moscow 2009 l. mulukova, Е. murzacheva, j. filatova new results in early entrepreneurship study in...
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Moscow 2009
L. Mulukova, Е. Murzacheva, J. Filatova
New Results in Early Entrepreneurship study in Russia,
CEE and BRIC
Moscow 2009
Ekaterina Murzacheva
Small business financing: Russia and countries of
Central and Eastern Europe, 2006
3 New Results in Early Entrepreneurship study in Russia, CEE and BRIC
Financial strategy of nascent entrepreneurs
Payback amount
Self-financing
Descriptive analysis
Financial structure Factor analysis
Start-up/Own capital
Payback time
Expected returns
Informal capital
Formal capital
4 New Results in Early Entrepreneurship study in Russia, CEE and BRIC
The structure of financial sources: upper bound, 5%
significance levelPercentage of early entrepreneurs:
demand
5 New Results in Early Entrepreneurship study in Russia, CEE and BRIC
Factors influencing the early entrepreneurs’ choice of funding structure
6 New Results in Early Entrepreneurship study in Russia, CEE and BRIC
Empirical evidence (2006)
Scale effect:Scale effect: the amount of start-up capital is a dependent variable
Efficiency effect:Efficiency effect: the expected returns on the invested capital is a dependent variable
Ordinal scale used: Ordinal scale used: contingency Kendall criterionTest quality: Test quality: the level of significance is in brackets
7 New Results in Early Entrepreneurship study in Russia, CEE and BRIC
The influence of GDP per capita on the supply of informal funds in countries-GEM participants
(2006)
8 New Results in Early Entrepreneurship study in Russia, CEE and BRIC
• Low expected returns are often combined with prevalence of informal financial sources
• Type of prevailing financial source determines the amount of start-up capital attracted: scale effect
• Expected returns are connected with the self-assessment of own abilities
But: the results differ among various countries:• In case of countries with weak formal financial system weak formal financial system informal investments
substitute unavailable and/or unstable formal sources (India, China, Russia, Slovenia)
• In case of countries with sound formal financial system sound formal financial system the rate of informal supply is low (Germany, UK, Japan)
• GDP higher than average is combined with a higher role of informal funding (Iceland, USA, Ireland, Norway) – not a loss of trust in formal credit not a loss of trust in formal credit institutions but high importance of social networks enables access to institutions but high importance of social networks enables access to start-up funding in richer societiesstart-up funding in richer societies
Summary
9 New Results in Early Entrepreneurship study in Russia, CEE and BRIC
Further prospective of the research
1.1. Informal support absorbs non-demanded business risk in the economyInformal support absorbs non-demanded business risk in the economy2.2. The lack of the quality control and as a result credit risk concentrationThe lack of the quality control and as a result credit risk concentration3.3. Evaluation: Evaluation: Basel Committee on banking Supervision – IRB advanced methodologyBasel Committee on banking Supervision – IRB advanced methodology4.4. Results:Results: maximum share of the GDP needed to cover risks caused by entrepreneurial maximum share of the GDP needed to cover risks caused by entrepreneurial
activity in order to make the economy more sustainable to systematic fluctuationsactivity in order to make the economy more sustainable to systematic fluctuations
What is the sense behind excessive informal financing?What is the sense behind excessive informal financing?
Moscow 2009
Julia Filatova
The Phenomenon of
Parallel Entrepreneurship in Russia, CEE and BRIC
11 New Results in Early Entrepreneurship study in Russia, CEE and BRIC
Definitions
Two types of entrepreneurs mentioned in the literature:
Serial entrepreneurs - those who go through the successive stages of starting, developing, and closing a venture, and then move on to float a new venture.
Parallel (portfolio) entrepreneurs – those owing /managing more than one company at any one time.
Parallel entrepreneurship characteristics:• Executive decisions decentralization; • Risk diversification;• Umbrella structure.
12 New Results in Early Entrepreneurship study in Russia, CEE and BRIC
Level of Parallel Entrepreneurship: GEM Data, 2006
France
United Arab EmiratesMexico
ItalySweden
BelgiumHungary
Denmark
Germany
MalaysiaFinland
Jamaica
China
Philippines
Indonesia
Peru
Czech Republic
Slovenia
ColombiaThailand
AustraliaIreland
Japan
US
Netherlands
IcelandNorway
South Africa
Latvia
TurkeyGreeceCroatia
Chile
Canada
United Kingdom
Argentina
Russia
Uruguay
Spain
SingaporeIndia
Brazil
0%
10%
20%
30%
40%
50%
60%
0 5 10 15 20 25 30 35 40 45
Countries
Le
ve
l of
pa
ralle
l en
tre
pre
ne
urs
Level of parallel entrepreneurship in Russia – 22%.
13 New Results in Early Entrepreneurship study in Russia, CEE and BRIC
Differences between parallel entrepreneurs and novice entrepreneurs
PE:
Older
Higher estimation of entrepreneurial
environment
Better educated
Psychologic motivation >
economic
Higher level of adaptation
Higher level of human capital
Higher level of social capital
Higher estimation of social environment
Higher share of external financial
sources
Higher level of self-esteem
Comparison of parallel entrepreneurs with novice entrepreneurs
14 New Results in Early Entrepreneurship study in Russia, CEE and BRIC
Business strategies of parallel entrepreneurs
RUSSIA•Business activities:
Wholesale and retail trade (40%), Personal/consumer service activities (18%), Transport and communications (13%).•Average number of co-owners: 3 persons.
•Average number of employees: 5 workers. •Estimated business growth: 1,8 times.•Non-innovation business orientation. •Low export potential.•Financial recourses shortage •High integration into entrepreneurial networks.
INDIA•Business activities:
Retail trade, hotels & restaurants (51%), Agriculture, hunting, fishing (11%), Manufacturing (9%).Average number of co-owners: 1 person.
•Average number of employees: 13 workers. •Estimated business growth: 1,9 times.•Rather innovation business orientation. •Rather low export potential.•Financial recourses shortage •High integration into entrepreneurial networks.
CHINA•Business activities:
Retail trade, hotels & restaurants (43%), Manufacturing (19%), Personal/consumer service activities (13%).Average number of co-owners: 3 persons.
•Average number of employees: 18 workers. •Estimated business growth: 4,5 times.•Non-innovation business orientation. •Rather low export potential.•No financial recourses shortage. •High integration into entrepreneurial networks.
BRAZIL•Business activities:
Retail trade, hotels & restaurants (21%) Wholesale trade (21%), Manufacturing (19%).Average number of co-owners: 1 person.
•Average number of employees: 2 workers. •Estimated business growth: 2,6 times.•Non-innovation business orientation. •Low export potential.•No financial recourses shortage.•Rather low integration into entrepreneurial networks.
15 New Results in Early Entrepreneurship study in Russia, CEE and BRIC
Network business forming strategies:
Existing business transfer to a new legal platform (50%)
Businesses are coincide by the type of business activity BUT there are distinctions at the particular sphere (9%)
Necessity based strategy: administrative barriers and business instability overcoming
New business supplement with the existing one (27%)
Strategy of fastening in the market niche
Businesses are not connected with each other (14%)
Strategy of maximum risk diversification OR strategy of personal preferences realization
Business strategies of parallel entrepreneurs
16 New Results in Early Entrepreneurship study in Russia, CEE and BRIC
Possible reasons for parallel entrepreneurship in Russia:Heterogeneous structure of parallel entrepreneurs
Reasons for parallel entrepreneurship
Opportunity based factors:
Personal features - strongly expressed «entrepreneurial spirit»,
Resource security: sufficient amount of social and human capitals.
Financial benefits (to gain benefits from the start-up status),
Growth-oriented behavior (using of social and economic capital and networks of already existing business to establish a new venture).
Necessity based factors:
Administrative barriers pressure,
Business and personal risks diversification strategy in conditions of environmental instability.
Tax minimizing strategy,
Tacit growth strategy in the situation of high risks of vertical growth (pressure of bigger firms dominating
the market, high taxes, etc.).
Possible reasons for parallel entrepreneurship in other countries:
17 New Results in Early Entrepreneurship study in Russia, CEE and BRIC
Summary
The parallel entrepreneurs identified during the APS 2006-2008 in Russia are mainly self-employees and owners of micro-business.
Entrepreneurial group with high growth potential from the point of social and human capitals.
BUT
Entrepreneurial group with low growth potential from the point of structure of financing sources and innovation orientation.
Moscow 2009
Linara Mulukova
Team entrepreneurship in Russia, Eastern Europe and BRIC:
some evidences of GEM 2006-2008
2nd year of MSc Applied Methods of Social Analysis of Markets Programme
19 New Results in Early Entrepreneurship study in Russia, CEE and BRIC
Team entrepreneurship
Team entrepreneurship - conducting or starting a business jointly with partners, sharing ownership with them.
