, are multifaceted and rather specific, our consi-derations will be limited to issues relating to the emergence of self-govern-ment structures in Poland and in the Russian Federation. Both countries have rich and diverse experience in self-government building.

2 S. Miklaszewski, E. Malendowski (eds.), Gospodarka światowa w warunkach globalizacji i regionalizacji rynków, Warsaw 2009, p. 4.

Self-government in Poland and Russian federation… 121

The paper draws attention to circumstances and mechanisms which shaped Polish and Russian local self-government. However, it is not an ex-haustive presentation of the entire spectrum of the policy as issues con-nected with self-government bodies in Poland and Russia or finances have been purposefully omitted. These are wide, complex and very interesting matters that need a separate discussion. Aspects we have touched let us draw a general picture of local self-government in Poland and in Russia.

As analysed areas are hard to compare (take at least the form of the state: Poland is a unitary state,3 Russia – federal;4 reforms, experiences of both countries in self-government formation), considerations were conducted in parallel and the construction of self-government in Russia was high-lighted more strongly. It seems to be less evidenced in literature, contrary to the restitution of local self-government in Poland.

2. Building up local self-government in poland and in Russia

Local self-government is one of fundamental institutions of modern society. It is a level of public authority, an element of market economy, as a supplier of public services, but also, which is fundamental in the light of the currently promoted concept of the governance, one of forms of citi-zens’ participation in public life, an element of civil society.

3 In a unitary state there are no parts, which are substantially independent. Unitary states are internally homogenous (there is a homogenous system of state bodies). All administrative units within the state (local self-government) are identical when it comes to their organisation and are all subordinated to the central level (they are not autonomous like Landen or states), which decides on their system and competence. In Poland administration is decentralised, i.e. local self-government is well developed (structure independent of government administration). This form of state is the most common in Europe and in the world.

4 Federal state (federation) is composed of smaller, autonomous component states (e.g. states, Landen, provinces, cantons), with a common (federal) government. Component states ususally enjoy wide internal autonomy and , in some countries, have their own legislation in some areas, what is joint is usually foreign and military policy. Federations have a common currency.


Restitution of local self-government in Poland became feasible as a result of changes initiated in 1989. They enabled democratisation of political, social and economic life, doing away with the centralised system of power and empowering local communities. First modest at-tempts of restitution of the local self-government were undertaken already in 1980-81 when works started on the plan of its reconstruction.5 How-ever, a realistic opportunity came in 1989. „Round Table” negotiations, which also covered the organisation and functionalities of local authorities6 helped the process, together with democratic Parliamentary elections on 4 June 1989 and the appointment of T. Mazowiecki’s government.7 The first self-government reform in 1990 was based on pre-war solutions and was temporary as it restored the self-government only at the commune level. It started with the adoption on 8 March 1990 of three key laws, i.e.: Act on amending the Constitution of the Republic,8 Act on local self-govern-ment9 and electoral ordinance for commune councils.10

In the light of acts quoted above, on 27 May 1990, after 40 years, Poland restituted local self-government in communes and overcame the monopoly of: uniform state power (self-government administration emerged on the side of central government administration), state own-ership (communal ownership was recognised), finance and state admi-nistration (a separate system of administration for local self-government

5 Wybrane zagadnienia z dwudziestoletniej ewolucji samorządu terytorialnego, Thematic study OT-584, Analyses and Documentation Office, Polish Parliament, Higher Chamber, Warsaw 2010, p. 3.

6 At the beginning the issue of local self-government was not included on the list of subjects to be discussed at the „Round Table”. Finally, the participants declared readiness to work on the area. Major discussions took place in the team dealing with associations and local self-government, which was later divided into two separate sub-teams, one for associations and one for local self-government. See P. Olszewski, Problem samorządu terytorialnego w obradach „Okrągłego Stołu”, „Polityka i Społeczeństwo” 2007, No. 4, p. 94.

7 See G. Dutkiewicz, Dzieje samorządu terytorialnego w Polsce po II wojnie światowej, Colloquium Faculty of Humanities and Social Sciences of Akademii Marynarki Wojennej w Gdyni, Yearbook II, Gdynia 2010, p. 200.

8 Dz. U. (OJ) of 1990, No. 16, item 94.9 Dz. U. of 1990, No. 16, item 95 (the present title is: Act on the commune self-

government). 10 Dz. U. of 1990, No. 16, item 96.


was set up).11 The system of local governance was based on independent commune self-government units with legal personality, separate budget, specific public assets and clearly specified powers. In the years to come, decentralisation of public administration continued to be crowned in 1999 with the restitution of the three-level territorial division of the state into: communes as the fundamental element of local self-government12, coun-ties and self-government provinces (voivodeships) by virtue of the Act of 5 June 1998 on county self-government13 and province self-government.14 Independent units of self-government set up a structure independent of government administration with no hierarchical subordination, which performs public tasks.

We should also highlight the fact that as a result of reforms of 1998 at the level of a province we introduced one of fundamental principles of a democratic state, i.e. dualism of the system of public administration. Administration as a function is performed by both government administra-tion bodies (voivode and non-consolidated administration) and independ-ent bodies of the self-government of the province, which administer all public matters connected with this level of local self-government on their own behalf and responsibility (independence in performing tasks and ac-countability is also true of counties and communes).

Three-level territorial structure was, first and foremost, the response to numerous weaknesses of the previous two-level system (there were communes and government provinces with two intermediary links, i.e. re-gional offices and the so called special administrations) full of conflict-gen-erating divisions of tasks and competence between central government and self-government administration, lack of social control over public ad-ministration or still highly centralised budget system. The three-level struc-ture forced out harmonisation and unification of the structures of Polish

11 J. Wojnicki, Samorząd lokalny w Polsce i w Europie, Publishing House of the Academy of Humanities in Pultusk, Pultusk 2008, p. 56.

12 Act of 8 March 1990 on the commune self-government, Dz. U. of 2001, No. 142, item 1591 with further amandments.

13 Dz. U. of 1998, No. 91, item 578 with further amendments. 14 Dz. U. of 1998, No. 91, item 576 with further amendments.


public administration with European Union standards, which backed up regional development and inter-regional cooperation and made a self-gov-erned province equivalent to a region in European countries.

Principal objective of these reforms was the strengthening of the state by introducing a clear-cut division of competence and responsibilities be-tween central, regional and local tiers of public authorities. In this system, central government created formal, legal, regulatory and political condi-tions and self-government, together with central administration, became an important link of decentralised public administration whose task was to meet public needs of local and regional communities (table 1). Re-forms were also fostered by an increasing need to separate administration from politics, to make public finances transparent and to make public au-thorities at all levels accountable vis-a-vis the citizens.

Table 1. Public authorities in Poland – structure

Public administrationGovernment administration Self-government administration

Central (central government and offices)In provinces (non-consolidated, consolidated – reporting to the Voivode)

Commune – 2479County – 65 townships, 314 country districtsProvince – 16

Source: own studies.

The Constitution of the Republic of Poland of 1997 is the building block of Polish self-government administration. It changed the principle of self-governance and the principle of public authorities decentralisation into fundamental systemic principles.15 The Constitution states that local self-government is a basic organisation form of public life and the state is just playing an auxiliary role here (principle of subsidiarity). Other equally relevant principles concerning the self-government are the princi-ple of independence and the principle of implicit competence. The first highlights the right of self-government bodies to deliver public tasks

15 B. Dolnicki, Samorząd terytorialny, LEX a Wolters Kluwer business Publishing House, Warsaw 2012, p. 53.


entrusted to them on their own behalf and responsibility. Independence in question is protected by law. Implicit competence means local self-go-vernment has the right to deliver public tasks which have not been reserved by the Constitution or laws for other public authorities.16

European Charter of Local Self-Government played a substantial role in the development of the self-government in Poland and other countries of Central and Eastern Europe, including Russia.17 It regulates the status of local self-government and places it at the core of democracy and the ex-pression of citizens’ involvement in managing the major part of public affairs.

We may assume that in Russia the building of foundations of local self-government also started at the beginning of the 1990s, i.e. with the col-lapse of the Soviet Union. At that time Russia, like Poland, was at the brink of radical systemic transformation. The starting points for the transforma-tion of the previous systemic model were the reforms of M. Gorbatchev, who initiated the policy of reconstruction (perestroika), acceleration (us-korienia) and openness (glasnost). They were aimed at democratisation of the state, the building up of civil society, market economy, and political liberalisation.

Reforms of public administration in post-Soviet republics took different courses. After the collapse of the Soviet Union some of them almost imme-diately declared their orientation consistent with West European standards, other tried to work out own solutions based on old traditions of national statehood or to retain the previous system. In Russia, similarly to Poland, reforms advanced in the spirit of far-reaching constitutional changes. They implied systemic transformations, changes in electoral law, development of the rule of law and its institutional guarantees, such as administrative and constitutional courts, and reconstruction of administration.18

16 Art. 163 of the Constitution of the Republic of Poland of 2 April 1997, Dz. U. of 1997, No. 78, item 483 with further amendments.

17 Poland ratified the Charter in 1994. 18 W. Hołubko, Transformacja administracji państw postradzieckich: od totalitaryzmu

ku standardom europejskim, „Rocznik Administracji i Prawa. Teoria i Praktyka”, Year X, p. 9–11.


The turning point in systemic transformation in Russia was the amend-ment of the Constitution of Russian Soviet Federative Socialist Repub-lic (RSFSR) in 1990, which introduced political pluralism and abolished the ruling role of the communist party.19 Deep transformations were still not feasible as attempts were made to adjust the inherited rigid and cen-tralised Soviet administration to new needs. However, the amendment to the Constitution inspired a broad discussion on the new systemic mod-el of the Russian Federation (amended Constitution introduced the notion of local self-government). Moreover, the Act on local self-government of the RSFSR of July 1991 recognised local self-government as an autono-mous subject and universal elections of authorities for the term of 5 years. Nevertheless, vertical subordination was retained and until 1993 local exe-cutive committees continued to exist (ispolkom).20

The adoption of the new Constitution of Russian Federation (RF) in 1993, which subscribed to political ideas and values of democratic states, initiated real development of self-government in Russia. The ca talogue of fundamental systemic principles was expanded with the principle of local self-governance, which enabled local community solving local problems in-dependently within the area of competence given to the self-government.21 As stressed by M. Bagłaj, the identification of responsibilities of the Rus-sian self-government is one of the most difficult issue. Its independence is limited with the scope of responsibilities common to the Federation and its subjects.22 They were generally outlined in Art. 132 of the Constitu-tion of the Russian Federation, pursuant to which self-government, acting within its powers, may independently administer municipal property, draft,

19 J. Matwiejuk, Rosja, [in:] S. Bożyk, M. Grzybowski (eds.), Systemy ustrojowe państw współczesnych [Political systems in contemporary states], Temida 2 Publishing House, Bialystok 2012, p. 279.

20 S. Mizobata, Softness and Hardness of the Institutions of Russian local Self-government, [in:] A. Campbell, Mizobata S., Yokogawa K., Denezhkina E., Institutional Transition and Local Self Governent in Russia, Kier Discussion Paper Series Kyoto University, Discussion Paper 2007, No. 640, p. 25.

21 Constitution of the Russian Federation of 12 December 1993, Publishing House of the Parliament, Warsaw 2000.

22 W. Bagłaj, Konstitucjonnoje prawo Rossijskoj Federacii. Uczebnik dla wuzow, Mocow 2006, p. 324.


adopt and execute local budget, decide on local taxes and charges, take care of public order and solve other issues at the local level. Self-government bodies may be entrusted with new responsibilities together with material and financial resources necessary to deliver them.

In 1995 another act was adopted concerning general principles that go-vern the organisation of the local government in the Russian Federation, which reinforced Russian self-government in institutional aspect. Due to large regional disparities, each region developed its own self-government model with different solutions, such as, e.g.: (1) universal elections of authorities, (2) main territorial units without the status of administrative unit (Kursk, Novosi-birsk, Tumen), (3) indirect elections of local self-government units (Briansk, Orel, Saratov), (4) vertical relations between controlling authorities at region-al level (Bashkortostan, Tatarstan), (5) setting up just one type of units – ru-ral districts (Tatarstan).23 It was due to the fact that self-government reforms in Russia at the beginning of the 1990s were highly imperfect. Firstly, they were concurrent with economic recession and changes in public finances did not support the emergence of local self-government. Secondly, breaking up of centralised state structures strengthened political forces at federal and re-gional rather than at the local level of authorities. Thirdly, self-government reform was not the main priority among changes that took place at that time in Russia (political problems were much more important).24

Deep reforms of local self-government were brought with the new federal Act of 6 October 2003 on general principles underlying the organi-sation of the local government in the Russian Federation (the so called act 131), which reflected the new shape of local self-government, its powers and responsibilities. In accordance with its letter, any district with more than 1000 inhabitants (population in districts is very much differentiated and ranges from 100 to even 35K inhabitants) has become a formal terri-torial self-government unit with its own elected authorities, own budget and responsibilities. Other results of the entry into force of Act 131 were amendments to many federal acts on, e.g. taxes or the labour market.

23 S. Mizobata, Softness and Hardness of the Institutions…, p. 26.24 I. D. Turgel, New Local Self-Government Reform in Russia: a Step

to Decentralization or Consolidation of Vertical Authority?, http://unpan1.un.org/intradoc/groups/public/documents/nispacee/unpan045243.pdf (accessed 1.02.2014).


Some references to local self-government were also made in the Rus-sian Federation Development Strategy until 2010, e.g.: delegation of some functionalities of public administration to self-government structures, feder-al protection of self-government rights and interests or the extension of local autonomy.25 We should also mention the European Charter of Self-Govern-ment (which Russia ratified in 1998), the building block of self-government, taking account of Russian reality and meeting global standards. It is particu-larly important in the case of Russia, which had no previous experience with respect to self-government. The system of self-government results from reforms undertaken in the 1990s, which abolished rigid and strong-ly centralised state structures typical of the Soviet period. Later outcomes of the process included, e.g., adoption of the above-mention Act on local self-government in 2003, which, in the opinion of M. Mokeev, seems to be a reasonable combination of experiences from the 10-year period of self-gov-ernment development in modern Russia and best practices from Western countries (Russian model of local self-government applied German solu-tions).26 All the above legal acts embody the main objectives of Russian self-government reforms (which seem to be convergent with the objectives of Polish reforms), that is: reinforcing local structures of the state, promoting inhabitants’ involvement, identification of tasks and responsibilities of local self-government, and ensuring financing for them.

The system of public authorities in the Russian Federation was orga-nised at three levels: federal covering all of the country; regional covering republics, countries, districts, direct-controlled municipalities, autonomous districts and autonomous areas; and – the one which we analyse – the local level (local self-government) playing a dual role: an administrative unit and an element of state structure. The structure of local self-government in Russia, i.e. the authority the closest to the citizens, is quite complex

25 G. Kurlyandskaya, Y. Nikolayenko, N. Golovanova, Local Governments in the Russian Federation, [in:] Local Government and Public Service Reform Initiative, http://english.fpcenter.ru/common/data/pub/files/articles/1895/Local%20Governments%20in%20the%20Russian% 20Federation.pdf (accessed 10.02.2014).

26 M. Mokeev, Development of Local Self-Government in Russia: Municipal Reform Outcomes, International Expert Meeting on local self-government and citizens participation in decision making processes and local democracy, Odessa 2011.


as responsibilities of various units overlap. Already quoted act 131 in-troduces a two-tier structure of local self-government consisting of three types of units:27

– in tier one: (1) municipal regions (municipal raions), divided into smaller administrative units (districts composed of a city and its neigh-bouring towns and villages) and (2) urban areas (gorodskoy okrug), which are not included in municipal regions, where executive bodies are respon-sible for all local affairs important for districts and municipal regions,

– in tier two: urban (cities) and rural settlements (gorodskiye and selskiye poseleniye), where self-government powers are executed directly by inhabit-ants (direct democracy) or/and through elected self-government authorities.

The structure also includes smaller units, the so called intra-city terri-tories of federal importance, where self-government powers are executed directly by inhabitants (direct democracy) or/and by elected self-govern-ment authorities28 (table 2). All of these units, besides performing a specif-ic scope of public tasks, may decide on local taxes and charges (deciding on local budget), and are protected by the judiciary29.

Table 2. Local self-government units in Russia (as at January 2013)

Number of local self-government units – 23001Municipal region (municipal districts) – 1817Urban areas (city okrugs) – 518Urban settlements – 1687Rural settlements – 18722Intra-city territory of cities of federal importance – 257

Source: Russia in Figures – 2013, Federal State Statistics Service Russian Federation, http://www.gks.ru/bgd/regl/b13_ 12/Iss WWW.exe/Stg/d01/2-02.htm (accessed 03.02.2014).

27 See D. W. Beuermann, The Role of Local Governments’ Efficiency in Decentralized Public Service Delivery: Evidence from a Randomized Intervention in Rural Russia, http://econweb.umd.edu/~beuermann/Research /Beuermann_Russia_V1.pdf (accessed 12.02.2014); Russia in Figures – 2013, Federal State Statistics Service Russian Fedreration, http://www.gks.ru/bgd/regl/b13_12/IssWWW.exe/Stg/d01/2-00.htm (accessed 03.02.2014).

28 E. Zieliński, System konstytucyjny Federacji Rosyjskiej [Constitutional system of the Russian Federation], Warsaw 2005, p. 90.

29 A. Kandzia, Samorząd terytorialny Federacji Rosyjskiej, „Pisma Humanistyczne” 2010, Vol. VII, p. 64.


Both in Poland and in Russia self-government structures are perceived as those, which give local communities the best possibility to fully decide about local matters. To this end, there are universal elections and other me-chanisms of direct democracy. Key solutions in this area have been recognised by systemic laws (constitution, specific laws). Representative democracy, which is the cornerstone of civil society, was laid down in the constitution of both countries. In Polish Constitution the right to exercise power directly (besides the possibility to do it through the intermediary of state and self-gov-ernment bodies) is guaranteed by Art. 4, para. 2 – the Nation shall exercise such power directly or through their representatives, while Russian Consti-tution in Art. 3, para. 2 reads – the Nation shall exercise the power directly and through state and local self-government bodies.

Referenda are the best known and significant tool in both countries as they exercise citizens’ right to decide on a specific issue. Other forms of democracy available to Polish and Russian citizens pursuant to law are procedural and play a less prominent role in political life. These are: citizens’ initiative, meaning giving the right to a specific number of people to initiate legislative process and social consultations, which consist in directly expressing an opinion.

3. Responsibilities of polish and Russian local self-government

The main reason why local self-government exists is the delivering of public tasks, which directly result from the needs of individual local communities. Self-government in Poland and in Russia is responsible for performing numerous tasks by rendering universally accessible public services. The structure of local self-government in Poland and in Russia does not permit, however, to directly compare the scope of these tasks, that is why our considerations cover only the local level.

In Poland local self-government includes mostly communes,30 in Rus-sia, as we have already mentioned, all local self-government units are parts of local level of public authorities. Analysis of responsibilities of both

30 Local government includes also counties, which have been purposefully omitted as they deliver tasks of supra-local nature. Besides, the areas of county responsibilites largely overlap with those of a commune.


self-government structures indicates many similarities. By performing their legal duties they meet accommodation, social, spatial and environmental order, public order needs, manage the assets and infrastructure (table 3).

Table 3. Local self-government responsibilities in Poland and Russia

Responsibility area Local self-government units in Poland

Local self-government units in Russia

Water supply YES YESWaste-water collection YES YESSupply of electricity, heat and gas YES YESWaste management YES YESPublic transport YES YESInfrastructure YES YESReal estate management YES YESHealthcare YES YESSocial welfare YES YESCulture, sports and leisure YES YESEducation YES YESProtection and conservation of green areas YES YES

Environmental protection YES YESFire protection YES YESManaging commune assets YES YESCemeteries YES YESSupport to local economy YES YES

Responsibilities of Russian:– Settlements – building local roads, local transport, sports, culture and leisure, waste

management, social housing for the poorest, cemeteries,– Regions, city okrugs: pre-school and school education, healthcare, also hospital care,

obstetrics care, emergency care, public transport, environmental protection (these respon-sibilities can be compared to responsibilities of Polish local self-government in counties).



Polish and Russian self-government are also authorised by laws to perform some powers of the state. To transfer such tasks to self-govern-ment level the contracting party (state) must guarantee material and finan-cial resources necessary to exercise them. In such an arrangement, local self-government is only the executor of tasks which (despite being assigned to it by law) remain outside of its own framework of responsibilities.

Execution of public tasks, remaining within the responsibility of local self-government, is closely connected with their financing from specific resources. In Poland local self-government is mostly financed from own resources, i.e. local taxes, share in taxes paid to the state budget (PIT, CIT), charges, income from assets and other income. They also receive transfers from the state budget: general subsidy and target subsidies, but the scale of the income is not as big as in the case of Russian government. Also nonreturnable income from foreign resources and EU budget resources are considered an income (table 4).

Table 4. Income of communes in Poland

Incomeown transferred from the state budget other

Local taxes (property, agricultural, forest, transport, inheritance and donations, civil and legal acts, the so called flat rate tax)Charges (stamp duty, market dues, visitor’s tax, service charge, for having a dog)Shares in PIT and CITIncome from commune assetsInheritances, legacy and donations for the communeInterests on untimely paid commune receivablesFines and penaltiesSubsidies from other units of local self-government

General subsidyTarget subsidies

Nonreturnable income from for-eign resources and resources from the EU budget



The share of local government units in specific sources of income is also important. In Poland, unlike in Russia, own income is fully re-tained in these units, with the exception of PIT and CIT taxes, which are the income of the central budget and the commune’s share in them is, respectively, 39.34% and 6.71%. The procedure for allocation of subsi-dies is laid down in the Act on Income of Local Self-Government Entities of 2003.31

In Russia self-government also has got its own financial resources that are in its disposal. These are also all sorts of taxes and charges (table 5). In practice, over 80% of income into local budgets come from federal and regional taxes, i.e. taxes beyond the control of self-government. Local taxes account for a little fraction of income (in Poland communes’ own resources represent almost 50% of the total income, in transferred income, general subsidy accounts for almost 30%32).

Table 5. Taxes at various levels in accordance with Russian act 131

TaxDetermination of Taxes assigned by Budget Code (%)

base rate federal regionallocal

districts settlements1 2 3 4 5 6 7

Local taxesPersonal property tax F L 100Land tax F L 100Regional taxesEnterprise property tax F R 100Transport tax F R 100Tax on gambling businesses F R 100

31 Act of 13 November 2003 on Incomes of Local Self-Government Entities, Dz. U. of 2003, No. 203, item 1966.

32 M. Kalisiak-Mędelska, Samodzielność dochodowa gmin. Znaczenie dochodów własnych [Income independence in communes. Importance of own incomes], „Studia Zarządzania i Finansów” 2013, No. 5, p. 119.


Table 5 (cont.)

1 2 3 4 5 6 7Federal taxes assigned to regional and local governmentsEnterprise profits tax F F 27 73Personal income tax F F 70 20 10Excise dutieson alcohol and alco-hol-based products F F 50 50

on gasoline and diesel fuel F F 40 60

on alcoholic products, except wine F F 100

on wine, beer F F 100Mineral resource extraction taxHydrocarbons other than gas F F 95 5

Common minerals F F 100Other minerals F F 40 60Fee for the use of fauna F F 100Simplified taxation system for small businesses

F F 10 90

Single tax on imputed income F F 10 90

Single tax on agricul-tural enterprises F F 10 30 30 30

Explanation: F – federal, R – regional, L – local.

Source: D. W. Beuermann, The Role of Local Governments’ Efficiency in Decentralized Public Service Delivery: Evidence from a Randomized Intervention in Rural Russia, http://econweb.umd.edu/~beuermann/Research /Beuermann_Russia_V1.pdf (accessed 12.02.2014).

Russian reform of public finances has made local budget significantly dependent on external sources of funding, which deepened lack of finan-cial stability of the self-government. Self-government income was prac-


tically limited to two taxes, i.e. land tax and personal property tax.33 Dif-ficult situation of the Russian self-government in this area is additionally aggravated by large financial disproportions among its entities. Only very few settlements are financially independent and that is mainly true of urban settlements. For rural settlements the income is often below the minimum threshold of their needs. Additional burden on local budgets are high ad-ministration costs generated by self-government units.34

4. Conclusions

Experiences of the past 25 years, despite many deficiencies and imper-fections, clearly confirm the correctness of systemic premises and reforms aimed at decentralisation and the development of self-government both in Po-land and in Russia. In both countries noticeable social and economic progress has been made and local self-government has become a vital and sustainable element of a democratic state, the foundation of the civil society.

Despite obvious differences between local self-government in Poland and in Russia, there are some common elements (features), such as:

– solid constitutional and legal base in acts that regulate self-govern-ment organisation and operations,

– local self-government model based on the European Charter of Lo-cal Self-Government, the Constitution of self-government in Europe,

– delegation of specific responsibilities performed as public services,– certain powers delegated to self-government authorities in the area

of managing all of public affairs in their respective self-government units,– ensuring own sources of funding and shares in certain state income,

33 Personal property tax is paid by individuals who own taxable property, such as: houses, second homes, apartments and other buildings. The tax is laid down by legal acts of self-government authorities and depends on the value of the property as decided by the region. Local authorities may also decide on tax allowances and rules based on which they are granted to taxpayers.

34 M. E. Bukhvald, Municipal reform and public finance innovations in the Russian Federation (2008), http://kastoria.teikoz.gr/icoae2/wordpress/wp-content/uploads/articles /2011/10/035-2008.pdf (accessed 10.02.2014).


– self-determination and independence in performing public tasks,– guarantee of judicial protection,– independent self-government authorities elected in universal suffrage,– ability of citizens to decide on local matters within the framework

of direct democracy.In spite of similarities, Russian self-government seems to be a very

different reality of a democratic state. The difference is largely shaped by the history, ethnic differentiation, social and economic situation or still tangible effects of strong centralisation of public authorities in the pre vious system. On top of that, often the idea of local self-government is distorted with individual interests of self-government authorities.

Both in Poland and in Russia, radical reforms have formally been completed, nevertheless, works to develop self-government have not been finalised, in particular in the area of fostering real (not limited to social consultations) social involvement, which provides the basis of a demo-cratic state and modern self-government.

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Abstract

Political and economic transformations which started at the beginning of the 1990s launched a series of reforms in the countries of Central and Eastern Europe, which laid foundations for democratic structures of the state, including local self-government. The pa-per draws attention to conditions and mechanisms that have shaped self-government struc-tures in Poland and in the Russian Federation. Considerations focus, first of all, on the con-struction, or, in the case of Poland, restitution of the structure of territorial self-government and the scope of its activities, indicating main resources of their funding.

Key words: local self-government, structure, public tasks, income.

Beata Gontar*

EmAil inQuiRiES in HOTElS. COmpARATiVE STudY OF ŁÓdŹ And nOVOSiBiRSK

1. introduction

In the time of technological changes, customers are used to electronic contacts and most often choose their convenience using internet and email addresses.1 Thus, it is necessary for companies to effectively use elec-tronic methods of communication, such as e-mail, which is a very efficient mean, able to conduct a low-cost marketing, and is inseparably connected with the development of the company and its profits. This is especially true for the tourism industry, where travelers visiting tourism websites (like hotels’) can choose convenient format of e-mail, specially if they do not speak fluently a foreign language or they are in different time zones. E-mail guarantees no language barrier in personal contact.2

* Doctor in Management Sciences, Assistant Professor, Department of Computer Sciences, Faculty of Management, University of Łódź.

1 P. Shields, Customer Correspondence: Corporate Responses and Customer Reactions, “The Marketing Management Journal” 2006, T. 16, Vol. 2, p. 155–170.

2 J. Kuzma, E-mail Responses of Tourism Agencies in Developing Countries, British Academy of Management 2011, Conference, University of Aston, 2011.

B. Gontar140

Mobile marketing is currently the most important trend in online mar-keting for hotels. Mobile devices, which are wildly used, can play some roles: assist in booking rooms, improve contact with the object, and thanks to them, the hotel can offer the possibility of effective upselling. Al-though reservations made through mobile devices are a small percentage of the whole number, their meaning is constantly growing (it is estimated that each year by about 131%).3 This channel of room distribution will soon be the most popular source of “last minute” sales. And without a rea-son, applications like “Hotel Tonight” are becoming increasingly popular. It is important to take care of the website and rank the hotel for several reasons: up to 60–70% of tourists looking for accommodation is using search engines. Hotels should strive to increase the role of hotel web-site as a source of booking, because it is simply the most cost-effective. The focus on external distribution channel can be difficult because the ho-tel has limited control over how the hotel is presented and what reactions its offer meets.

Google is still the most important source of booking, contrary to ap-pearances, the cost positioning is relatively lower – especially compared with the cost of other external booking sources. According to the report “Top 12 Hotel Internet Marketing Questions Answered”, search engines are still the number one in making reservations. Hotels should focus on increasing the effectiveness of marketing campaigns in internet. Po-tential guests almost always evaluate the object visiting its website – its errors and not attractive layout can result in the opinion of the entire hotel. With an extremely fast-changing standards and developing technology, op-timal website life is evaluated for average three years.

From the technological point of view, there are some latest trends in hotels website design: flash technology is loosing popularity. Large, at-tractive photos become now a standard as well as the use of HTML5 (the latest standard for HTML) and CSS3 technology, which give the ability to use advanced graphic solutions. In addition, modern websites are able to adapt to different resolutions and devices. The current fashion is to use

3 Raport Top 12 Hotel Internet Marketing Questions Answered, Agencja Vizergy, 2012, www.vizergy.com /whitepapers.htm (accessed 22.04.2014).

Email inquiries in hotels. Comparative study of Łódź and Novosibirsk 141

in the website content: short forms, witty slogans, icons, pictograms – be-cause contemporary design is simple and intuitive. It is clear for hotels that to run a business effectively selling the service – booking a room – is the most important.4

Answering e-mail inquiries belongs to relatively well researched areas of ICT application in tourism, especially in hospitality sector. The objective of the research presented in the paper was to examine internet as a good and fast mean of communication. Response quality for e-mails sent is con-nected with time of response and their content. Conducting the prepared survey, the mystery shopping methodology was used. Thanks to it, the au-thor could collect the data and analyze them. With this method, all hotels in Łódź and Novosibirsk were surveyed. Both cities are the third biggest cities in Poland and Russia. The author would like to compare the results, clients and hotels behavior. E-mail addresses were found on the informa-tion portals for tourists and then verified with contact data on each hotel website. The messages were sent in August, using two user accounts creat-ed intentionally for this purpose. E-mails were sent in national languages (to hotels in Łódź – in Polish, and to hotels in Novosibirsk – in Russian) at the same, ordinary day in the morning.

2. Related works

Numerous studies were undertaken from early 2000 and they pro-vide different approaches to the problem. One of the first, who surveyed the quality of using mails in tourism was K. Matzler in 2002. The objec-tives of the survey presented in his study were to test empirically response behavior to Internet enquiries and to analyze the role of size, classification and location of the hotels in Austria. It was also found that hotels response behavior was different off-season than during high season.5 Researches

4 Raport Top 12 Hotel Internet Marketing Questions Answered, Agencja Vizergy, 2012, www.vizergy.com/ whitepapers.htm (accessed 22.04.2014).

5 K. Matzler, H. Pechlaner, D. Abfalter, M. Wolf, Determinants of response to customer e-mail enquiries to hotels: evidence from Austria, “Tourism Management” 2005, T. 26, p. 249–259.

B. Gontar142

made by group from University of Bern6 explore the response behavior to internet enquiries in alpine tourism destinations. The request for a room with some additional questions were sent to sample of several tourism of-fices. General conclusion was that the quality of e-mail customer services were unsatisfactory. Researches done by Law and Kua7 were dedicated to international hotels of very high standard. The conclusion was that there is a problem because there is no e-mail customer service. Hotels in Poland were surveyed by Pawicz and Mroczkowska.8 Their paper presents the re-sults of surveys conducted in Poland in selected 200 hotels of different categories and in various regions. The hotels were situated in all voivode-ships of Poland, in the cities and in rural areas as well. The other group investigated using this methodology were tourism agencies. At the begin-ning of XXI century there was study analyzing travel agencies in Singa-pore to determine the level and quality of internet responses. The very low rate of responses were received (around 3%) and only 25% of emails were answered.9 An online travel service was studied in Thailand. Although the country developed a mature tourism industry, the quality of e-mail service was poor.10 The results of survey run in tourism agencies in eight developing countries were presented by Kuzma in 2009. A poor level of response to e-mail inquires from potential customers, with an average of only 30% response rate and their inadequate level were pointed out. The paper offers an in-depth picture of online services offered by online tourism agencies. It can lead to lost opportunities and revenue.

6 M. Fux, M. Noti, T. Myrach, Quality of feedback to email requests – an explorative study in alpine tourism destinations, [in:] M. Hitz, M. Sigala & J. Murphy (eds.), Information and Communication Technologies in Tourism 2006.Proceedings of ENTER 2006, Springer-Verlag, Lausanne 2006, p. 370–382.

7 R. Law, T. Kua, Analyzing the quality of e-mail responses of leading hotels of the world to customer inquiries, “Journal of Quality Assurance in Hospitality and Tourism” 2009, T. 10, Vol. 3, p. 175–193.

8 A. Pawlicz, M. Mroczkowska, Liczba pokoi obiektu hotelarskiego jako determinanta jakości obsługi klienta, „Raport z rynku hotelarskiego w Polsce” 2011, p. 32–34.

9 J. Murphy, I. Tan, Journey to nowhere? E-mail customer service by travel agents in Singapore, “Tourism Management” 2003, T. 24, p. 543–550.

10 K. Cosh, I. Assenov, Reviewing the Use of Online Services by the Tourism Industry in an Emerging Market: The Case of Thailand, Information and Communication Technologies in Tourism 2007, Ljubljana 2007, p. 493–502.


3. Short characteristics of territorial subjects of the study

Łódź is a third biggest city in Poland concerning population (719 900) and the fourth concerning the surface (293,25 km2), situated in the center of the country.11 Since 2002, the number of citizens is decreasing each year (e. g. in 2007 – 758.343 inhabitants lived there). Łódź has got a long histo-ry, but its real development occurred in XIX century, when a textile indus-try center was developed. In today’s landscape of the city, there are a lot of reminders of these times, like residences, palaces, factories and church-es, the total of almost 2000 monuments. Concerning the map of the most attractive places for tourist in Poland, Łódź is not a tourist center, but there are several museums and places to visit with some tourist routs, also equipped with ICT facilities. The city’s road infrastructure is currently be-ing reconstructed due to its inability to cope with the growing traffic load. The main developed branches are: chemical, pharmaceutical industry, building, energy production. Among most recognizable regional products one can mention: ceramic wall tiles (around 70% of country production), electrical energy (20%), lignite (60%), and building materials, like glass construction. Except lignite, there is a lack of mineral resources in the re-gion. In 1997 the Łódź Special Economic Zone was created. Now there are 173 enterprises situated (or belong) there. The people who live in Łódź, are employed mainly in production sector (up to 40%), and around 22% in services. Łódź has got almost 30 hotels, and there are still new ones with Double Tree Hilton, finished last year. The Russian city of Novosi-birsk was founded in 1893 and has been built to be used as an important railroad junction of the Trans-Siberian Railway. Today it is the third largest city in Russia, and the biggest city is Siberia. It is also the youngest city to exceed the population of a million citizens. Here are some statistics related to the city: population (in April, 2013)12: 1,523,801 people; size: 500 km2. It is placed in the second hundred according to living standards

11 Urząd statystyczny w Łodzi, http://lodz.stat.gov.pl/dane-o-wojewodztwie/stolica-wojewodztwa-1323/ ludnosc---dane-o-lodzi-2012-987/ (accessed 14.04.2014).

12 Novosibirsk, www.novosibirsk2013.ru/ (accessed 12.04.2014).

B. Gontar144

by Mercer Human Resource Consulting and 2nd place among Russian ci-ties. Today Novosibirsk is the business-center of Siberia. It is a major transportation junction. It is important scientific center with Akademgo-rodok, Novosibirsk State University and dozens of scientific laboratories and institutes. There are several smaller but effective scientific and tech-nological clusters, like – Koltsovo and Vashnil. It is also a center of in-dustry. There were launched many factories in the Novosibirsk region de-spite the lack of precious mineral resources. Novosibirsk can be also called the cultural center of Siberia. Today more attention is paid for business, science and transports. Most of the roads are reconstructed, new highways in Novosibirsk region were built.

4. Structure of the study

Although websites are created in the network and are commonly used as a channel providing tourist information, e-mail inquiries are still one of the main ways of contact between service seller and potential custom-ers. E-mail communication in tourism is very important in the context of competitive advantage and changing consumption patterns.13 E-mail of-fers companies many advantages over traditional communication channels such as telephone, including: 1) it does not require scheduling of contacts between two parties, 2) it is cheaper than a phone, especially in the case of international contacts and 3) it can easily overcome geographical dis-tance and time changes.14 Additionally it is easier to communicate for peo-ple who does not use foreign language fluently and let to hesitate before deciding. The advantage for the company and the customer is that e-mail communication can be effective and simple and allows for quick commu-

13 A. Zehrer, H. Pechlaner, Response Quality of E-Mail Inquiries – A Driver for Knowledge Management in the Tourism Organization?, “Journal of Quality Assurance in Hospitality & Tourism” 2006, T. 7, p. 53–73.

14 J. Kuzma (2011), E-mail Responses of Tourism Agencies in Developing Countries, British Academy of Management 2011, Proceedings of the Conference, 13–15 September 2011, University of Aston, p. 22–34.


nication and response.15 One of the crucial factors which help to determine customer satisfaction are response time and its accuracy,16 so the survey covers both aspects.

Bearing above in mind, the survey consisted of the following phases:1. Creating a list of hotels and then hotels’ addresses to survey,2. Creating letters in national languages for e-mail inquiry,3. Sending the inquiries and receiving the responses,4. Perform an in-depth analysis of the collected data.To obtain the data for analysis e-mail addresses of all hotels were used.

In Łódź there are 29 hotels (table 1). Novosibirsk hotels can not be classi-fied so easy. Most of them do not include the information about category. Analyzing many websites on Novosibirsk and hotel portals the author has got the information about 56 hotels.

In the next phase of this project, the e-mail inquiries were created, and then using a mystery shopping method, they were sent to select-ed hotels. A variety of papers and studies have used mystery shopping as a methodology to analyze a customer service level. The questions, in-cluded in the inquiries, were developed based on typical questions that any customer may ask in a hotel.

Identical mails have included some questions about:1. Free room and its price in chosen period (the end of August),2. A possibility of booking a room for nonsmoking person,3. Information for tourists in the visited city (like maps, guides, infor-

mation on museums, etc.),4. Access to restaurant for vegetarians, and also5. An access to wi-fi in a hotel room.The aim of the survey was to find the answer for such questions:– Has hotel a valid e-mail address (contact data) on its website? (Can

a client use e-mails as a way of communication with a hotel?)– Does the hotel answer for e-mails? (Is it the right way to book

a room?)– Is the answer time short? (up to 3 hours) (Is the response time fast?)15 P. Shields, Customer Correspondence: Corporate Responses and Customer

Reactions, “The Marketing Management Journal” 2006, T. 16, Vol. 2, p. 155–170.16 A. Zehrer, H. Pechlaner, Response Quality of E-Mail Inquiries…

B. Gontar146

– Does the hotel answer for inquiries in details?– What is the overall customer service response level (quality) among

the hotels?

5. Results of the study

The data was analyzed concerning the research questions:• Has the hotel got a valid e-mail address (contact data) on its website?

(do the client can use e-mails as a way of communication with a hotel?)Table 1 presents obtained results. Concerning Novosibirsk not all

contact data on the websites were trustful. There were also undeliverable e-mail addresses (more then 7%) and not all e-mails were answered (al-most 20%). Websites of hotels in Łódź have contact information, where tourist can find proper e-mail address. 27,5% of emails were not answered.

Table 1. Number of surveyed hotels

Novosibirsk Łódźnumbers rates (%) numbers rates (%)

Number of hotels 56 100 29 100Wrong addresses 4 7,1 0 0Not answered 11 19,6 8 27,5

Source: own study.

• Does the hotel answer for e-mails? (Is it the right way to book a room?)

Visiting the website of each hotel, two possibilities to contact with sur-veyed hotels were recognized. First one, to use enclosed on the website e-mail address (or fax/phone number) and write an e-mail from user ac-count. The other one – to use form-based inquiry page/box where cus-tomer can type in questions or query, and then send it after submitting it by pressing the button. The rate of answered emails in both cases (cities) is comparable.


Table 2. The statistical sample


Number of hotels 56 100 29 100Number of answers 41 73,2 21 72,4

Source: own study.

Around 72% of hotels in Łódź and Novosibirsk were interested in book-ing a room for a client. The rate of answers were very similar in both cities. According to the competition between hotels, the rates where not very high.

• Does the hotel answer for inquiries in details (for asked questions)?Sent e-mails were very similar and consist of five questions concern-

ing the possibility of (1) booking a room in chosen period, (2) availability of a room for nonsmoking person, (3) receiving of information for tourists in the visited city, (4) access to restaurant for vegetarian and also (5) an ac-cess to wi-fi in a room.

Table 3. Quality analysis of received answers


Received answers(statistical sample) 41 100 21 100

Answered questions:– one question 7 17,07 0 0– two questions 0 0 0 0– three questions 3 7,32 0 0– four questions 10 24,39 2 9,52– five questions 17 41,46 17 80,95Answer – (no free rooms) 3 7,32 2 9,52Ask for call 1 2,44 0 0

Source: own study.

In Łódź, two hotels did not answered the question concerning the avail-ability of rooms for non smoking person. All other have sent detailed infor-mation and answered all questions in-depth.

B. Gontar148

Novosibirsk hotels presented less detailed information, especially concerning the question about tourist information. The reason may lay in the fact that Novosibirsk is not a touristic city, but rather business center. It is quite difficult to find any useful maps or information leaflets about the city or its monuments, museums or tourist attractions and guides. There is also lack of city tourist information, so maybe it is a reason the answer for this question is so often missing. Although people who come here in business also would like to visit the city and read about its attractions.

• Is the answer time short (up to 3 hours)?In the paper the response time is understand as short when the answer

was received within 3 hours. This allows to establish contact and exchange of emails which might result in taking decision concerning the room reser-vation.

In Łódź, all hotels answered for an e-mail in some hours after receiv-ing. Most of them in next 3 hours, what allow a client for making decision and booking a room in the same day. The rage of answer time was differ-ent, from some minutes up to six hours. Concerning Novosibirsk, the range of time used for answering was longer, since some minutes (mostly they were information the hotel will answer later) to several hours (last answers were received next day – Novosibirsk about 12,5%). Table 4 shows the response rates and times for hotel websites for both cities, as well as total results.

Table 4. Analysis of response time

Average response timeIn Novosibirsk In Łódź

numbers rates (%) numbers rates (%)Statistical sample 41 100 21 100Up to 3 hours 36 87,8 16 76,19Up to 6 hours 2 4,88 4 19,05Up to 12 hours 1 2,44 1 4,76Up to 24 hours 1 2,44 0 0Answers at the some day 40 97,6 21 200

Next day 1 2,44 0 0

Source: own study.


6. Conclusions

This study is concentrated on customer communication with a hotel and quality of response for e-mail inquiry in two big cities: Łódź in Po-land and Novosibirsk in Russia. Some research questions were surveyed and answered after the data analysis. The rate of obtained answers were in both cases more then 70%. It proves, that internet is an important mean of communication and plays important role as a marketing tool but the rates should be higher, taking into account the meaning of in-ternet in personal and business life nowadays and easy access to in-ternet. Hotels should be aware that an increase of client loyalty can be a result of effective communication between customer and client. The lack of information on hotel website or not valid e-mail address can be a reason of loosing clients or their interest in other hotel. As well as undeliverable hotels addresses or not satisfactory response time which cause that clients have to look for another hotel. In Polish hotels the response time was not too long, what can give a hope that the reser-vation can be made in the same day. In Russian hotels, the reservation time was shorter. More then 87% responses were received up to 3 hours and over 90% were received up to 6 hours. In case of Łódź this rate was lower (up to 76%), but higher concerning up to 6 hours – about 95%. The received responses were very often personalized. Some authors, like Shields, indicates that personalized e-mail responses can increase client satisfaction and can build more positive relationship between seller and customer. High quality responses to e-mails let tourism firms to acquire competitive advantages over those who do not offer better service. Following Zehrer and Pechlaner, effective e-mail responses should be: prompt, polite, addressed to customer by name and answer the question(s).

The results concerning the quality present that full 71% of e-mails were responded. Assuming them as a statistical sample over 40% of No-vosibirsk hotels and 80% of Łódź hotels answered all included questions in-depth. These rates are not satisfactory and it can have consequences is a case of taking a decision which hotel chose to stay.

B. Gontar150

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Kuzma J. (2011), E-mail Responses of Tourism Agencies in Developing Countries, British Academy of Management 2011, Proceedings of the Conference, 13–15 September 2011, University of Aston, p. 22–34.

Law R., Kua T. (2009), Analyzing the quality of e-mail responses of leading hotels of the world to customer inquiries, “Journal of Quality Assurance in Hospitality and Tourism”, T. 10, Vol. 3, p. 175–193.

Matzler K., Pechlaner H., Abfalter D., Wolf M. (2005), Determinants of response to cus-tomer e-mail enquiries to hotels: evidence from Austria, “Tourism Management”, T. 26, p. 249–259.

Murphy J., Tan I. (2003), Journey to nowhere? E-mail customer service by travel agents in Singapore, “Tourism Management”, T. 24, p. 543–550.

Novosibirsk, www.novosibirsk2013.ru/ (accessed 12.04.2014).Pawlicz A., Mroczkowska M. (2011), Liczba pokoi obiektu hotelarskiego jako determinan-

ta jakości obsługi klienta, „Raport z rynku hotelarskiego w Polsce 2011”, p. 32–34.Raport Top 12 Hotel Internet Marketing Questions Answered, Agencja Vizergy, 2012,

www.vizergy.com/whitepapers.htm (accessed 22.04.2014).Shields P. (2006), Customer Correspondence: Corporate Responses and Customer Reac-

tions, “The Marketing Management Journal”, T. 16, Vol. 2, p. 155–170.Urząd statystyczny w Łodzi, http://lodz.stat.gov.pl/dane-o-wojewodztwie/stolica-wojew-

odztwa-1323/ludnosc---dane-o-lodzi-2012-987/ (accessed 14.04.2014).Zehrer A., Pechlaner H., (2006), Response Quality of E-Mail Inquiries – A Driver

for Knowledge Management in the Tourism Organization?, “Journal of Quality As-surance in Hospitality & Tourism”, T. 7, p. 53–73.

Abstract

Guests and travel shoppers constantly search and book hotel rooms all over the world on various devices, shifting from one screen to another. Thanks to internet, “anytime, any-where” access to information quite far outweighs its downsides. In the paper, the author


focuses on the efficient use of the Internet as a tool which helps to communicate with cli-ents. The reaction to inquiries sent by email influences both booking behavior and guest satisfaction as well. The objective of the survey presented in this paper is to test empirically response behavior to Internet enquiries. In particular, response time and information quality of received answers (information depth) were also analyzed.

The research methods, which are used in the article, include the issue analysis, desk-top study (review of academic papers with related works), the survey (using mystery shop-ping methodology) and analysis of the obtained results.

Key words: hotel inquires, tourist traffic, Łódź, Novosibirsk.

Izabela Bednarska-Wnuk*

mOBilE BEHAViORS OF gEnERATiOn C in THE lOCAl lABOR mARKET: A CASE STudY OF pOlAnd And RuSSiA

1. introduction

These days, more and more often the issue of young genera-tion in the labor market is discussed from the theoretical and practical, that is economic, point of view. This generation is called generation C. Their current situation is examined and there are attempts to outline the future prospects of their functioning in a differentiated labor market. The changes which take place in the social sphere of generation C occur naturally as a result of socio-demographic transition and some of them are the consequence of changes in organizational relationships. These in-clude the disappearance of loyalty to the organization, changing the psy-chological contract towards its transactionality and new communication tools, among others. All of this means that young job seekers need to take certain actions in the labor market which will ensure them a competitive advantage. Some of them are mobile behaviors which involve a variety of activities undertaken by the individual. They may either aim at en-

* Dr, Assistant Professor, Department of Management, Faculty of Management of the University of Łódź.

I. Bednarska-Wnuk154

tering the labor market or improving the current occupational situation. These behaviors may include the change of professional qualifications, changing the industry, the change in the organizational structure (moving up or down) and the change of place of re sidence associated with taking a job. Therefore, given all the changes taking place within generation C and the importance of todayʼs mobile behaviors in the structure of compe-tence, it is worth analyzing these behaviors in young people, especially due to the fact that they can be guidance for all the people making decisions related to establishing themselves in the labor market.

The purpose of this article is to identify the understanding of mobile behaviors by generation C and to answer the question of whether this generation identifies these behaviors with obtaining a competitive advan-tage in todayʼs job market. This article will present the results of the re-search carried out on the selected representatives of the generation C on the territory of Poland, a country belonging to the European Union, and Russia, the largest country in the world. The choice of countries was purposeful because of the different macroeconomic conditions and geo-graphical location.

2. The contemporary labor market – economic and social conditions

Nowadays, the labor market is subject to many changes. They most-ly result from institutional and socio-demographic transitions, the use of newer information technologies, new work organization and the chang-ing characteristics of work. All of this results in changes in the pattern of employment in the organization in terms of its flexibility. The division between the specialized workers and those performing simple tasks tigh-tens up. The departure from the typical permanent employment in favor of the projects where specialists are hired by organizations for specific projects if necessary is also inevitable.1 The labor market is strongly stra-

1 A. Rogozińska-Pawelczyk, D. Majewski, Trendy na rynku pracy, Wydawnictwo Uniwersytetu Łódzkiego, Łódź 2013, p. 6.

Mobile behaviors of generation C in the local labor market… 155

tified. Oftentimes people holding higher-education degrees do not work in their acquired profession but must be satisfied with current positions that do not always meet their expectations regarding their conditions (e.g. salary) and the scope of work. This increases frustration among young and educated people who will not be able to be a part of a group of top managers. However, they will not be doomed to routine and low-paid jobs, but they will work in design mode without permanent employment with a single employer.2

In addition to the above, we can point to other emerging trends in the labor markets. These include two groups:3

– universal trends, applicable to all types of organizations, such as increasing competition, increasing awareness of customers/applicants and employees, increasing unemployment, globalization of production and services as well as migration for work,

– specific trends relating to specific countries (e.g. European Union, Asian or Western Europe countries) or industries (e.g. developing and de-clining industries as well as those with or without prospects).

In the labor market, the person who creates an “unique” potential ow-ing to their competence and who has a competitive advantage is the most valuable.4 With regard to this, a person who wants to establish them-selves in such a changing labor market should have the right set of skills that would allow their adaptation to the requirements of its modern envi-ronment.

The labor market is a source of information based on which the state can use various instruments of macroeconomic policy; therefore, to exa-mine the different attitudes of employees, it is crucial to take a closer look at the condition of individual markets, especially due to their diverse loca-tion and various mechanisms used by the state that can significantly affect the employment decisions. With respect to this, the labor market in Poland

2 Ibidem, p. 7.3 J. M. Szaban, Rynek pracy w Polsce i Unii Europejskiej, Difin, Warsaw 2013, p. 34.4 A. Cierniak-Emerych, Zmiany w modelu zatrudnienia a partycypacja pracownicza,

[in:] S. Lachiewicz, A. Walecka (eds.), Współczesne problemy zarządzania zasobami ludzkimi, Monografia Politechniki Łódzkiej, nr 1925, Łódź 2010, p. 358.


and the Russian Federation is characterized below. Bearing in mind the choice of the local labor market,5 the labor market in Łódź Voivodship and Siberian Federal District are described respectively.

3. The labor market in poland and in Łódź Voivodship

In Poland only since 1989, the problems of the labor market and the un-employment rate have become the subject of interest in theoretical and practical context. They were associated with the transition from a cen-trally planned to a capitalist economy. In the previous system (a social-ist economy) the state authorities created jobs regardless of the demand in the market. Unemployment was hidden and almost all of the sectors of the economy were characterized by excessive employment. This is evi-denced by the data of the Central Statistical Office which did not show unemployment, viewed in terms of macroeconomics, in official statistics. In the 90s, the macroeconomic transition took place in Poland. It result-ed in a drastic reduction in the number of employed people. It was also the consequence of the liquidation of hidden unemployment in enterprises as well as the decline in the overall economic situation.6 In subsequent years, the Polish economy struggled with adverse macroeconomic pheno-mena in the labor market. In 2003, the unemployment rate reported by Eu-rostat was as high as 19.7%.7 The situation in the labor market improved after the Polish accession to the European Union. This was due to the free flow of goods, services and people. At that time, many people went abroad

5 The study assumes that the local market is determined by the structure of territorial division. In Poland it is a system of voivodships, while in Russia it is determined by the borders of the federal districts. The local market and its boundaries is an area where the population lives, the majority of them is employed and pursues an upper secondary education degree as well as satisfies their consumer needs. A. Ziomek, Społeczno- -ekonomiczne determinanty zatrudnienia w ujęciu lokalnym, Wydawnictwo Uniwersytetu Ekonomicznego w Poznaniu, Poznań 2013, p. 8.

6 More information on the labor market in Poland in article by I. Bednarska-Wnuk, Mobility in the Perception of Young People – Based on the example of Poland and Portugal, “Edukacja Ekonomistów i Menedżerów” 2014, nr 1(31), p. 93–108.

7 http://epp.eurostat.ec.europa.eu/portal/page/portal/eurostat/home (accessed 10.02.2014).


in the search for a job. Thanks to the European Funds, Poland also began to invest in various sectors of the economy which lead to economic reco-very. Even in 2008, when the global financial crisis spread among Europe-an countries, in Poland, the effects of the crisis were visible to a far lesser extent than in other countries. Despite this crisis, Poland reported very good macroeconomic indicators in comparison with other European coun-tries. Currently, as reported by Trading Economics, Poland, with a popu-lation of 38.53 million inhabitants, is characterized by the unemployment rate at 14.0% (data of 15.01.2014), with an annual growth rate of GDP 1.90 (data of 30.09.2013) and inflation 0.70 (data of 15.12.2013).8 At the same time, there is still a high rate of unemployment in the age group under 25 years which was up to 27.4% at the end of 2013.9

How is the labor market in Łódź Voivodship defined against this back-drop? At the beginning it should be noted that Łódź Voivodship occupies the central part of the area of Poland comprising 18,219 km2 and represent-ing 5.9% of the country. The capital city of the voivodship is Łódź. This province was known for textile and clothing industry which could not meet the requirements of a market economy. Many plants were closed. Current-ly, Łódź sees the opportunity for development in new industries and ra-pidly developing services. Nowadays, Łódź is becoming the largest manu-facturing center of home appliances in Poland. Other areas of the economy characterized by high dynamics of development are the pharmaceutical industry, the production of dressings and medical equipment. Currently, in Łódź there are 28 universities (6 public and 22 private) and a num-ber of research institutes.10 According to the Central Statistical Office, the aver age employment in the enterprise sector stood at 311 400 people in December 2013, that is 0.2% lower than a year ago. In annual terms, there was a decline in employment in such sectors as: accommodation and catering, construction, administration and support, and real estate ser-vices, amongst others. In contrast, employment growth occurred in pro-fessional, scientific and technical, information and communication as well

8 http://pl.tradingeconomics.com/poland/population (accessed 16.01.2013).9 http://epp.eurostat.ec.europa.eu/portal/page/portal/eurostat/home (accessed 10.02.2014).10 http://www.wios.lodz.pl/docs/r10-i-wojewodztwo.pdf (accessed 11.02.2014).


as transportation and storage sectors. Currently, the registered unemploy-ment rate is at the level of 14.1% (December 2013). It is unfortunately at a higher level than in the country.

3.1. The labor market in the Russian Federation and in the Siberian Federal District

Russia has 143.3 million residents. This number is small considering the vast territory of the country – as many as 17.1 million km2. It con-sists of 46 provinces. It belongs to the economies of developing countries. It has also 11 cities with over 1 million inhabitants. It is not easy to move to the city, because it requires undergoing complicated registration proce-dures. Most of the economic power is concentrated in two cities: Moscow, with 10.4 million inhabitants (unofficially 16 million people because a lot of people live in the city without registering their residence) and Sankt Pe-tersburg, with 4.6 million inhabitants (unofficially 6.5 million).11 Actually, Russia faces the demographic crisis. As indicated by the pre-census data of 2010, compared with 2002, the population of Russia decreased by over 2 million people. Disparities between regions increase – in some regions depopulation occurs, and some regions are very densely populated (urban population increases, while some villages cease to exist). The distribution of the population is characteristic – nearly 27% of the population lives in the Central Federal District, while in the Far Eastern Federal District lives just 4.4 percent of the entire population of the Russian Federation.12 Therefore, for some time now, Russia is struggling with the phenomenon of depopulation which affects reducing labor resources.

Despite a weak correlation between employment growth and GDP growth, the labor market in the Russian Federation is characterized by a low unemployment rate in contrast with most European countries. For example, in the period 1999–2008, GDP doubled its value and the to-

11 http://www.wsz-pou.edu.pl/magazyn/?strona=mag_stud68&nr=68&p (accessed 10.02.2014).

