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COMPARATIVE ANALYSIS OF ENTREPRENEURSHIP IN BULGARIA AND ROMANIA

Juliana HADJITCHONEVA, PhD1

Abstract Bulgaria and Romania are Eastern European countries with almost identical

socio-economic backgrounds and developments, both facing the new realities and challenges of the post-socialist transition to a market economy. They stand similar socio-cultural and economic influences and experience common starts and difficulties to emphasise and enhance the entrepreneurship activities, as the latter should impact their economic developments and growth intensively. In this light, the current paper aims to trace the recent entrepreneurship performances obtaining a summarised picture from a comparative perspective. Thereon, three conductive lines are in the focus of this study: first, a review of methodological approaches to measuring entrepreneurship on a cross-country basis; second, highlights of the recent economic and entrepreneurial contexts and impacts in the countries; and third, outlines of developments and trends applying a mixed range framework to assess comparatively the entrepreneurial dimensions.

Keywords: entrepreneurship measurement, cross-country comparison, entrepreneurial ecosystems, innovation

JEL Classification: B10, J2, M13, O3

Introduction Bulgaria and Romania are neighbouring former socialist countries with

similar political, economic and social backgrounds, contexts and trajectories, having started a long and difficult transition in the 90s from centrally planned economies to market economies. Both are members of the European Union for almost 12 years. Hence, they are transposing the same European legislation, and they are implementing the same European policies and practices to enhance their economies. European funds and operational programmes support their strategic economic and social priorities and objectives. Still, they are the least developed economies in the European Union; their economic and social performances and developments are evaluated mainly as inadequate and unsatisfactory; they struggle to escape to the labour-intensive dependence and to switch into added-value comparative advantages to improve their competitiveness.

1 Senior Assistant Professor, New Bulgarian University, [email protected]

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Bulgaria and Romania: Country Members of the EU, Part of the Global Economy

Essential for the economies, entrepreneurship impacts intensively the economic development and economic growth (Dejardin, 2000; OECD, 1998, 2008); described as "the most powerful economic force” (Kuratko, 2017). The role of entrepreneurship in economic development involves initiating and constituting changes in the structure of business and society, and this change accompanies growth (Hisrich & Peters, 1995). The entrepreneurial activity is recognised to be a driver of productivity, innovation, and employment. