moscow 2009 l. mulukova, Е. murzacheva, j. filatova new results in early entrepreneurship study in...

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


The structure of financial sources: upper bound, 5%

significance levelPercentage of early entrepreneurs:

demand


Factors influencing the early entrepreneurs’ choice of funding structure


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


The influence of GDP per capita on the supply of informal funds in countries-GEM participants

(2006)


• 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


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


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.


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%.


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


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.


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


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:


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


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


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%)


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


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


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



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



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) “-”



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!

moscow 2009 l. mulukova, Е. murzacheva, j. filatova new results in early entrepreneurship study in...

Documents

early entrepreneurship

bric slide

early business

scale effect expected

filatova new results

global effect

structure of financial

startup capital