Team entrepreneurship is one of the means of risk diversification and fundraising, raising capital of different forms (economic, social, human, etc.).
Possible reasons for running business collectively:- entry barriers- absence of support infrastructure- highly developed social networks- cultural and historical prerequisites
20 New Results in Early Entrepreneurship study in Russia, CEE and BRIC
Team entrepreneurship in Russia
Team entrepreneurship rate, 2006-2008
57%
43%
Team Individual
Team entrepreneurs vs individual ones:- younger (means - 33 vs 37, medians – 31 vs 38)- opportunity-based (38% vs 1% - opportunity (have job) and 9% vs 45% - necessity (+opportunity))- more favourably assess regional conditions for business start-up (44% vs 31%)- less working full time (50% vs 73%), more retired and students- more nascent entrepreneurs (65% vs 28%)- less new and established owners (23% and 19% respectively vs 44% and 34%)
21 New Results in Early Entrepreneurship study in Russia, CEE and BRIC
Dynamics of team entrepreneurship in Russia
63,7%55,1%
48,2%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2006 2007 2008
22 New Results in Early Entrepreneurship study in Russia, CEE and BRIC
Team entrepreneurship in Russia, EE and BRIC countries
63,7%57,1%
52,9%
0%
10%
20%
30%
40%
50%
60%
70%
Russia CzechRepublic
Hungary
63,7%59,0%
37,2%
26,6%
0%
10%
20%
30%
40%
50%
60%
70%
Russia India China Brazil
Top-5 countries:Iceland (70%)United Arab Emirates (68%)France (66%)Russia (64%)Belgium (60%)
Bottom-6 countries:Jamaica (26%)Brazil (27%)Indonesia (30%)Philippines (32%)Japan (34%)Thailand (35%)
Eastern Europe
BRIC
23 New Results in Early Entrepreneurship study in Russia, CEE and BRIC
Team entrepreneurship in Russia and EE and BRIC countries
Eastern Europe
Czech Republic – more business angels; more think that “there are lots of good opportunities for starting a business”; more think that “starting a new business is a good career choice”; less work full time, more retired and students; more nascent, less established entrepreneurs
Hungary – more have required knowledge and skills; more nascent, less established
Russialess think that “successful new business leads to high level of status and respect”; more nascent entrepreneurs, less owners of functioning business
24 New Results in Early Entrepreneurship study in Russia, CEE and BRIC
Team entrepreneurship in Russia and EE and BRIC countries
BRIC
India – more female; more have negative business experience; less have required skills; less work full time, more homemakers; lower income; lower level of education; more not working; more nascent entrepreneurs, less owners of functioning business
China – less have negative business experience; less have required skills; less think that “people prefer uniform living standard’; less think that “starting a new business is a good career choice”; less work full time, more work part time or homemakers; higher income; higher level of education; more not working; more nascent, less established entrepreneurs
Brazil – more know other entrepreneurs; more think that “there are lots of good opportunities for starting a business”, that “people prefer uniform living standard”; higher income; higher level of education; more nascent, less established entrepreneurs
Russialess think that “successful new business leads to high level of status and respect”; more nascent entrepreneurs, less owners of functioning business
25 New Results in Early Entrepreneurship study in Russia, CEE and BRIC
Team entrepreneurship in Russia and EE and BRIC countries
Eastern Europe 2006: 65,8% matchesAge “-”Agrees that “Starting new business is a good career choice” “+”Owner of a business (new or established) “-”
Russia 2006: 66,1% matchesNascent entrepreneur “+”
Russia 2006-2008: 71,2% matches2007, 2008 “-”Age “-”Owner of a business (new or established) “-”
26 New Results in Early Entrepreneurship study in Russia, CEE and BRIC
Team entrepreneurship in Russia and EE and BRIC countries
BRIC with Russia 2006: 75,8% matchesBrazil, China, India “-”Age “-”Has knowledge and skills to do a start-up “-”Agrees that “People prefer uniform living standard” “+”Higher levels of education “+”
BRIC without Russia 2006: 76,3% matchesAge “-”Expects to do a start-up in 3 years “+”Shut down business in past 12 months “-”Has knowledge and skills to do a start-up “-”Higher levels of education “+”
Thank you for your kind attention!