12 K. Przybyła, Russiaʼs Internal Challenges and Threats in the Coming Years, p. 27, www.bbn.gov.pl/download/1/12743/kbns117-139Rosjawobec.pdf (accessed 31.01.2014).


tal number of employees increased by only 6.9%. A feature of the Russian labor market is that there is always labor demand, despite economic fluctu-ations. The labor market there is governed by very strict formal regulations that are unlikely to change and are mainly based on the flexible working hours and flexible remuneration.13 A major problem occurring in the labor market in Russia is the grey market, which takes 25% of the annual GDP. As a matter of fact, 38 million Russians work in the grey market. This is due to complicated registration procedures. Besides, these are people with low qualifications. There is a lack of highly skilled workers, special-ists and engineers with experience in specific occupations.14 To counter-act this, a new migration policy was developed which assumes goals, di-rections and mechanisms for the implementation of the migration policy of the Russian Federation. Because it is the main direction of migration for the citizens of post-Soviet countries, the migration processes are an im-portant factor in the socio-economic situation in the country. On the one hand, they complete the deficiencies in the labor market and, on the other hand, they intensify social tensions. Thus, the concept indicates adopting a pragmatic approach to the problem of migration by the authorities which is presented as a manner to alleviate the negative effects of demographic decline and filling the gaps in the domestic labor market.15

Currently, professionally active population in Russia in 2013 amount-ed to a monthly average of 75.5 million people, of whom 4.1 million were unemployed, an increase of 0.2% compared to the same period in 2012.16 At present, as reported by Trading Economics, Russia has an unemploy-ment rate of 5.6% (data of 31.12.2013), with an annual growth rate of GDP 1.50 (data of 30.09.2013) and inflation 6.10 (data of 31.01.2014).17

13 R. Kapelyushnikov, A. Kuznetsov, O. Kuznetsova, The role of the informal sector, flexible working time and pay in the Russian labour market model, “Post-Communist Economies”, June 2012, Vol. 24, No. 2, p. 177–178.

14 It is assumed, that half of the Russians work in the grey market, http://www.forbes.pl/polowa-rosjan-pracuje-w-szarej-strefie,artykuly,146355,1,1.html (accessed 12.02.2014).

15 K. Jarzyńska, New Migration Policy of Russia, http://www.osw.waw.pl/pl/publikacje/analizy/2012-06-20/nowa-koncepcja-polityki-migracyjnej-rosji (accessed 12.02.2014).

16 http://ria.ru/economy/20140207/993691842.html#ixzz2t0XOEG6S (accessed 3.02.2014).17 http://pl.tradingeconomics.com/russia/indicators (accessed 11.02.2014).


As well as the Province of Novosibirsk is concerned, it is situ-ated in the western part of Siberia. It covers an area of 178 200 km² which represents 1% of the total area of the Russian Federation. Novo-sibirsk region population is about 2 649 900 people (2006) with over half the population living in Novosibirsk, the capital city of the re-gion. The city is the third largest city in Russia and an important in-dustrial center.18 Industries such as engineering, electronics, aviation, chemical, leather and footwear, iron and tin as well as Novosibirsk Hydro Power Plant are located there. Currently, more than 200 large companies from 15 different industries, which employ more than 30% of the city population, operate in Novosibirsk. According to the official data of April 2012, there are 136 880 different companies registered in the city. The city is still of great importance in the transportation sec-tor in the Russian Federation. In the region of Novosibirsk the head-quarters of one of the largest airlines in Russia, S7 Airlines, is based. There are also more than 50 banks in the city. Novosibirsk is also one of the leading scientific centers of the Russian Federation. Science re-search mainly takes place in the scientific center of Akademgorodok, es-tablished in the late 50s of the twentieth century. Novosibirsk is a major research and training center in Russia.19 Overall, 32 higher educational institutions (11 universities, 8 academies and 13 institutes) have their headquarters in Novosibirsk. Additionally, 14 out-of-town branches of other Russian universities (including the University of St. Petersburg and the University of Moscow), where more than one hundred thousand students study, operate in the city.20 The unemployment rate at the end of January 2014 was 0.47% and as many as 20% of inhabitants were unemployed in the age group under 30 years.21

18 http://pl.wikipedia.org/wiki/Obw%C3%B3d_nowosybirski (accessed 15.02.2014).19 http://pl.wikipedia.org/wiki/Nowosybirsk#cite_note-ns34-54 (accessed 15.02.2014).20 Обзор ВУЗов Новосибирска, http://www.novosibirskgid.ru/education/answers/

kakie-est-vuzi-v-novosibirske.html (accessed 15.02.2014).21 Занятость и безработица в новосибирске, http://www.gczn.nsk.su/rinok/ 2010-

12-02-10-57-07 (accessed 15.02.2014).


4. Characteristics of generation C

In academic and economic practice, the functioning of various gen-erations and their impact on a community is often discussed. Numerous studies primarily aimed at diagnosis of the most important attributes of a given generation in the labor process and their work and family va-lues are conducted in this area. Against this backdrop, the society is di-vided into the following generations: Baby Boomers (those born between 1946–1964), generation X (1960–1974), generation Y (1975–1989), generation Z (from the 1990s to 2000). However, in academic literature, there is no consensus on the division of the above-mentioned generations when it comes to the time frame.22 It is also important to keep in mind that a person within a particular generation is not necessarily character-ized by the key attributes assigned to the group because the characteris-tics of a particular generation only point to certain trends in the perception of the current standards and values and they shows the extent to which the society recognizes and identifies with them.

In recent times, more attention is devoted to the people who were born after 1990 and who will soon enter the labor market. This gene-ration is usually partly considered as generation Y. However, many au-thors create separate names for this generation, calling them a generation C or Z. This generation is referred to as “instant online”. This neologism relates to the operation of this generation by taking advantage of inten-sive technological development. Therefore, this generation is also known as Generation I, the Internet Generation or Generation Next, the Net Ge-neration or iGeneration.23 The characteristics of this generation include:

– content, creation,– people born after 1990,– creativity, casual, collapse, control, and celebrity,– online mobility of people 24 hours a day.

22 R. Levickaitė, Generations x, y, z: how social networks form the concept of the world without borders (the case of Lithuania), “Limes” 2010, Vol. 3, No. 2, p. 173–180; P. J. Montana, F. Petit, Motivating generation X and Y on the job and preparing Z, “Global Journal of Business Research” 2008, Vol. 2, No. 2. p. 139–148.

23 R. Levickaitė, Generations x, y, z…, p. 173.


This generation also learns the so-called multitasking. They switch from one task to another without paying attention to the accuracy, but rather to the speed of its execution. They are raised in the world of information technology and they cannot imagine life without it. Generation C easily grasps all the technological innovations and uses them in every area of their activity. It is very active in all social networks which are becoming an integral part of their life. The typical professional values of generation C include: high demands regarding their job, focusing on development, pre ference for flexible working hours and striving for independence. How-ever, they may have difficulty in adjusting to the requirements of the or-ganization in terms of the working environment. This means that they cannot imagine working without flexitime and resigning from family life for the sake of career. Therefore, the hierarchy of values changes. More and more often contemporary employees of Generation Y are character-ized by a low level of loyalty to the job and less organizational commit-ment than it was in the case of generation X. Thus, it is predicted that these values (loyalty and commitment) are likely to disappear or will transform into short-term psychological contract in the generation C.

Any negative phenomena occurring in the demographic and economic areas affect the attitudes adopted in the work process. This is particularly true of the younger generation which will soon enter the labor market. In this context it is worth discovering their mobile behaviors undertaken in the context of the functioning of the labor market, in particular, due to the fact that they can be guidance for all those involved in human re-sources in the organization.

5. Results of the individual study

The study involved 120 respondents who are students of the two coun-tries: Poland (62 people) and Russia (58 people). They were conducted respectively in Poland, at Łódź University (Department of Management) and in Novosibirsk in Russia, at Novosibirsk University in December 2012 and September 2013. The group was homogeneous in terms of level of studies, namely undergraduate degree. The study questionnaires meas-


uring perception of mobility were anonymous and were carried out during classes. The aim of the study was to identify mobile behaviors of young generation in the local labor market in the perception of the generation C. In addition, specific objectives were established. These include:

– identifying the degree of the propensity of young people to be pro-fessionally and spatially mobile,

– identifying factors associated with the willingness to work in the per-ception of the young generation,

– identifying factors associated with future job by young people,– capturing the differences between the two study groups (Poland

and Russia)24 in relation to their mobile behavior.Since the selection of the study sample was purposeful and does

not meet the statistical requirement of representativeness, the obtained study material enables only to give the perception of mobile behaviors in the eyes of the young generation from Poland and Russia. The table 1 shows a selection of mobile behaviors in the perception of generation C.

Table 1. Selected aspects of mobile behaviors in the perception of generation C (%)

StatementDefinitely

yes Rather yes I have no opinion Rather not Definitely

notPO RU PO RU PO RU PO RU PO RU

1 2 3 4 5 6 7 8 9 10 11I am willing to retrain 25,6 22,2 45,1 37 10,6 7,4 15,2 22,2 3,5 11,1Frequent changing jobs contributes to the career development

9,3 4 37,8 24 18,2 24 22,3 16 12,4 32

Frequent retraining increases the compe-titiveness in the labor market

5,3 – 42,8 16,7 8,2 29,2 16,1 20,8 27,6 33,3

24 In this article we examined young people in Łódź and Novosibirsk, however, cannot be concluded that they are residents of those cities. Therefore it is assumed that the test results will be referred to the general-young Poles and young Russians.


Table 1 (cont.)

1 2 3 4 5 6 7 8 9 10 11Frequent changing jobs increases the competitiveness in the labor market

12,5 6,9 6,1 22,1 21,7 10,3 43,8 20,7 15,9 40

It is worth undertaking professional activity regardless of the type of employment contract

33,5 11,1 62,4 22,2 1,7 11,1 2,4 29,6 – 26

PO – Poland; RU – Russia

Source: own study.

Taking into account the results of empirical studies regarding the percep-tion of selected aspects of mobile behaviors, it can be seen that young Poles are more mobile in this field (retraining Σ70.7) than young Russians – Σ59.2. Young Poles believe that such behavior increases their value and competi-tiveness in the labor market. They realize that one needs to constantly expand their skills and be willing to retrain in order to function in todayʼs job mar-ket. This is the idea of learning throughout life. Young Poles are also aware of the fact that frequent changing jobs can contribute to the development of their careers which mean physical and psychological mobility of indivi-duals these days. In contrast, although the majority of young Russians is also willing to retrain (Σ59.2%), they do not perceive it as the means of establish-ing their competitiveness in the labor market. The two study groups (young Poles – Σ64.5% and young Russians – Σ55.9%) mostly believe that the fre-quent changing jobs does not increase their competitiveness in the labor mar-ket. Perhaps, this is related to the opinion that the worker who frequently changes jobs cannot adapt to the organizational environment and that they are not worth investing in their development. On the other hand, these people have a larger network of contacts and they have a rich variety of experience that can be successfully used in a subsequent job.

The study results on undertaking professional activity are also inter-esting. Young Poles are more willing to manifest their professional activ-


ity (definitely yes and rather yes Σ95.9%) than young Russians (definitely yes and rather yes Σ33.3%). This probably results from the belief that em-ployers are reluctant to employ people without any experience, which can be acquired by taking a job which contract is regulated by the Civil Code. It is also an opportunity to get to know the employee, mainly their skills. The results are surprising because young Russians exhibit less ten-dency in this area (rather not 29.6% and definitely not 26%) than young Poles. It is quite surprising that, although Russia has low unemployment, the other components of the mobile behaviors exhibit high flexibility.

Figure 1. Tendency of the respondents to seek work in another voivodship/province (%)

Source: own study

As goes for tendency of the respondents to seek work in another voivod-ship/province, there are significant differences in the context of the per-ception of mobile behaviors in terms of spatial mobility. Definitely more mobile are young Poles (Σ 83.2%) compared to young Russians (Σ13.5%). The result is interesting because both countries share a common (previous) economic system and the resulting cultural and occupational habits which are associated with having one job or profession for a lifetime. There was no unemployment in this system (except hidden) and it was easy to get a job that would give a sense of security. Why then are young Poles be-coming more prone to spatial mobility nowadays? It is probably connect-ed with the circumstances of the local labor market which, in contrast to the Siberian Federal District, is characterized by worse macroeconomic indicators. The result is that many young Poles from the Łódź Voivodship search for a job in other local labor markets.

20,4

62,8

5,5 4,3 75,5 8 9,8

35,4 41,3

020406080

definitely yes rather yes I have noopinion

rather no definitely no

Poland

Russia


The table 2 shows the importance of selected occupational factors in the future job in the perception of generation C (table 2). Understanding them is particularly significant because they may affect their decisions re-garding the choice of their job in the future.

Table 2. The importance of selected occupational factors in a future job in the opinion of the generation C (%)

Occupational factors

Very important Important I have

no opinionNot so

importantNot

importantPO RU PO RU PO RU PO RU PO RU

Clear rules for getting promotion 17,6 38,1 56,9 52,4 13,7 11,8 9,5 –

Salary 53 62 47 14,3 – 19 – – – 4,7Atmosphere among employees 39,6 30 50 45 6,2 15 4,2 10 – –

Position of the organization in the market

13,4 40 25 45 34,6 – 27 15 – –

Clear criteria for evaluation of employees

15,7 33,3 45,1 38,2 15,7 9,5 23,5 14,3 – 4,7

Non-pay motivators 11,8 50 43,1 27,3 11,8 – 31,3 18,2 2 4,5

Opportunity for professional development

49,2 25 39,6 70 5,6 – 5,6 5 –

Sense of security 27,5 4,5 64,7 50 5,8 4,5 2 36,5 – 4,5Maintenance of a balance between work and family life

56,8 25 35,3 40 2 5 5,9 30 – 5

Quality of contacts with the superior 21,6 23,8 56,9 66,6 13,7 4,5 7,8 – – 4,8

Additional payments (bonuses, awards) 17,6 62 58,9 23,8 9,8 – 13,7 9,5 – 4,8

PO – Poland; RO – Russia

Source: own study.


The conclusion that can be drawn from the study results is that for the majority of young Poles and Russians almost all of the pro-posed factors are important when choosing the future job. These results may indicate that both groups have high expectations for the future job. In the case of the Russians, the most important factors are: salary (62%), non-pay motivators (50%) and additional payments (62%). Such percep-tion is thought-provoking as it means that the main criterion which will guide the survey respondents when taking a job is the financial criterion. Although to a lesser extent, occupational factors associated with social relations in the organization, the possibility of professional development or maintenance of balance between work and family life are also important for them. In contrast, the responses of the group of Poles indicate that they have high professional expectations for the future job which are out of touch with Polish reality. The most important for them are professional develop-ment (49.2%), salary (53%) and the balance between family life and work (56.8%). Clear rules for getting promotion (56.9%), the atmosphere among employees (50%), clear evaluation criteria of employees (45.1%), non-pay motivators (43.1%), a sense of security (64.7%), the quality of contacts with the superior (56.9%) and additional payments (58.9%) are also equal-ly important for them. Although the awareness of the young generation regarding the need to upgrade their skills or retrain in order to find a job in the asymmetric labor market increases, as shown by the data in the pre-vious table, they still have high expectations in terms of the scope of work. This comprises the professional value system of this generation which, unlike the previous generation X, is not afraid of change and is character-ized by high flexibility and free access to technologies. On the other hand, such an approach and high requirements for the future job can greatly hin-der entering the labor market in which the supply of labor is greater than the demand.

Moreover, it is worth mentioning that, though constituting a mino-rity, negative responses regarding the importance of occupational fac-tors in the future job can be noticed in both groups. This may indicate the respondents’ belief that, in order to become a part of the modern labor market, one should not have too high expectations. It also seems that this group of respondents is willing to take any job, regardless of the proposed


conditions and the type of work, guided by the conviction that, in order to achieve professional success in the future, one should reduce their re-quirements at the beginning of their career.

In the deliberations regarding the mobile behaviors of the respon-dents, it is also important to identify factors associated with the willingness to work. The table 3 presents these factors.

Table 3. The importance of factors related to the willingness to work in the opinion of respondents%

Factors related to the willingness

to work

Very important Important I have

no opinionNot so

importantNot

importantPO RU PO RU PO RU PO RU PO RU

A job requiring a long commute 5 15 21,7 20 16,7 5 51,6 25 5 40

A job involving business trips 16,7 13,6 58,3 9,9 16,7 4,6 6,7 31,8 1,6 40,1

Burdensome distribution of working time

5 13,6 21 4,5 13 18,2 51 13,7 10 50

Difficult working conditions 6,7 4,8 15 9,5 16,7 9,5 43,3 28,6 18,3 47,6

A job involving resignation from family plans in the near future

11,7 9,5 15 9,5 21,7 9,5 38,3 19,1 13,3 52,4

A job involving acquiring addition-al qualifications at the employee’s expense

6,7 11,1 51,7 22,2 24,9 16,7 11,7 33,3 5 16,7

Working in other than acquired profession 15 9,5 50 23,8 15 23,8 10 9,5 – 33,4

Source: own study.

As shown by the above data, there are some visible differences be-tween Polish and Russian representatives of generation C in the perception of the factors associated with the willingness to work. The visible differ-


ences in responses indicate the existence of different trends in the context of the importance of factors in future job and they enable the formulation of certain conclusions. The fact that respondents from Russia have hardly any requirements associated with the willingness to work can be consid-ered optimistic. Thus, regardless of the conditions, they are willing to take any job. For a group of Poles, the important factors associated with a par-ticular job are: business trips (58.3%), the requirement to acquire addition-al qualifications at their own expense (51.7%) and working in other than their acquired profession (50%). Therefore, the respondents would not like to work in a profession other than acquired, do not want to incur additional expenses for their development and do not want to be sent on business trips which, in turn, can be interpreted as a lack of personal interest in raising their professional qualifications at their own expense. As a matter of fact, this interpretation is contrary to the results of previous studies related to the selected aspects of the mobile behaviors. On the one hand, young Poles, declare their willingness to be spatially and professionally mobile and, on the other hand, they do not want to take jobs requiring additional financial costs, resignation from free time for the sake of business trips and retraining.

6. Conclusions

To sum up, it should be noted that young Poles are more prone to mo-bile behaviors than young Russians. This is probably due to the infe-rior Polish macroeconomic situation and the ever-increasing awareness of young Poles about the functioning of the modern labor market. This is also associated with the various actions of the European Union which increase mobility of people. Even though young Russians have a lesser degree of mobility, the fact that they realize the importance of mobile be-haviors in the structure of competence is definitely a positive. However, the existing economic conditions in the Russian Federation do not encour-age people to take such actions. Nevertheless, these actions are particularly necessary in the context of creating individual responsibility for designing their own career path.


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Abstract

The article discusses issues related to the mobile behavior of the young genera-tion (generation C) in the labor market. This subject is relevant and important especially in the context of ongoing changes in the unit functioning on heterogeneous labor market. The purpose of this article is therefore to identify the understanding of mobile behaviors by generation C and to answer the question of whether this generation identifies these be-haviors with obtaining a competitive advantage in todayʼs job market. This article will pres-ent the results of the research carried out on the selected representatives of the generation C on the territory of Poland, a country belonging to the European Union, and Russia, the larg-est country in the world. The choice of countries was purposeful because of the different macroeconomic conditions and geographical location.

Key words: mobile behaviors, generation C, labor market in Poland, labor market in Russia.

Katarzyna Januszkiewicz*

A CAREER mOdEl undER THE COndiTiOnS OF CHAngE And ECOnOmiC CRiSiS – A COmpARATiVE STudY

CONDUCTED IN POLAND AND RUSSIA

1. introduction

Modern technologies and organizations, as well as societies undergo changes that influence the way of career functioning of an individual. All the transformations are concentrated in a new dimension of the person ver-sus organization relation.

