The purpose of the research: to identify regional factors of entrepreneurial activity in Russia in 1998-2014. The (null) hypothesis: geographical position can be an important factor for entrepreneurial activity (NEG)

1. FACTORS OF ENTREPRENEURIAL
ACTIVITY IN RUSSIA: INSTITUTIONS
OR LOCATION
Speaker:
Stepan Zemtsov,
PhD, senior researcher
Authors:
S. Zemtsov, V. Barinova, J. Tsareva
Laboratory for corporate strategies and firm behavior
studies, Russian Presidential Academy of National
Economy and Public Administration, RANEPA
Innovation Economics Department, Gaidar Institute for
Economic Policy, IEP
Dublin
05.06.2017
RSA Annual Conference 2017

2. PURPOSE
2
The relevance of our research:
• Economic crisis and sanctions - need to encourage SME’s activity
• Small and medium enterprises (SMEs) is an important object of public
support in Russia
• The uneven development of SMEs - need for regionally differentiated
policy
The purpose of the research:
• To identify regional factors of entrepreneurial activity in Russia in 1998-
2014
The (null) hypothesis:
• Geographical position can be an important factor for entrepreneurial
activity (NEG)

3. SME’S IN RUSSIA
3
0
10
20
30
40
50
60
70
80
90
100
0
500
1000
1500
2000
2500
3000
3500
4000
4500
5000
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Thousandfirms
Individual entrepreneurs
Medium-sized enterprises (101-250
empl.)
Small businesses (16-100 empl.)
Micro-enterprises (<15 empl.)
Small enterprises, including micro
The share of small firms in the number
of companies (right scale), %
The proportion of SMEs and
entrepreneurs in the number of
organizations, %
SMEs Small Micro
Employment structure

4. WHAT IS ENTREPRENEURIAL ACTIVITY?
4
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
0
5
10
15
20
25
30
Numberoffirmsper1000EAP
The number of small businesses per EAP
The number of small (no micro) enterprises per EAP
The correlation between the number of small and micro
The coefficient of regional variation (right-hand scale)
• The problem of micro enterprises (‘one-day’ firms) – is it entrepreneurship?
• Entrepreneurial activity growth was mostly statistical (methodology changed in 2007)?
• Regional convergence – equal conditions for SMEs?

5. GEOGRAPHY?
5

6. REGIONAL ENTREPRENEURSHIP CULTURE?
EMBEDDENESS
6
The correlation coefficient between the entrepreneurial activity in the target year
(2000-2014) and previous years (t0 - this year, t1 - the previous year, etc.)
2014 и 2013
2014 и 1998
Average

7. Entr_act – number of small firms per 1000 EAP
WEntr_act – spatial affects of entrepreneurship (Klotz, 2004)
Inst – institution (Yakovlev, Zhuravskaya, 2011; Nielsen, 2014)
Human_cap – human capital (Fritsch, Wyrwich, 2014; Acs, Armington, 2004)
Market_pot – market access (Head, Mayer, 2004; Hanson, 2005)
Support – government support (Storey, 2008)
' '' ''
, , , ,
'' ''' '''' '''''
, , , , ,
ln _ ln _ ln _ ln
ln _ ln _ ln
i t i i t i i t n i i t
i i t i i t i i t i i t i t
Entr act const WEntr act Entr act Inst
Human cap Market pot Support
  
    
       
         
Factor Indicator
Institutions
Investment Risk Evaluation RAEX
The index of bank services availability in the region (Bank of Russia)
Human capital
Unemployment rate, %
The average number of years of education,%
Market potential The amount of available markets, trillion rubles.
SMEs’
governmental
support
The amount of governmental subsidies to support SMEs
per enterprise, million rubles.
Control variables
Population density, persons / sq. m. км km
Urbanization (share of urban citizens)%
The share of the mining industry in the GRP%

8. INVESTMENT RISKS

9. MARKET POTENTIAL
 



iz
z
ij
j
ii
d
GDP
d
GRP
GRPMP
05,001,0

10. GOVERNMENT SUPPORT

11. 11
GMM. Number of observations: 6000
First year lag of dependent variable (embeddedness)
0,708 ***
(0,040)
0,691***
(0,041)
Spatial effects (neighborhood) of dependent variable
0,155 ***
(0,043)
0,144 ***
(0,044)
Investment risks
−0,299 ***
(0,048)
−0,315***
(0,049)
Unemployment
0,073***
(0,021)
0,067***
(0,021)
Population density
-0,481
(0,299)
Urbaniztion
-0,267
(0,366)
Constant
0,028 ***
(0,003)
0,025***
(0,003)
The first-order serial correlation test
-4,170
(0)
-4,159
(0)
The second-order serial correlation test
-1,19
(0,2)
-1,19
(0,2)
The Sargan test for overidentification
45,833
(0,104)
46,257
(0,097)
1998-2007 Economic growth
с
с

12. 12
2008-2014 Uncertain economic situation
GMM. Number of observations: 355
First year lag of dependent variable (embeddedness)
0,325***
(0,059)
0,387***
(0,064)
Spatial effects (neighborhood) of dependent variable
0,212**
(0,096)
-0,005
(0,107)
The index of bank services availability
0,132*
(0,073)
0,180**
(0,088)
Unemployment
-0,138**
(0,055)
Market potential
0,490**
(0,208)
Population density
-0,385
(0,385)
Urbanization
-0,200***
(0,056)
Mining industry share in GRP 0,013
Constant
0,013*
(0,008)
-0,020
(0,014)
The first-order serial correlation test -3,2 (0,0) -2,9 (0,0)
The second-order serial correlation test -0,03 (1) -0,7 (0,5)
The Sargan test for overidentification
20,041
(0,129)
19,786
(0,137)
с
с
с

13. CONCLUSION
13
• The high proportion of micro-enterprises in trade and services
can be related to ‘one-day’ firms
• Russian regions differ substantially in entrepreneurial activity
and have different dynamics
• There is no stable regional pattern but there are distinguished
groups of regional leaders and outsiders, regions with growing
and falling activity during 1998-2014
• There is a relationship between institutional development and
entrepreneurial activity
• There should be more active institutional and infrastructural policy
• Unemployment changes its influence
• Geographical location is more important during crisis
• No links between direct public support of SMEs and the
business activity at the regional level

14. Thank you for your attention!
Stepan Zemtsov,
PhD/senior researcher
E-mail: zemtsov@ranepa.ru
URL:
https://www.researchgate.net/profile/Stepan_Zemtsov
http://www.ranepa.ru/prepodavateli/sotrudnik/?742
http://istina.msu.ru/profile/spzemtsov/
Laboratory for corporate strategies and firm behavior studies
Russian Presidential Academy of National Economy and Public
Administration, RANEPA
Innovation Economics Department
Gaidar Institute for Economic Policy, IEP

15. SME CRITERIA
Prior to 2008 - small businesses (<25% of a property) in the industry - up
to 100 people, SH. and R & D - 60, in retail trade - up to 30, in the
wholesale trade, etc. -. 50
2007 - Federal Law N 209 "On the development of small and medium
enterprises in the Russian Federation" (<49%) for employment: up to 15
people - Micro, 16-100 - small, 101-250 - medium (in terms of revenue,
respectively, 60 million rubles, 400 and 1,000)
2016 - RF Government Decree N 265: revenue, respectively, 120 million
rubles, 800, and 2000