These changes specifically concern two groups. On the one hand the changes shape the reality which professionally active people have to deal with. It is they who are forced to react to changes, based on the re-action mechanism of adaptation to the new conditions. And being able to prepare themselves, they are forced to operate on the spot. The second group is young people standing on the threshold of adulthood who shape their vision of how they pursue their career on the basis of observations. Therefore, it is worth considering how these transformations affect the per-ception of professional career and whether in times of globalization they

* Doctor in economic sciences, Assistant Professor, Department of Management, Faculty of Management of the University of Łódź.

K. Januszkiewicz174

have an unified character, or whether in spite of access to the Internet, pro-fessional activity of an individual is still determined by their nationality and cultural circle in which they grow up. The theoretical aim of this paper is to describe a new career model and to indicate the factors determining its course. Whereas, its practical aim is to explain in what scope these changes have been incorporated in the perception of professional career represent-atives of generation Y from Poland and Russia.

2. determinants of professional career

It is assumed that the development of a professional person is deter-mined by two groups of factors (determinants):

– internal (subjective) – related to a person, to his or her individual characteristics – such as biological, physical or psychological ones,

– external (objective) – situated outside a person, situational – such as historical, economic, technical, cultural, social, political and pedagogi-cal background.

Leaving aside subjective determinants and recognizing that they are relatively insensitive to changes, it is worth considering what external factors decide on the course of career nowadays. In the literature, among the most frequently mentioned trends that describe work of the future, are the following:

– dispersion of work in time and space,– rapid pace of innovation,– increasing complexity of work,– global competition,– development of smaller and larger organizational units,– a change in the concept of work and career,– increased use of teamwork,– reduction of supervision,– increasing cultural diversity.1

1 N. Chmiel, Psychologia pracy i organizacji, Gdańskie Wydawnictwo Psychologiczne, Gdańsk 2002, p. 462.

A career model under the conditions of change and economic crisis… 175

To the factors mentioned, one should also add an economic situation which seems to be the catalyst for any change. The confirmation of these words are the results of a survey conducted by the service Monster.com, which asked visitors to the website the following question: Does a na-tional or global crisis make you consider a career change? The question was answered by more than 3,400 people. More than 50 per cent of re-spondents had tried to change jobs due to the economic crisis, one third of the respondents wanted to change career path, and only 14 percent stat-ed that the crisis did not affect their professional life.2

The number and diversity of factors influencing the professional ca-reer model of an individual lead to the observation that the model valid for decades, undergoes significant transformations today and will also undergo them in the future. The matter is further complicated by the fact that the professional career is increasingly connected to other areas of ac-tivity of an individual and just like in the system model, a change of a com-ponent changes the whole system.

3. A new paradigm of professional career

In traditional terms, simultaneity of development in different are-as of the functioning of an individual means that at certain periods, var-ious activities support and complement each other. There is no contra-diction between personal and professional development of an individual. These dimensions are placed on the same continuum of the individualʼs life, from birth to death, specifying the use of given time. Primarily they are characterized by the consistency and sequence of successive phases.3 For each period of life of the individual, there are certain characteristic developmental challenges as well as crises related to them (see table 1).

2 Monster.com, fc: http://pracaikariera.pl/s/2574/64840-Newsy-kariera/4022727-Poszuki wanie-nowych-sciezek-kariery-przez-kryzys-ekonomiczny.htm [accessed 15.02.2014].

3 K. Januszkiewicz, Sukces zawodowy w perspektywie jutra, Prace Naukowe Uniwersytetu Ekonomicznego we Wrocławiu (249), Wydawnictwo Uniwersytetu Ekonomicznego we Wrocławiu, Wrocław 2012, p. 274.

K. Januszkiewicz176

Table 1. Levinson’s model of adult development

Early adulthood17–39 years of age

Early adult transition17–22 years of age

An individual looks for his place in the world, crystallizes his or her pref-erences as for the further way of life, these processes are due to leaving their parents’ home

Entering the adult world22–28 years of age

Creation of the sense of identity at work and outside work

Age 30 transition29–33 years of age

Summary and evaluation of the achievements

Settling down34–39 years of age

A stage of implementation of the objectives and full involvement in work and family

Middle adulthood40–60 years of age

Mid-life transition40–45 years of age

Assessment of life goals set at the age of 30 and realization of the limita-tions of length of life

Entering middle adult-hood 46–50 years of age

A stage of particular care and atten-tion to professional and life stabili-zation

Transition connected with 50s age51–55 years of age

Another verification of objectives that were set earlier and of achieved results

Culmination of the middle-aged adulthood 56–60 years of age

A stage of full adaptation to earlier choices and omission of changes in live

Late adulthoodOver 60 years of age

Time of finishing of active working life The statement of achieved results

Source: E. Turska, Globalizacja a restrukturyzacja a nowy model kariery i sukcesu, [in:] B. Kożusznik (ed.), Kapitał ludzki w dobie integracji i globalizacji, Wydawnictwo Uniwersytetu Śląskiego, Katowice 2005, p. 252.

Dependencies and mutual relationships between the professional sphere and private life of an individual were very well captured by D. Super in rainbow model of a career, where the stages of life correspond to a par-ticular type of professional activity, whereas different roles that the indi-vidual takes on lose or gain meaning depending on the dominance of one


of the spheres.4 D. Super’s model is currently not exactly dated, but it seems not to take into account in a comprehensive manner the diversity and va-riability of the environment and the individual (see figure 1).

Figure 1. Rainbow model of a career by D. Super

Source: Super’s theory, http://www.careers.govt.nz/educators-practitioners/ career-practice/career-theory-models/supers-theory/(accessed 15.04.2014)

On the other hand, the new paradigm of a career that implies per-manent transitions, destroys the old order of simultaneity of sequencing of development. The requirement of flexibility prompts the individual

4 Nevill, Super 1986, p. 4 for: E. Hornowska, W. J. Paluchowski, Technika badania ważności pracy D. E. Supera, [in:] M. Strykowska (ed.), Współczesne organizacje. Wyzwania i zagrożenia. Perspektywa psychologiczna, Wydawnictwo Fundacji Humaniora, Poznań 2002, p. 275.

K. Januszkiewicz178

to repeatedly change the place and character of work in search of opportu-nities to achieve professional success. Therefore, there is no stabilization period, maintenance of the position, or pause in acquisition of new skills. The activity is of course a prerequisite for staying on the labor market, but one should bear in mind that the tendency of sequencing in achieving professional and personal goals is lacking. In this case, waiting for a longer period of stagnation in a career – the achievement of professional success allowing concentration on other aspects of life is becoming more and more unrealistic.5

Table 2. Super’s five life and career development stages

Stage Age Characteristics

Growth birth–14 Development of self-concept, attitudes, needs and general world of work

Exploration 15–24 “Trying out” through classes, work hobbies. Tentative choice and skill development

Establishment 25–44 Entry-level skill building and stabilization through work experience

Maintenance 45–64 Continual adjustment process to improve positionDecline 65+ Reduced output, prepare for retirement

Source: http://www.careers.govt.nz/educators-practitioners/career-practice/career-the-ory-models/supers-theory/ (accessed 15.04.2014).

In the classical concept of career by D. Super, an individual gradually performs developmental tasks during subsequent phases of the life cycle (see table 2). Six basic criteria of maturity for a career are distinguished: focus on choice of profession, gathering information and planning, con-sistency in the career preferences, crystallization of qualities, professional independence and wisdom of professional preferences. So called sequen-

5 K. Appelt, Środkowy okres dorosłości. Jak rozpoznać ryzyko i jak pomagać, [in:] A. I. Brzezińska (ed.), Psychologiczne portrety człowieka. Praktyczna psychologia rozwojowa, Gdańskie Wydawnictwo Psychologiczne, Gdańsk 2005, p. 453.


tial growth of structure of I to the maturity is achieved once in a lifetime.6 It is precisely this cumulation of experience, which determines profession-al success.

However, in the new approach, one should take into account the changes in the paradigm of a career, where a category of career ma-turity is no longer a developmental process carried out once in a lifetime, but the process executed many times when it is necessary or when present patterns become outdated. Maturity for a career under the current condi-tions is repeated crystallization of a professional identity of an individual. It is shown by flexibility, open-mindedness and pro activity.7 Several times during lifetime, a person has to make a decision regarding the implemen-tation of professional functions. Collection, processing and use of infor-mation in the new reality must be followed in two ways. An individual on the one hand should examine the environment, capture opportunities and risks that go with it, on the other hand – stay in touch with their own professional identity and check if and when it will be ready for another change. That is precisely a multiplication of professional success, which unfortunately takes place with harm to its quality.

Thus, changes in the scope of implementation of a career have a per-manent character and remain in strong dependency with the environment in which a given professional activity of an individual is carried out. Therefore, it raises a question of whether young people experiencing these changes (representatives of the generation Y), defined through the prism of flexibility and via the Internet, (unlimited access to the world far beyond their direct experience), have an unified vision of their professional future, or whether their perception of a career has more individual character, still defined by the socio-cultural factors. The answer to this question is given by the results of own research, which allows to compare the representa-tives of the generation Y from Poland and Russia. The subject of the anal-ysis is the perception of professional success as an intermediate category, which allows for the description of a new career model.

6 Super 1972 for: A. Bańka, Kapitał kariery – uwarunkowania, rozwój i adaptacja do zmian organizacyjnych oraz strukturalnych rynku pracy, [in:] Z. Ratajczak, A. Bańka, E. Turska (eds.), Współczesna psychologia pracy i organizacji – wybrane zagadnienia, Wydawnictwo Uniwersytetu Śląskiego, Katowice 2006, p. 62.

7 Ibidem, p. 63.

K. Januszkiewicz180

4. professional career in the perception of generation Y – a comparative study

The study involved 155 students from Poland (111), and Russia (40). Selection of the sample had incidental character, the questionnaire was filled in by students present on the day of testing at the lecture for the third year of studies. The study had a character of the identification diagnosis, within which were put the following research questions:

– whether professional success is a desirable category?– at what stage of career they expect to be successful?– how subjects rate their chances of achieving career success?Answers to the research questions served as the basis for a comparative

analysis of the perception of career success of future managers from Po-land and Russia, because from the way they perceive the desired activity in the professional sphere will affect not only the shape of their own future career but also of the people that they will manage in the future.8

Orientation on professional success seems to be something obvious for a modern manager. This seems to be one of the components of work in the area of management. Proper performance of the duties and responsi-bilities is significantly associated with success.

In the examined group, the vast majority of people declared desire to achieve professional success (table 3). It is certainly a positive result from the point of view of the organization. Such people seem to have a strong inner motivation and will try to raise quality of work to increase their chances to achieve it.

Table 3. Orientation on success

Would you like to achieve professional success?

Poland RussiaYes No Yes No99% 1% 100% –

Source: own study.

8 It should be noted that the study was conducted in two local industrial centers: Łódź and Novosibirsk, and therefore terms used in the article “future managers of Polish and Russian”, refers only to the study group.


However, from a psychosocial point of view, such an explicit atti-tude leads to reflection and analysis of the obtained result in the category of a certain phenomenon – success orientation.9

In the modern world, an individual faces a cultural imperative of mak-ing independent choices. The transformation in the scope of value (includ-ing the progressive secularization) means that the vision of life and atti-tude to challenges from the environment does not need to be confronted with intersubjective values . The weakening of their impact makes a person to define their own priorities and make their own choices among many possibilities. Such self-construction of their own space of values and as-pirations is very tempting. In such a situation, professional success may have a lot of dimensions, indicators, attributes. Its definition will depend on the individual. The results of the research indicate that both for the youth from Poland and Russia, professional success is seen as something posi-tive, as the goal being sought and equally highly estimated by the respon-dents probability of achieving it (table 4).

Table 4. Rating the chance of success (%)

Chances Poland Russia0 1 0

10 1 020 2 030 13 540 8 350 28 1860 7 1370 13 1880 14 1890 4 15

100 11 13Σ 100 100

Source: own study.

9 Definition by the author.

K. Januszkiewicz182

The vast majority of surveyed students turned out to be people op-timistically perceiving their future, although it should be pointed out that the belief in their own abilities is higher among young Russians, the average assessment of their chance to achieve professional success is 71%, while for the Polish – 59% (see table 5). There is also a lower value of the standard deviation, indicating a greater consistency in the examined group.

Table 5. Evaluation of the chance of success 2

Measure Poland Russia

Number 111 40

Average (%) 59,5 71,0

Median (%) 50,0 70,0

Standard deviation (%) 23,0 19,3

Mode (%) 50,0 70,0Index of similarity of structure for countries 0,73

Source: own study.

The analysis of results of research presented so far, invites us to reflect that success seems to be an inherent attribute of thinking about work, re-gardless of the method of its definition and understanding. Such oriented individuals will expect certain results of actions not only from each other, but will also expect the organizations to create opportunities for their ac-complishment. Understanding these expectations proves to be necessary from the point of view of organizational behavior.

That apotheosis and faith in the possibilities of a person, which could be assumed from the obtained results, seems to emphasize the unique char-acter of an individual. While in the personal sphere, the choices may be made on the basis of partially negated or partially accepted values , which are kind of heritage of humanity (religious, moral values), the professional life of modern person is dominated by a sense of ambivalence.


On the one hand, work relations characteristic for the previous poli-tical and economic system have developed in employees lack of responsi-bility for their own future, lack of desire to the initiative or need for par-ticipation in creating their own work environment. On the other hand, the requirements towards such ‘lost’ individual are becoming increasingly clear. Employees are expected to be absolutely subordinate to the current trends which define the direction of work. One of the challenges singled out as the basic one and conditioning success is the need to supplement know-ledge, develop skills, need for permanent learning. However, if we want to such an initiative to take place, it seems to be necessary for the em-ployees to accept requirements formulated towards them and internalize the values promoted by the environment. In the face of so many and so diverse choices, the way to success is no longer obvious or very simple. It puts a condition of engagement resulting from the acceptance of a given value. However, representatives of generation Y, also called Millennials, tend to treat these circumstances, not as a challenge posed by the changing environment, but as usual conditions in which they will have to pursue their professional career and achieve success.

In this context, it is interesting to see the answers of the future managers, who point out that the best time to achieve professional success is the time between the 25 and 45 years of age. At the same time as the most likely period to succeed, most of them considered the period from 30 to 45 years (see table 6). It is difficult to provide exhaustive interpretation only the basis only of these data. However, one can presume, that before the 25 years of age an individual is seen as not yet ready and prepared for the satisfying performance of profes-sional tasks. The second of omitted periods (45–60+), the respondents prob-ably perceive as a period of stagnation, leisure, celebration of achievements.

Table 6. Age of achievement of professional success

Age from/to Poland (%) Russia (%)1 2 3 4

20 25 0 326 30 9 1531 35 28 3536 40 31 15

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Table 6 (cont.)

1 2 3 441 45 14 546 50 1 051 55 1 056 60 0 061 80 0 0

lack of answer 0 0any age 17 28

100 100

Source: own study.

These results, however, are puzzling for two reasons. Firstly, at present times being active professionally means the necessity of permanent devel-opment. Thus, one can not expect that when you reach a certain age job opportunities will shrink and the world of achievements will be closed you. Among the respondents from Russia, the average age at which they expect to achieve what they consider professional success is 33.3, for the Polish this value is only slightly higher, namely 36.3 (see table 7). This is the last interval of so called early adulthood, which in the traditional career model means realization of set objectives and full involvement in work and family.

Table 7. Age of achievement of professional success 2

Measure Poland RussiaNumer 92 29Average [years] 36,3 33,3Median [years] 36,6 33,1Standard deviation [years] 4,91 4,58Index of similarity of structure 74%

Source: own study.

Nevertheless, the second reason why it is worth considering these results seems to be more important. Accepting the perspective emerging from the research we can conclude as for the measure of success in the per-


ception of the respondents. They do not associate it with theprofessional satisfaction felt at the end of the path, but with some objectives, the at-tributes available in the period of intense activity. Even if you take into account the response of people for whom the age category does not matter, they still remain in the minority in their group, where no one expects pro-fessional success before the 25and after 45 years of age.

5. Conclusion

Transformations of the career model are a permanent process. One must admit that they constitute almost its inherent trait. Up to now, they have never had such a dynamic nature and have not included such a broad spectrum of activities of an individual. These new conditions analyzed in comparison with the old career paradigm, for people just entering the la-bor market, are habitual reality, a reality which will be updated on a regular basis to verify their activities.

The presented research results show quite a coherent picture of the pro-fessional future of the young Polish and Russians. This coherence is comes out in the observation in both groups of the following tendency to:

– high evaluation of the category of success (in both groups almost 100% want to achieve what is considered professional success),

– high-rating of the chances to succeed (in both groups the average rating exceeded value of 50),

– placement of achievement of professional success during middle adulthood.

On the other hand, the detailed analysis of the results leads to a con-clusion that this is only a tendency, under which one can find diverse char-acteristics of the representatives of Poland and Russia.

Index of similarity of structures for each of the analyzed parameters indicates slight similarity in the distribution of features in the examined col-lectivities (within w(p)ϵ(0,7; 0,8>). Future managers from Russia are more optimistic than their Polish peers, assessing their chances of professional success on average on a higher level. Certainly it is worth, in search of in-terpretation of such a result to raise the question of the reason. This may on the one hand, be the result of lack of awareness of changes occurring

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on the labor market, on the other hand, however, may indicate the differ-ences in the nature and strength of the impact of the determinants of a ca-reer. Poland is a country belonging to the European Union, numerous rela-tions and contacts with partners that shape the work space here are of very dynamic and unpredictable nature, while the experience of students from Novosibirsk is certainly to a large extent determined by the Russian labor market. This situation is additionally reinforced by the geographical location of Novosibirsk. Similarly, representatives of Russia expect earlier achievement of professional success than the Polish, and although this dif-ference seems slight, it confirms their greater optimism in thinking about the future.

The results of the research, due to the selection of the sample can not be considered representative. An additional drawback is a significant difference in the number of students in the examined groups. Therefore, the resulting conclusions should be taken with caution as an observation of trends, which may in the future lead to in-depth research and analysis in this area.

Despite these limitations, it is difficult to escape the valuation and in-dication of the risks of such an understanding of a professional career. What seems to be a simple change of meaning of a word, in turn may lead to a sense of frustration and confusion. Young people less and less look up in their lives to authorities, also more and more rarely use objective indicators and determinants of behavior. Through almost unlimited access to the entire world they take advantage of it by selecting the values and norms that seem to them attractive at the moment. This process can not be stopped besides it is not worth trying. The only thing worth doing is to try to understand the new generation and provide them with the conditions for action and de-velopment, for shaping themselves in the organizational and social space.

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Abstract

Currently, the entire space professional functioning of individuals undergoes signifi-cant changes. These changes on the one hand have a global character, but on the other hand are strongly determined by local factors. The theoretical aim of this paper is to describe a new career model and to indicate the factors determining its course. Whereas, its practical aim is to explain in what scope these changes have been incorporated in the perception of professional career representatives of generation Y from Poland and Russia.

Key words: professional success, professional career, generation Y.

Zbigniew Gontar*

pERSpECTiVES OF inTEgRATEd “nEXT induSTRiAl REVOluTiOn” CluSTERS in pOlAnd And SiBERiA

1. introduction

This study is concentrated on perspectives of the next industrial revo-lution clusters in Poland and Siberia. Next industrial revolution is a man-ifestation of Internet of Things, Data and Services (IoTDS) paradigm,1 offering new ways of monitoring and managing all components of busi-ness, enables new types of products and services, and new strategies,2 and enables developing new forms of industrial organizations. Stephan Haller from SAP research – a research unit of SAP AG – defines IoTDS as a world, where physical objects are seamlessly integrated into the in-formation network, and where the physical objects can become active

* Doctor in economic sciences. Department of Computer Science, Faculty of Management, University of Łódź.

1 M. Ruggieri, H. Nikookar, Internet of Things: Converging Technologies for Smart Environments and Integrated Ecosystems, River Publishers, 2013.

2 J. Manyika et al., Disruptive technologies: Advances that will transform life, business, and the global economy, McKinsey Global Institute Report, May 2013, McKinsey & Company, 2013.

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participants in business processes, and services are available to interact with these smart objects over the Internet, query and change their state and any information associated with them, taking into account secu-rity and privacy issues.3 The growing relevance, scale, and complexity of smart initiatives at the universities of the world (StreetScooter GmbH4 at the University of Aachen, Transformative Learning Technologies Lab5 at the Stanford University, City Science6 and SENSEable City Laborato-ry7 at MIT, etc.) entails the need to find the solutions for the coordination of its development, focused on innovation and entrepreneurship in order to strengthen regional economies. The following two steps are identified in the paper as necessary to establish trans-border next industrial revo-lution clusters: smart campus projects enhancing universities capability to establish smart industry projects,8 and the trans-border centres of excel-lence for smart industry aimed at developing and implementation joint in-tegrated network of international programmes in the field of smart indus-try and to establish a trans-border network of master courses concerning smart industry in which companies would also be involved, and strength-ening cooperation between Poland and Siberia in the field of smart indus-try, involving the universities.

The new up-to-date paradigm driving next industrial revolution9 is Integrated Industry, the lead theme and official motto for Hannover Messe 2014 – one of the world’s most important trade fair for industrial technology – and the purpose of German government project Industry 4.0, one of the symbols of the next industrial revolution. In Harting’s In-

3 S. Haller, The Things in the Internet of Things, [in:] Proceedings of Internet of Things, Conference 2010, Tokyo 2010.

4 Access: www.streetscooter.eu5 Access: tltl.stanford.edu6 Access: cities.media.mit.edu7 Access: senseable.mit.edu8 Smart campus means that universities will be an experimental field for implementing

smart initiatives.9 R. M. Locke, R. L. Wellhausen (eds.), Production in the Innovation Economy.

The MIT Task Force on Production and Innovation, MIT, 2010.

Perspectives of Integrated “Next Industrial Revolution” Clusters in Poland... 191

tegrated Industry concept,10 components, solutions, systems and consult-ing services are combined into an innovation range that covers all levels. Each single level is just as important as the interaction of all in order for us to act as competent partners for our customers.11 Integrated Indus-try is not only a research concept, but currently industrial application, e.g. Festo company is currently working on the water project in St. Pe-tersburg in the framework of Integrated Industry, and Intelligent Systems & Technologies Laboratory at the Institute of international educational programs, St. Petersburg state polytechnic university equipped with In-tegrated Industry equipment.12 In general, Integrated Industry means integration of engineering distributed facilities with intelligent system enabling on-line control and optimization of these facilities.13 It enables in the near future the construction of distributed power plants and fac-tories, composed with many levels located in manufacturing or energy pools in the future smart cities. Reindustrialization in that sense means establishing the areas of such pools or the areas of production and control pools. The specific smart industry initiatives mentioned above are aimed at establishing next industrial revolution industry clusters in the sense of new organization of industrial companies resembling integrated in-dustry concept: distributed virtual cross-board company,14 with digital-ly developing and manufacturing products and systems, offering new ways of cooperation through Internet networking, and optimizing its processes split among thousands of participants and distributed Poland and Siberia wide, equipped with intelligent networked manufacturing systems supported by embedded software, operating on products con-taining software, GPS systems, sensors and actuators, testing on a digital model the product, the production system, the tooling and manufactur-ing facility, and characterizing by the integration of the value creation

10 Access: www.harting.com11 Philip Harting, Board Member for Connectivity & Networks at HARTING.12 Access: www.festo.com, www.festo-didactic.com13 Monitor, Magazine for electrical safety, 1/2013.14 B. Gontar, Z. Gontar, A Cross-Border Innovation Cluster Assessment Methodology,

Social Science, Kaunas University of Technology, 2013, p. 7–14.

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chain in the sense of involving potential future customers in the concept and planning phases (involved in innovation and product development) forcing integration the data from the sketch through to the ordering of spare parts.15

The estimated period of full implementation of next industrial revo-lution policy is 6-20 years. At the moment, the core of the next industrial revolution seems to be the integration of the organizations, the processes, the specialist disciplines and the entire value creation chain (or other value creation logic). This integration could be enhanced by trans-border initia-tives. The next industrial revolution industry clusters proposed in the paper are exemplification of this idea. This enables stronger engagement of Po-land and Siberia in next industrial revolution development.

Value/originality of the paper is as follows: list of artefacts asso-ciated with next industrial revolution, new concept of industry clus-ters, map of potential next revolution initiatives in Poland and Siberia, and the idea of smart organization. The accelerated development of sci-ence and technology determinates continuous change in external condi-tions and revise the rules of performance of enterprises. From the point of view of the next industrial revolution, the most important determi-nants include smart manufacturing, saturated by intelligent information and communication technologies (ICT), and new technologies which allow to change any consumer in the manufacturing prosumer. The dif-ferences between big manufacturers and manufacturing prosumers will then disappear, as each of them will use shared resources from ma-nufacturing pools, and large manufacturers will be balanced by grid manufacturing clusters (in a similar way grid computing competes now with supercomputers in the sense of computing power). For this to happen, it is needed the implementation of smart education ideas. Smart organization shall be understood as grid enterprise (e.g. trans-bor-der organization), microgrid enterprise (e.g. reduced to the geographic area), and smart compact enterprise (e.g. smart organization reduced to the factory, like the SmartFactory KL project).

15 U. Sendler, Integrated Industry – big idea, but it covers a lot, Monitor 1/2013, p. 4–8.


2. method for identification next industrial revolution clusters

The paper explores the concepts of the next industrial revolution, and smart-manufacturing hubs16 projects as perspectives of integrated in-dustry clusters. The goal of the research is to identify common features of the next industrial revolution, and define a roadmap for implementation of the next industrial revolution concept in Poland and Siberia.

The objectives of the article are as follows:1. To review and discuss the concepts of the next industrial revolution,2. To identify best practices concerning the next industrial revolution,3. To define roadmap of developing perspectives of digital cross-bor-

der innovation clusters between Siberia and Poland.The researches consisted of five following phases:1. Creating a list of Integrated Industry initiatives to survey,2. Collecting data and creating artefacts of Integrated Industry initiatives,3. Perform an in-depth analysis of the collected data,4. Identifying perspectives of Integrated Industry initiatives mapping

in Poland and Siberia,5. Define roadmap of developing perspectives of cross-border Inte-

grated Industry clusters between Siberia and Poland.Smart, sustainable and inclusive regional growth in the closed future

will be based on ideas taken from the next industrial revolution. In smart era trans-border integrated industry clusters will take over many of the tasks carried out by traditional innovation instruments, offering new opportuni-ties. The research of perspectives of trans-border integrated industry clus-ters are important from different points of view, also taking into account the development of the regions. This may contribute to the emergence of new regional policy instruments.

The results of the paper is the roadmap of developing the potential next industrial revolution industry clusters in Poland and Siberia. The clus-ters are discovered as the smart-manufacturing hubs dealing with the fol-lowing initiatives:

16 Manufacturing hubs are defined in the paper as cooperation of industry, universities, governments, and other parties to solve innovation deployment challenges of smart industry.

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1. FabLabs originated in Neil Gershenfeld student course at Massachu-setts Institute of Technology, US17 entitled “How to Make (Almost) Any-thing”. While the first projects were rather insignificant (bag for screams, etc.), at the moment due to technology development (3D printers, 3D scanners, Computerized Numerical Control machine tools, etc.) and open-source hardware movement, it is a global environment coordinated by Fab foundation evolving toward establishing factories at home.18 From the per-spective of next industrial revolution industry clusters, FabLabs are a tool aimed at establishing innovate and educational workplace for cross-border initiatives in the sense of factories at home pools coordinated by regional competency centers. It is planned in the next two years more than 20 labs for personalized digital production will be set up in Moscow and its sur-roundings, and another over 100 across Russia.

2. Fabless manufacturing (personal manufacturing) aimed at creation manufacturing pools concentrating on performing production work, inte-grated with manufacturing centres equipped with enterprise manufacturing integration and intelligence systems enabling operating in those flexible manufacturing structure. The flag project of that concept: StreetScooter established at the University of Aachem, Germany indicates the direction of future evolution of this idea. In Siberia, in 2009 Rusnano, Russia’s largest nanotech company, and the Nitol, international group of investors started its Usolye Sibirsky Silicon (USS) to produce polysilicon (poly-Si) material for solar energy and microelectronics, and established Liotech, company in Siberia’s Novosibirsk manufacturing lithium-ion storage batteries, Novosibirsk and Tomsk for the nano centres. The most pro-minent fab-less design Russian enterprises for military are MCST, Elvees and Module.

3. Smart Factory understood in the sense of the first European Smart Factory, built originally in Kaiserslautern in 2007, Germany as a Cy-ber-Physical System by the German Research Center for Artificial In-

17 N. Gershenfeld, Fab: The Coming Revolution on Your Desktop–from Personal Computers to Personal Fabrication, Basic Books, 2005.

18 H. Lipson, M. Kurman, Factory@Home: The emerging economy of personal fabrication, White House Office of Science and Technology Policy, 2010.


telligence (DFKI) with 20 industrial and research partners, having equi-valents in the form of Smart Manufacturing initiative in US19 engaging the leading US universities, and deployed as a concept in Germany Industry 4.0 initiative integrating government, university and indus-try. From the perspective of next industrial revolution industry clusters it is a manufacturing grid of fully automated production. Software Engi-neering Company “Smart Solutions” is only one of Russian SME which has won the FP7 Integrated Project (IP) in Consortium with EADS, Air-bus and world-leading universities, consulting companies and software vendors.

4. Smart Materials are resemble to smart manufacturing or smart grid systems, in the sense that they automatically adjust their properties accord-ing to external environment. In the paper, we consider smart materials only in the framework of biotechnology, and this type of potential next indus-trial revolution industry clusters will be regarded as smart biotechnology clusters.

3. next industrial revolution

The next industrial revolution is considered in the paper mainly as a manifestation of Internet of Things, Data and Services (IoTDS). Ac-cording to Mazhelis et al.,20 IoTDS could be described from the following four perspectives:

1. MIT Auto-ID Labs21 perspective referring to things or virtual en-tities identification in the form of Radio-frequency identification (RFID)

19 J. Davis, T. Edgar, J. Porter-DuPont, J. Bernaden, M. S. Sarli, Smart Manufacturing, Manufacturing Intelligence And Demand-Dynamic Performance, “Computers & Chemical Engineering” 2012, Vol. 47, p. 145–156.

20 O. Mazhelis, H. Warma, S. Leminen, P. Ahokangas, P. Pussinen, M. Rajahonka, R. Siuruainen, H. Okkonen, A. Shveykovskiy, J. Myllykoski, Internet of Things Market, Value Networks, and Business Models: State of the art Report, Jyväskylä University Printing House, Jyväskylä 2013.

21 The Auto-ID Labs are the leading global research network of academic laboratories in the field of Internet of Things, access: www.autoidlabs.org

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tags or Electronic Product Code (EPC). From this perspective, IoTDS is a world-wide network of interconnected objects uniquely addressable, based on standard communication protocols.22

2. Web of Things community23 et al., referring to the Internet archi-tecture. From this perspective, IoTDS is a global network infrastructure, linking physical and virtual objects through the exploitation of data cap-ture and communication capabilities on the base of specific object-iden-tification, sensor and connection capability as the basis for the develop-ment of independent cooperative services and applications, with high degree of autonomous data capture, event transfer, network connectivity and interoperability (EU founded project: Coordination and support action for global RFID-related activities and standardisation – CASAGRAS).

3. Semantic technologies perspective, referring to representation, or-ganization and storage, searching and exchanging the things-generated information. From this perspective, IoTDS is an interoperability among IoTDS resources, information models, data providers and consumers, and facilitates effective data access and integration, resource discovery, semantic reasoning, and knowledge extraction on the base of efficient methods and solutions that can structure, annotate, share and make sense of the IoT data and facilitate transforming it to actionable knowledge and intelligence in different application domains.24

4. We add one more perspective to this list, i.e. business process analy-sis perspective, referring to SOA architecture, and process mining analysis.25 From this perspective, IoTDS is a dynamical network of highly dispersed processes, whose choreography and orchestration are defined on the base of online analysis of processes through process mining extension of Bosh at-tempts to combine Business Process Management (BPM), Business Rules Management (BRM) and Machine to Machine Communication (M2M) into

22 EPoSS – The European Technology Platform on Smart Systems Integration, access: www.smart-systems-integration.org

23 Access: www.webofthings.org24 P. Barnaghi, W. Wang, C. Henson, K. Taylo, Semantics for the Internet

of Things: early progress and back to the future, “International Journal on Semantic Web and Information” 2013, Vol. 8, p. 1–21.

25 B. Gontar, Z. Gontar, Business Process Mining, Ekonomika i Organizacja Przedsiębiorstwa, Instytut Organizacji i Zarządzania w Przemyśle „ORGMASZ”, 2013, p. 18–27.


IoTDS implementations.26 According to Smith I.G. (ed.),27 one of the current Internet of Things, Data and Services issues is business models, which means an exploitation of the IoTDS business potential, and new business models for the existing incumbents but also new and innovative players need to be developed. New business models for IoTDS reefer mainly to manufacturing, where it would be possible to plan and produce (almost) at the same time. The first attempts of manufacturing in this framework are very promising, i.e. so called Disruptive Network Approach (DNA) of StreetScooter manufactur-er or SmartFactory KL project. Both projects are initialized by university en-vironment: University of Aachen, and German Research Center for Artificial Intelligence (DFKI). Process Mining, called also Automated Business Pro-cess Discovery, Process Intelligence, Process Analysis or Workflow Mining integrates Business Process Management (BPM), Data Warehousing (DW) and Business Intelligence (BI), and includes methods, standards and tools to support the discovery and analysis of operational business processes. Process mining is an approach that provides new and objective insights into the way business processes are conducted within organizations. Taking a set of real executions (event logs) as the starting point, these techniques attempt to extract useful process information from various perspectives.

The next industrial revolution is characterized by:– intensive use of information and communication technologies, in-

cluding 3D printers, 3D scanners, Computerized Numerical Control ma-chine tools, Cyber-Physical Systems, multi-agent systems, SOA, business intelligence, open hardware,

– real time monitoring and analysis, based on new business intelligence applications, i.e. Manufacturing Intelligence, Smart Grid Analytics, etc.,

– two way communication between producer and consumer, and as re-sult active customer participation in production and domination of prosum-ers, which concept is the combination of two words – producers and con-sumers, what in extreme form means personal manufacturing, just like described in Fab Lab concept,

– distributed production with the control of dispersed automated busi-ness processes based on production pools,

26 Access: www.bosch-si.com27 I. G. Smith, The Internet of Things, ClusterBook, New Horizons, 2012.

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– smart meters enabling online business processes control,– new players and new services enabling creation of new business leader,– smart materials enabling biotechnology applications in all fields.The most influential concepts of the next industrial revolution are Neil

Gershenfeld’s Fab Labs from 2002, enabling personal digital manufactur-ing,28 and creation of new business ecosystem through the following stages: building effective forms of collective action and self-organisation for Fab Labs, breaking free from traditional systems of manufacturing and creat-ing value and creatively design new systems that tap into the capabilities of Fab Labs, protection of the interests and creative freedom of makers en-suring wide access to new knowledge, processes and products, appropriately and effectively creation and capturing value, achieving equity and fairness.29

Table 1. Artefacts of industrial revolutions

1st 2nd The next industrial revolution1 2 3

Printing Press /Information Network

Radio, TV /Media Network

Internet and its evolution into the cloud / Digital media network

Coal and Steam Oil and Electricity Silicon and ComputerMass education Combustion engine Internet of Energya / Renewable Energies

Railways and Rail transport Highways

Internet of things, data and servicesb (IoTDS) / Web of Things (WoT) /Machine to Machine (M2M)

Factories New materials

Smart Materials / Smart Everything /Smart Factoryc /Decentralized Production /Agile Manufacturing /Automatic identification and data capture (AIDC)d

28 N. Gershenfeld, Fab: The Coming Revolution on Your Desktop--from Personal Computers to Personal Fabrication, Basic Books, 2005.

29 P. Troxler, Making the 3rd Industrial Revolution. The struggle for Polycentric Structures and a New Peer-Production Commons in the Fab Lab Community, J. Walter- -Hermann & C. Buching (eds.), FabLab: Of Machines, Makers and Inventions, Bielefield, Transcript Publishers, 2013.


1 2 3Seaports and ship transport Automobiles Cyber physical systemse (CPS)

Semantic technologies

Mass production

FabLabs /Persobal Manufacturing /Personal Fabricators /Personal Fabrication /Personal Computer Manufacturing

Mass consumption Open source hardwareProsumer eraManufacturing intelligence /Decentralized Intelligencef /Smart Factory /Automating manufacturing processes /Cloud manufacturingManufacturing as Commodityg

a According to Germany Trade & Invest (access: www.gtai.de) this model is based on principles of smart power generation, smart power grids, smart storage, and smart con-sumption.

b This refers to a world in which all everyday objects, devices and services are com-pletely interconnected for seamless interoperability. Ordinary objects, devices and services in the physical world will, for example, be able to independently communicate and ex-change information over the internet thanks to increased programmability, memory storage capacity, and sensor-based capabilities.

c Smart factory refers to cyber-physical systems (accessed op. cit.).d AIDC referred to as “Auto-ID” refers to the methods of automatically identifying

objects, collecting data about them, and entering that data directly into computer systems (i.e. without human involvement).

e Cyber-physical systems (CPS) means embedded systems, enriched with internet, enabling online data and services processing.

f Decentralized intelligence means intelligent objects enabling via network connection independent process management.

g The concept from the 90-ies, assuming, that manufacturing system like a turnkey production network is highly adaptive because it uses turnkey relationships to weave va-rious key production clusters into a global-scale production network based on external eco-nomics for OEMs and brand-owners.

Source: own study.

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In Poland, there are a few Fab Labs projects, including FabLab Warszawa,30 FabLab Kielce,31 FabLab Łódź,32 FabLab Trójmiasto.33 In Si-beria, similar project has been established or has been announced to be established in Krasnoyarsk,34 Norilsk, Khabarovsk.

Another concept worth mentioning is a new form of manufacturing: pooled, digital and personal,35 based on open source hardware and open de-sign, resembling to those of the Open Hardware project, the Open Source Hardware and Design Alliance, et al. In such environment, manufacturing corporations will dramatically change, just like in the concept of Industrie 4.0 from 2011,36 in which physical equipment of manufacturing environ-ment is located in manufacturing pools with broadband Internet access, au-tonomously exchanging information, triggering actions, controlling each other, and visible for the enterprise as objects in the Internet cloud.37 All these concepts indicate new industrial revolution in the sense of the end of fixed and predefined manufacturing structures, and as a consequence of this – triumph of distributed manufacturing in trans border business ecosystem across the whole digital value chain (or other value creation logic). Integrated industry clusters in that sense are production networks, dynamic, and self-coordinating established as a result of innovation policy in business ecosystems around smart cities, just like Novosibirsk and Eka-terinburg in Siberia, or Warszawa-Łódź duopolis or Silesian megapolis in Poland.

30 Access: fablab.waw.pl31 Access: www.fablabkielce.pl, www.tytan3d.com32 Access: fablablodz.org33 Access: www.fablabt.org34 Access: fablab24.ru35 C. Anderson, Makers. The New Industrial Revolution, Crown Publishing Group,

New York 2012.36 G. Baum, H. Borcherding, M. Broy, M. Eigner, A. S. Huber, H. K. Kohler,

S. Russwurm, M. Stümpfle, U. Sendler, Industrie 4.0: Beherrschung der industriellen Komplexität mit SysLM, Springer Vieweg, 2013.

37 H. Kagermann, W. Wahlster, J. Helbig, Recommendations for implementing the strategic initiative INDUSTRIE 4.0, Securing the future of German manufacturing industry, Final report of the Industrie 4.0 Working Group, 2013.


4. integrated industry characteristics

The main discussion on the subject of the next industrial revolution in the sense of Industry 4.0 is taking place on the Plattform Industrie 4.038 launched in 2013 by the industry associations in Germany: VDMA,39 ZVEI40 and BITKOM41 with the aim to manage the implementation of In-dustry 4.0 concept.

In the paper, integration in manufacturing is defined fourfold:– vertical integration of production and resources systems in net-

worked manufacturing system, controlled by manufacturing intelligence systems,

– horizontal integration of production and resources systems through value networks controlled by manufacturing intelligence systems,

– integrated engineering throughout the product lifecycle, using pro-duct lifecycle management (PLM) systems,

– integration of information areas, meaning merging of machines and information into a system that is responsive and efficient in concurrent engineering.

As a result, separated production environments are combined to pro-duce universal production worlds, which are partly of a physical, and part-ly of a cyber nature.

5. university engagement in new industrial revolution – results of the survey

There are at least the six outstanding lines of initiatives of the world concerning new industrial revolution, in which universities play key eco-nomic role: FabLab concept originated by the Massachusetts Institute

38 Access: www.plattform-i40.de39 German Engineering Association (VDMA) access: www.vdma.org 40 German Electrical and Electronic Manufacturers’ Association (ZVEI) access:

www.zvei.org41 German Association for Information Technology, Telecommunications and New

Media (BITCOM) access: www.bitkom.org

Z. Gontar202

of Technology, aimed at establishing manufacturing society, where ma-jority of the jobs will be associated with personal manufacturing, Smart Manufacturing initiative in the US, concentrating on the Smart Manufac-turing Leadership Coalition attempts to standardize the implementation of smart concept in industry and engaging the leading US universities, the Industrial Internet Concept by General Electric (GE) in the US being the result of engagement the biggest corporations in new forms of ma-nufacturing, Industry 4.0 in Germany being the example of integration of government, university and industry initiatives, and smart grid – dif-ferent forms of application of IoTDS to energy sector, and National Net-work for Manufacturing Innovation (NNMI) in the US aiming at building a network of regional manufacturing hubs with the leading role of the US universities, that will accelerate development of new manufacturing tech-nologies.

The symbol of universitiesʼ engagement in new industrial revolu-tion in Europe seems to be SmartFactoryKL in Kaiserslautern, Germa-ny – a manufacturer-independent, model, demonstration and research platform, built in 2007 by the German Research Center for Artificial In-telligence (DFKI) with 20 industrial and research partners.42 The vision of Smart Factory was developed in 2004. Non-profit association “Techno-logy Initiative SmartFactory KL” was launched in 2005. SmartFactoryKL thus became the first European, supplier-neutral, demo-factory for the in-dustrial application of modern information technologies. SmartFactoryKL is a real production system producing and bottling colored liquid soap, and the platform served as a research and development basis in numer-ous projects. The product is manufactured, filled into dispenser bottles, labeled, and delivered by consumer order. The plant has been designed modular and consist of a process manufacturing part, and a piece goods handling part.43

The business model for the university engagement in the next industry revolution encompass the following elements:

42 Access: www.smartfactory-kl.de43 D. Zuehlke, Smart Factory – Towards a factory-of-things, “Annual Reviews

in Control” 2010, Vol. 34, Issue 1, p. 129–138.


– smart campus initiatives, enabling contact with up-to-date technolo-gies, getting involved in developing required solutions, work on the theory related to smart era concept, cooperation with innovative industry,

– university engagement in smart city/smart grid/smart manufacturing initiatives, enabling integration with manufacturers, and non-profit organ-izations aiming at growing the capabilities in smart grid technology, 3D printing, reducing energy costs, etc. through collaboration in design, mate-rials, technologies, etc.

– university engagement in establishing the next industrial revolution centers of excellence (innovation institutes), enabling managing all aspects of an next industrial revolution strategy, projects and systems, includ-ing developing, and implementing new innovative tools and supporting the users who rely on them.

The table 2 shows the results of a survey of the next industry revolu-tion initiatives in Poland and Siberia.

All projects presented above are in the infancy stage, however indicate the potential of establishing a quality trans-border clusters enabling coop-eration between Poland and Siberia in the area of smart grid, smart man-ufacturing, and new materials (biotechnology). Transformation of these projects into Integrated Industry Clusters in Poland And Siberia would be possible through institutional engagement for establishing facilities for dispersed initiatives. In Russia, similar initiatives covering cooperation with Germany are under way, including the Russian-German Center for In-novation and Entrepreneurship, the Russia – Germany Innovation Forum “Energy efficiency 2020: ideas, technology, services”, German-Russian Innovation Forum “Promoting business process management excellence in Russia” Propeller 2012,44 etc.

44 Access: propeller.ercis.org

Z. Gontar204Ta

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6. discussion/Conclusions

The next industry revolution is a very popular concept in industrial-ized countries. The perspectives of next industrial revolution industry clus-ters means new organization of industrial companies, resembling integrat-ed industry concept.

The model of integrated industry clusters assumes engagement of uni-versities as determinants of strategy for establishing new smart enterprises. The next industrial revolution, associated mainly with Internet of Energy and smart manufacturing, rely on new achievements in ICT area, and de-velopment of the following two branches of Business Intelligence (BI), i.e. Smart Grid Analytics, and Manufacturing Intelligence. BI projects need special assistance, i.e. Business Intelligence Competency Center (BICC, in other words Center of Excellence),45 which is a team of people that is re-sponsible for managing all aspects of an organizationʼs BI strategy, pro-jects and systems, including developing a BI strategy, implementing BI tools and applications and then training and supporting the business users who rely on them.

The trans-border centers of excellence for smart industry would help in better understanding the potential benefits that the next industrial revo-lution initiatives can provide in business operations. The steps for setting up Integrated Industry Competency Center (IICC) are to be resembling those of BICC, i.e.:46

1. Understanding next industrial revolution concept and relevance to Poland and Siberia development. Conduct next industrial revolution concept assessment in the sense of economical potential. Perform gap ana-lysis. Create roadmap and action plan,

2. Define IICC objective and mandate. Build case (e.g. Smart Facto-ry). Decide on functional area to be addressed and required roles and skills. Develop change management plan,

45 BICC concept emerged in 2001, as results of researches conducted by Gartner Research (Dresner 2001).

46 These phases to set up competency center are based on SAS proposition, access: www.sas.com

Z. Gontar208

3. Assign roles to people. Train IICC stuff. Execute change manage-ment plan. Prepare work environment,

4. Run first project. Review project and IICC functions, and on the base of findings, create new projects.

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Abstract

The paper presents the mapping of potential next industrial revolution clusters in Po-land and Siberia. Deindustrialization of the cities and struggles with its consequences are one of the fundamental economic problems in current global economy. Some hope to find an an-swer to that problem is associated with the idea of next industrial revolution and reindus-trialization initiatives. In the paper, projects aimed at developing next industrial revolution clusters are analyzed. The objective of the research was to examine new industrial revolu-tion paradigm as a platform for establishing university-based trans-border industry clusters in Poland and Siberia47 and to raise awareness of next industry revolution initiatives.

Key words: clusters, new industrial revolution, case studies.

47 Platform is both business model, and organizational design dedicated to business ecosystems in the next industrial revolution. Baldwin indicates the emergence of new organizational designs, i.e. open-communities, and standard-setting organizations (Baldwin, 2012).

Małgorzata Marks-Krzyszkowska*

pOliSH And RuSSiAn RuRAl AREAS in TRAnSiTiOn. lAnd And dEmOgRApHY

1. introduction

The turn of the 1980s and 1990s brought changes in the political and so-cio-economic organization of Russia and Poland. They initiated, among other things, free-market economy reforms, transformation towards a demo-cratic system, and reactivation of local governments. The transformation em-braced also the rural areas and the agricultural sector associated with them, for which the important role was played by the land legislation. And all re-form measures brought the expected results, and the consequences of some failures have been felt to this day. Chaotic agricultural policy and habits re-lated to subordination to the central management of agricultural production have become a barrier to the free-market activities. Moreover, in the initial period of transition, both Poland and Russia almost completely withdrew from subsidizing agriculture. As a result, disorganization and crisis prevailed in the agriculture sector. The reaction to it were corrective actions of the gov-ernments and more thought-out policy of rural areas strategic management.

* Doctor in Economic Science. University of Lodz, Faculty of Economics and Sociology, Department of Local Government Economics

M. Marks-Krzyszkowska212

Rural development is carried out in a different way in various coun-tries and it is conditioned by a set of specific environmental, economic, and social factors. The terms of the macroeconomic environment, in-cluding mainly political, but also historical and cultural factors, caused that Poland and Russia have chosen other paths of transformation, yielding diverse results. Above all, the two countries perceive the role of the rural areas in the society in a different way.

The purpose of this article is to present the main changes in the struc-ture of the space and demographic processes of rural areas in Poland and Russia, taking place under the influence of socio-economic transfor-mation after 1990. Though both countries are completely different (e.g. as for the perspective of scale, the position in the international arena, the forms of agricultural production, etc.), they were subjected – within a similar period of time – to the systemic change (from a centrally-con-trolled system to a market economy) and are faced with multiple problems of the transition period. However, the underlying causes of these problems, their scale and the ways of solving them are quite different. This article is the outcome of the internship completed by the author within the “Func-tioning of the Local Production Systems in the Conditions of Econom-ic Crisis (Comparative Analysis and Benchmarking for the EU and Be-yond),” funded by the 7th Framework Programme of the EU.

2. The main socio-economic reforms in the 1990s in polish and Russian rural areas

Before 1990, the socio-economic situation in the Russian countryside was different than in Poland. The main difference lied in the organization model of the sector, i.e. the main function of the rural areas. Russian agri-cultural system was based on the so-called socialized forms of organiza-tion, i.e. kolkhozes and sovkhozes (collective and state farms). In Poland, the socialized sector (cooperatives and state agricultural farms – PGR) accounted for approximately 25% and the system was dominated by in-dividual forms of farming. Russian countryside was forcibly collectivized by the end of the 1920s. This process consisted in forcing peasants to give

Polish and Russian rural areas in transition. Land and demography 213

of their farms and livestock to the state. The authorities quickly trans-formed these resources into kolkhozes and sovkhozes, which became al-most the only form of farming. Sometimes, the subsidiary household plots of the employees where allowed or even ordered.1

Presently, socio-economic situation of Polish rural communities and their residents is an effect of political reforms conducted in the 1990s and the accession to the EU in 2004. The legal and political transforma-tion initiated in 1988 sought to lay the foundations of the market econ-omy by abolishing restrictions on private entrepreneurship and creating the possibility of state farms commercialization. It assumed the develop-ment of the services sector and the creation of non-agricultural jobs, which are an alternative to agricultural sources of income. Action was taken then to execute the marketization of agriculture itself, including – among other things – market pricing of purchase and retail prices and abolishing subsidies for agricultural production. New conditions became, however, a substantial barrier for the management of the agricultural sector that was not flexible and accustomed to subsidized and command-and-quota-based system. Peasants began to feel a rapid decline in revenue and an increase in production costs and experienced growing difficulties in repayment of their loans. The state farms (PGRs) were not in a position to bear the tax burden. Low agricultural productivity only added momentum to the inten-sifying crisis. One of the corrective actions was the adoption of the Act of 11 April 2003 on Shaping the Agricultural System. It determined the policy of improving the structure of farms, preventing excessive concentration of agricultural property, and referred to the qualifications of the persons engaged in agricultural activities.

The accession to the European Union has significantly increased the flow of funding of various socio-economic initiatives. It is estimat-ed that from the moment Poland joined the EU to 2010, the agricultural sector alone was supported with 75 billion PLN, of which about 70 bil-lion went to farms to be used primarily for production and modernization. The remainder was allocated for early retirement of peasants, improving

1 W. Paciorkowskij, Przemiany instytucjonalne wsi w Rosji w latach 1991–1999, „Wieś i Rolnictwo”, 1/2001; Z. Lerman, N. Shagaida, Land policies and agricultural land markets in Russia, “Land Use Policy”, 24/2007.


processing and marketing of agricultural products and technical assistance.2 Despite many positive changes that have been recorded in the agricultural sector, Polish agriculture compared to other EU countries, is still ineffi-cient, with an excess of labor and unsatisfactory structure of the farms size.

Another significant factor was the reform of local governments of 1990. Under it, local authorities were entrusted with the authority and responsi-bility for carrying out public tasks on their own territory and were grant-ed legal personality. The Polish administrative reform of 1999 introduced a three-level structure of the country, currently composed of 16 voivode-ships, 314 poviats and 2,479 gminas (including 306 urban, 602 urban-rural and 1,571 rural gminas). In fulfilling their tasks, local governments man-age the financial resources derived from taxes and administrative fees, lo-cal assets, loans and bonds, general and special purpose grants and other external sources, such as foreign means. For instance, in the years 2007–2013 Polish municipalities received 71.3 billion PLN from EU funds. They were designed primarily for the construction and modernization of road, water and wastewater, and social infrastructure as well as for counteracting digital exclusion.3

As far as the economic transformation in the Russian countryside in the 1990s is concerned, it consisted in the introduction of the land re-form4 and the reorganization of collective and state farms.5 Restructuring started from decollectivization, based on granting them the status of non-state farms having legal personality. To initiate the development of the pri-vate sector in the countryside, around 34 millions of employees and retir-ees of collective farms and state farms received a certificate of ownership of the land – the so-called collective land ownership titles – with the right to participate in the shared ownership. It was assumed that the employees would treat these resources as initial capital and form private farms on this

2 J. Wilkin, Polska wieś 2012 – główne tendencje zjawiska, problemy, [in:] J. Wilkin, I. Nurzyńska (eds.), Polska wieś 2010. Raport o stanie wsi, Scholar, Warsaw 2012.

3 Samorząd europejski. Ranking wykorzystania funduszy unijnych, “Rzeczpospolita”, 18.07.2013.

4 Land Reform Act of 1990.5 The Resolution of the Russian Federation on the reorganization of kolkhozes

and sovkhozes of 1991.


basis. However, the reluctance to manage at one’s own risk – conditioned by historical reasons and bad economic situation – blocked most of the ini-tiatives. Great numbers of the citizens passed their titles under the authority of the collective and state farms in exchange for work. In the later period, they often decided to sell their shares. At the same time, there began to de-velop private-family agricultural enterprises called farms. Enlarging one’s acreage was conducted by buying shares and using the offer of a district land distribution fund.6

The reforms led to a change in the structure of the agricultural pro-duction organization. There were created private agricultural enterprises (peasant’s farms) and the so-called household plots. The mixed farming structure was to allow to use the advantages of small- and large-scale agri-cultural production. However, the state – referring to the “invisible hand” of the market – heavily reduced the budget allocation for agriculture.7 The expected economic benefits of the reforms did not occur. The private agricultural production dropped to such an extent that the food security of the country was threatened. Paradoxically, the reforms led to the devel-opment of the production of small goods, the ineffectiveness of the capi-talization of agriculture, destroying the incentives for employees, the im-poverishment of the rural population and degradation of the countryside in the social sphere.8 Over the past 10 years, agrarian legislation has been targeted at solving the problems of land ownership relations, improving the standards governing the activities of household plots, stimulating the growth in agricultural consumer cooperation, improving credit condi-tions for producers of agricultural products, and insuring production risks. Although the changes can be assessed positively, still they have not led to overcoming the crisis in the sector.9

6 A. Pilichowski, W. Stołbow, Dekolektywizacja Rolnictwa w Rosji. Perspektywa społeczno-ekonomiczna, „Przegląd Socjologiczny”, 1–2/2002.

7 In 1999, it amounted to 0.17% of GDP, compared to 0.52% in 1995 and 8.8% in 1990 (Z. I. Kalugina, Vector of Postcrisis Development of Rural Russia, “Regional Research of Russia”, Vol. (1) 2/ 2011).

8 Z. I. Kalugina, Paradoksy agrarnoj reformy v Rossii: Sotsiologicheskij analiz transformatsionnykh protsessov [Paradoxes of Agrarian Reform in Russia: A Sociological Analysis of Transformation Processes], Izd. IEOPP SO RAN, Novosibirsk 2000, p. 149–150.

9 Z. I. Kalugina, Vector of Postcrisis… .


An element of the system transformation in Russia was the assumption concerning the democratic functioning of the state and the organizations of lo-cal governments within its structures.10 According to the constitution, the Rus-sian Federation is composed of eight federal districts with the authority ap-pointed by the president and 83 equal local government entities functioning in these districts, i.e. 21 republics, 9 countries, 46 districts, 2 cities of federal importance, 1 autonomous region and 4 autonomous areas. A country, district, city of federal importance, autonomous region and autonomous area may cre-ate their own statute and legislation. Within these structures, there are func-tioning human clusters of different status: municipal district, city okrug, urban settlement, rural settlement,11 intra-city territory of a city of federal importance. Their numbers constantly change, which probably is not so much related to the administrative changes, but rather to depopulation problems of Russia.

Table 1. Types of municipal entities in years 2011–2013

Municipal entities 2011 2012 2013Municipal districts 1824 1821 1817City okrugs 515 517 518Intra-city territory of cities of federal importance 236 236 257

Urban settlements 1733 1711 1687

Source: Russia in Figures. Federal State Statistics Service, 2013, p. 56.

The development of self-government elements in Russia is complex, in-consistent and complicated, not only because of the intricate structure, but also due to the growth of corruption in public life, the lack of regulation concerning the delegation of local competences, the lack of trust of the citizens in the re-formed institutions, etc. Local authorities of rural settlements are in a particular predicament. Before the changes introduced to the system, the organization

10 The modern organization model is defined in the Act of 2003 “On the general organizational principles of local self-governing in the Russian Federation”.

11 Rural settlement – one or several rural communities (settlements, big villages, Cossack villages, villages, farmsteads, kishlaks, mountain villages and other rural communities), where local self-government is effectuated by the population directly and/or through elected and other local self-government bodies.


of social life in the countryside was dominated and subordinated to kolkhozes and sovkhozes. These entities were not only the employers, but also the plan-ners. The role of the local authorities consisted mainly in providing favorable business conditions for collective entities. The acts of self-governments im-posed on the local authorities the responsibility for the planning, construction, infrastructure, social services and community organization, but the authorities received no financial and material basis for these tasks.12

3. major changes in the structure of the polish and Russian rural areas

Polish territory shows mainly rural traits, although the nature of the area is significantly diverse. There are highly urbanized areas, and traditional, dispersed settlements dominated by agricultural activities. The land is pre-dominantly used for agriculture13 (53.2%) or forestry (30.4%), although these uses are often pushed out by the functions of housing, services and industry in the suburban municipalities.

Table 2. The structure of the territory of Russia and Poland

Country Russia PolandTotal area (in 2012, sq. km) 16.376.870 304.150Forest area (% of land area) 49.4 30.4Agricultural area 13.2 53.2Water 4.1 2.7Other 37.5 16.4

Source: www.faostat.fao.org (accessed 17.01.2014).

12 Cf. W. Paciorkowskij, Przemiany instytucjonalne wsi w Rosji…; V. Gelʼman, The politics of local government in Russia: The neglected side of the story, “Perspectives on European Politics and Society”, Vol. 3/2002; P. Kirkov, Local self-government in Russia: Awakening from slumber?, “Europe-Asia Studies”, Vol. (49)1/1997; D. Fic, Wpływ zmian politycznych w Rosji na kształtowanie się władzy lokalnej, „Samorząd Terytorialny”, Vol. 6/2012.

13 According to the FAO statistics.


Year after year, the share of land available to agriculture decreases. In the period preceding the Polish integration with the European Union many socio-economic barriers (low profitability of agricultural production and the problems with selling the products) intensified the phenomenon of set-aside and fallow agricultural land. For example, in 2002, 2.3 mil-lion hectares of arable land was fallow land, which accounted for 17.6% of the total area, and after the accession to the EU, this acreage was re-duced to 1.3 million hectares.

Table 3. Land use in Russia and Poland (in million hectares)

Country Years Total

Arable land and orchards Meadows

and pasture

Total

total of which arable land per capita % of total

area

Poland2000 17.8 13.9 13.7 3.9 0.47 58.62009 15.6 12.4 12.1 3.2 0.3 50.0

Russia2000 217.2 126.2 124.4 90.9 1.48 13.32009 215.6 123.5 121.8 92.0 1.51 13.2

Source: Rocznik Statystyki Międzynarodowej [Central Statistical Office of Poland], 2012, p. 305.

The implementation of the Common Agricultural Policy and in par-ticular obtaining direct subsidies undoubtedly contributes to the decline in the growth rate of set-aside lands. It is dependent on maintaining the land in good agricultural condition (GAC). The main non-economic reasons for the systematic loss of agricultural land are: resigning from the agri-cultural use of areas with unfavorable natural conditions, substantial frag-mentation of fields and allocating land for non-agricultural purposes (e.g. for construction, infrastructure, afforestation).

Also, the number and structure of the households change. This leads to the development of a new model of agriculture in Poland. There is a clear downward trend in the number of farms. Halamska notes that this process already began in the 1950s, but it gained momentum after 1988.14 Since

14 M. Halamska, Transformacja wsi 1989–2009: Zmienny rytm modernizacji, „Studia Regionalne i Lokalne”, Vol. (44)2/2011.


2003, the tendency of the smallest farms to disappear has been accom-panied by the increasing share of the large-area farms. These are positive developments in terms of improving the competitiveness of the agricul-tural sector. The declining process affecting small farms, especially those covering up to 0.5 ha, is very appreciated, because of their low productiv-ity and insignificant relation to the market. The share of the large farms has increased due to the aforementioned process of a decrease in the num-ber of the smaller ones. The current average size of a farm has increased and equals around 9.5 ha of arable land.

Table 4. Farms by area groups of agricultural land in Poland (in %)

Years Total 0–1 ha 1–5 ha 5–10 ha 10–15 ha 15–49 ha 50 and more

1996 3066 33.2 36.8 16.9 7 5.3 0.42002 2933 33.3 39.1 14.6 6.2 6.1 0.72010 2278 31.4 37.9 15.4 6.7 7.4 1.2

Source: Rocznik Statystyczny Rolnictwo 2010; Powszechny Spis Rolny 2002, Użyt-kowanie gruntów, powierzchnia zasiewów i pogłowie zwierząt gospodarski, Central Statis-tical Office of Poland 2003, 2012.

Located on two continents, Russia has the largest land area in the world. It is a country with a very diverse terrain, climate and a large variety of natural resources. Approximately half of the total surface area is covered by forests. As mentioned by Nefedowa,15 the lands for ag-riculture occupy about one-fourth of the territory, of which only 50% is actually used. The rest are mostly fallow lands, peat bogs and very limited rural settlements and roads. The national average of agricultural land is 13%.

The reduction of the area related to agriculture began earlier than in the 1990s, but the crisis intensified this process. For example, in 1970, Russia had 222 million hectares of arable land, in 1990 – 214 million ha,

15 T. G. Nefedova, Agricultural Land in Russia and Its Dynamics, “Regional Research of Russia”, Vol. (1) 3/2011.


and in 2008 – 195 million ha.16 The loss of agricultural land over 38 years amounted to about 30 million. The 1990s were characterized by signi-ficant losses of the crops cultivation area, much larger than the decrease of the plowed fields.17 This was a consequence of the crisis of agricultural enterprises, which in 1990 faced the new market conditions and remained deprived of state subsidies. Moreover, according to Nefedowa, in Soviet times, entities operating in harsh natural conditions were forced to engage in bigger areas than they actually could manage. Large farms still have much more land than they can handle. There are also signs of “concealed” processes of land abandonment. A lot of land, although still included in the statistics as plowed, is now covered with young forest. It is indicated by the difference between the plowed land and the area under cultivation. In addition, the decline in the percentage of the cultivated land is intensi-fied by the process of buying shares for speculative purposes.18

Table 5. Types of agricultural farm in Russia (% of the total)

Type of farm 1992 2000 2005 2008 2009 2010 2011 2012Agricultural enterprises 67.1 45.2 44.6 48.1 45.4 44.5 47.2 46.7Household plots 31.8 51.6 49.3 43.4 47.1 48.3 43.8 44.8Peasant farm 1.1 3.2 6.1 8.5 7.5 7.2 9.0 8.5

Source: Agriculture and Forestry, Russia in Figures. Federal State Statistics Service, 2013, p. 275.

The changes in the agricultural land are a consequence of the sponta-neously formed new structure of land ownerships. In the period 1990–2000, the share of agricultural enterprises in the use of agricultural land decreased from 98% to 80%, the share of peasants farms increased from virtually

16 Data given by Nefedowa are slightly different than these found in the Concise Statistical Yearbook of Poland.

17 The crops cultivation area has decreased from 118 to 78 millions of ha during the last 20 years.

18 T. G. Nefedova, Agricultural Land in Russia…; O. Visser, N. Mamonova, M. Spoor, Oligarchs, megafarms and land reserves: understanding land grabbing in Russia, “The Journal of Peasant Studies”, Vol. (39)3–4/2012.


zero to 7.4%, and the one of household plots grew from 1.4% to 2.9%.19 Over the next 10 years, the share of peasants farms and household plots continued to increase. These two sectors now have roughly equal shares in the total agricultural production. Household plots, at the begin-ning of the transformation, functioned in symbiosis with the kolkhozes and sovkhozes that supported them technically, provided fodder for ani-mals and were knowledge sources. The economic crisis in Russia (unem-ployment, difficulties in obtaining food, high prices of imported food, pov-erty) contributed to the growth of interest of the rural and urban population in running farms for their own use and the so-called dachas. A significant increase in the number of household plots is therefore not a consequence of a free choice, but the only way for some people to survive.20

4. demographic changes in polish and Russian rural areas

Poland is characterized by a relatively high rate of population den-sity (38.9 million people per 321,000 km2). For example, in rural areas it equals on average 51 persons/km2, and in the cities – 1,088 persons/km2. In 2010,21 the rural areas were inhabited by 15 million people, i.e. about 39% of the total population of the country.22 In comparison to 2002, the number of rural residents increased by over 3%.23

19 B. Frumkin, Problemy I tendencje w Rozwoju rolnictwa Rosji, [in:] Dziś i jutro gospodarstw rolnych w krajach Centralnej i Wschodniej Europy [Problems and trends in the development of agriculture in Russia, [in:] Today and the future of agricultural farms in Central and Eastern Europe], IERiGŻ PIB, Vol. 98/2008.

20 Z. Kalugina, Agricultural Policy in Russia: Global Challenges and the Viability of Rural Communities, “International Journal of Sociology of Agriculture and Food”, Vol. 22/2014; Z. Kalugina, Vector of Postcrisis... .

21 This section was prepared, based on: Obszary wiejskie. Powszechny spis rolny 2010, GUS 2013; Obszary wiejskie w Polsce, GUS, Olsztyn 2011; Rocznik demograficzny, GUS, Warszawa 2013.

22 The biggest share of the rural population in the total one (over 50%) can be found in the south-east parts of Poland.

23 Although during this period 20 rural settlements were granted the municipal status, the number of the population in the cities decreased then by 0.6%.


The demographic situation in rural areas is depicted by the data on the real growth, which takes into account the birth rate and migration. In 2009, in the countryside, it amounted to 0.4% of the population. Cur-rently, in the countryside, more children are born (per 1000 persons) than in the cities. The total fertility rate in 2009 was 1.50.24

The number of residents is also affected by internal migration between the rural and urban areas and foreign labor migration. The balance of these two processes results in an increase of the population in rural areas in Po-land. Since 2000, there has been a noticeable positive balance of internal migration. Despite the inconveniences and civilization delays (e.g. time and cost of traveling to the city, the lack of social infrastructure or insuf-ficient services, the lack of jobs in the community, etc.), the countryside is a place of residence that is chosen increasingly more often. Even 50% of the rural youth and 13% of the urban youth declare their willingness to live in rural areas.25 International migration, particularly to the UK, Ire-land and Denmark, reduces the number of the rural population. It concerns, however, much smaller numbers of people than internal migration.

Polish rural population, compared to other European countries, is rel-atively young. In 2010, the age ratio (the proportion of people aged 65 and more) was among the lowest in the European Union. The average life expectancy in rural areas in 2009 amounted to 71 years for men and 80 years for women. The life expectancy for men in rural areas was lower than that for the male residents of the urban areas (72 years). For rural wom-en it was 80 years. Since 2003, the average life expectancy in rural areas for both sexes increased by one year.

In 2010, the share of persons with higher education in the rural pop-ulation accounted for circa 9%. Women had higher education more often than men (10% vs. 7%). Rural areas were characterized by a high propor-tion of people with basic vocational education (29%) and primary educa-tion (26%). Although in the last decade the level of education has relatively quickly increased, the percentage of the population with higher education is still three times lower than in the cities.

24 1.33 in cities. 25 K. Szafraniec, Szanse życiowe wiejskiej młodzieży, [in:] J. Wilkin, I. Nurzyńska

(eds.), Polska wieś 2010. Raport o stanie wsi, Scholar, Warsaw 2012.


In summary, the current demographic situation in Polish rural areas is satisfactory and in some respects more favorable than in urban areas. However, long-term projections indicate potential problems. The regions most vulnerable to aging are the eastern provinces of Poland, and the ar-eas more prone to depopulation include the świętokrzyskie, opolskie and łódzkie voivodeships. Depopulation, caused mainly by migration to the cities, is expected in rural regions of eastern Poland. The population growth in rural areas is expected to occur primarily in the suburban areas of major Polish cities.

At the same time, Russia is a country with a very large population (143 million), but due to the huge area it has a relatively low population density (8.1 persons/km2). A characteristic feature of modern Russia is population decline, depopulation of some areas and the progressive, uneven population centered mainly around large urban agglomerations, especially Moscow.

Unfavorable demographic situation has been one of the most serious problems in Russia since the beginning of the economic crisis. D. Szymańs-ka even calls this country “the leader of demographic degradation”.26 Since the early 1990s, there has been observed a drastic decrease in the num-ber of the population, a growth in the negative birth rate, and a decline in the fertility rate. According to the World Bank, the number of Russians has decreased in the last two decades by 5.7 million.

The negative demographic processes are noted across the country, al-though with different intensity. The territory east of the Urals with par-ticularly harsh living conditions and rural areas are becoming increasingly depopulated. The residents of the countryside, especially the younger ones, consistently move to the big cities, especially those located in the Europe-an part of the country. The negative demographic trends are influenced, beyond the economic crisis, also by the negative institutional changes of the family and the lack of incentives to live in sparsely populated areas. These processes contribute to, inter alia, a reduction in the number of vil-lages. Currently, there are 18.722 rural settlements, while 10 years ago there were more than 24 thousand.

26 D. Szymańska, Kryzys demograficzny w Rosji, [in:] S. Ciok, P. Migoń (eds.), Przekształcenia struktur przestrzennych – aspekty społeczne, ekonomiczne i przyrodnicze, Instytut Geografii i Rozwoju Regionalnego, Wrocław 2010, p. 4.


Table 6. Number of rural settlements in Russia the period 2003–2013

Years 2003 2005 2007 2009 2011 2012 2013Rural settlements 24421* 24373* 22944 20127 18996 18833 18722

* Including rural soviets (selsovets), volosts, rural areas (okrugs), local self-government bod.

Source: Russia in Figures. Federal State Statistics Service, 2011, 2012, 2013.

Currently, 26% of the population live in rural areas. Unfortunately, according to the last Census of Russia, the average annual decline rate in the rural population in eight years (2002–2010) amounted to 0.39%, which is three times higher than in case of urban areas.27 In comparison with the previous period (1989–2002), the rate has tripled.

Table 7. Total number of population, the proportion of urban and rural population in Russia

PopulationAverage annual rate of decline in %

1989–2002 2002–2010Total –0.09 –0.20Urban –0.10 –0.13Rural –0.06 –0.39

Source: www.gks.ru (accessed 17.01.2014).

Since 1992, a negative birth rate has been observed in Russia, al-though in recent years its negative values have decreased. The birth rate in rural areas is lower than in the cities. For comparison, in 1960 it was 18.3 for rural settlements and 13.7 for cities (per 1000 persons); in 1990 it equaled 2.3 for rural areas and 2.2 for cities, and in 2005 it fell to –7.6 in the countryside and –5.3 in the cities. Furthermore, there is a sustaining

27 For comparison, according to the FAO statistics: in Poland, in 2000–2010, there was noted an average yearly increase in the number of rural areas inhabitants by 0.1%. In a comparable period in Russia, this indicator equaled –0.1% (FAOSTAT. Russian Federation, www.faostat.fao.org, accessed 17.01.2014).


high infant mortality rate, although it should be noted that it is twice lower than in the early 1990s. For instance, in 2011, it was 9.1 for rural areas and 6.6 for the cities.

Table 8. Polish and Russian population in cities and villages

Country2000 2005 2010

city village city village city villagePoland 61.9 38.1 61.5 38.5 61.0 39.0Russia 73.4 26.7 72.9 27.1 73.2 26.8

Source: Rocznik Statystyki Międzynarodowej 2012, Russia in Figures. Federal State Statistics Service, 2010. Population.

Another analyzed demographic feature is life expectancy, which in 2011 equaled about 70 years. Women live longer than men, which is also typical for other countries. What raises concerns, however, is the early age of mor-tality of men: in 1995 it was 58 years (72 for women), and in 2011 it equaled 64 years (76 years for women). The causes of premature death are mainly suicides, accidents in the workplace and diseases of the cardiovascular system caused by alcoholism. Moreover, there are very clear differences between the life expectancy of the residents of villages and cities. The most disadvan-taged are men who live in the countryside. In 1994, the average age for this group was approximately 56 years and in 2011 it was 62 years. The reasons for this situation, besides the aforementioned causes, are much more difficult living conditions in the countryside. They arise not only from the harsh con-ditions of the natural environment, but also the social factors, such as the lack of access to health care institutions. The low quality of life is confirmed by the data indicating the alarmingly low state of basic sanitation facilities. Only every fourth of rural farms has access to hot water (although this rate has increased by 15% in 15 years). In addition to this, less than half of the flats in Russia have access to water supply and a sanitary-sewage system.28

A major problem in rural areas is poverty. According to the World Bank, in 2002, the poverty rate for rural areas was 30%, and in 2006 it amounted to 20%.

28 M. Gorczyca, Mieszkalnictwo w Rosji, „Wiadomości Statystyczne”, Vol. 9/2013.


Table 9. Poverty headcount ratio at rural poverty line (% of rural population) in Russia

Years 2002 2003 2004 2005 2006Rural poverty rate 30.0 29.0 25.2 22.7 21.2Poverty gap at rural poverty line (%) 8.7 8.4 7.1 6.1 5.5

Source: www.data.worldbank.org (accessed 14.01.2014).

In conclusion, Russiaʼs rural population has been seriously affected by the economic and social crisis. The countryside is not an attractive place to live or work for young Russians, which leads to aging and depopulation. Consequently, this has a negative impact on food production and distribu-tion due to the increased distances between the production and consump-tion points and the lowering number of potential agricultural workers.29

5. Conclusions

The changes in the agriculture, economy and society are closely related. The complexity of these relationships depends on the general economic development of the state and on its policy. In developed coun-tries, agriculture is still an important sector of the economy – it provides crops, generates jobs and makes the source of income. However, there is observed a gradual reduction of its impact on the economy and so-ciety. This is reflected in the increasingly smaller share of agriculture in GDP and the gradual reduction of space dedicated to this activity. Moreover, the increase in agricultural productivity reduces the demand for labor.

Comparative analyzes of the processes taking place in the Polish and Russian countryside make a very difficult task. This is due to technical reasons, such as incomparability of some statistical data and the organiza-tional and political uniqueness of both countries. The main difference lies in the role of rural areas in the contemporary politics of Poland and Russia.

29 FAOSTAT. Russian Federation, www.faostat.fao.org (accessed 17.01.2014).


Polish countryside develops by implementing the principles of the Common Agricultural Policy and using the financial support of the European Union. The main aim of these activities is multifunctional development, understood as a process of progressive change in non-ag-ricultural spheres of activity (tourism, trade, services) in the rural areas. The countryside is no longer an area limited solely to agricultural produc-tion, but a place of diversified business and even a residential area.

Russian countryside is identified traditionally as a place dominated and dependent on agriculture. However, despite the recent food insecurity hazards, this sector has been depreciated in relation to other parts (sectors) of the economy. Unfortunately, the reform measures have not protected the rural areas from spatial and social degradation. The extremely unfa-vorable demographic situation in the Russian countryside clearly demon-strates that the current policy has lacked the appropriate social approach. The negligence in the technical, social, and housing infrastructure togeth-er with the shortage of employment opportunities cause depopulation in rural areas, which in the future may hinder their development. In con-clusion, the Russian countryside needs immediate help in eliminating the adverse socio-economic processes and support for the multifunctional and sustainable development. At the core of this policy lies understand-ing that the modern countryside may perform non-agricultural functions. Rural areas can become an attractive place to live and work if the gap between the living conditions in the village and in the city is significantly reduced.

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Abstract

The aim of this article is to present the main changes in the structure of the space and demographic processes of rural areas in Poland and Russia, taking place after 1990. Though both countries are completely different (e.g. as for the perspective of scale, the po-sition in the international arena, the forms of agricultural production, etc.), they were sub-jected – within a similar period of time – to the systemic change and are faced with multiple problems of the socio-economic transition period. The terms of the environment, including mainly political, but also historical and cultural factors, caused that Poland and Russia have chosen other paths of transformation, yielding diverse results. Above all, the two countries perceive the role of the rural areas in the society in a different way.

Key words: rural areas, Poland, Russia, socio-economic transformations.

functioning of the local production systems european countries … · the marshallian concept of...

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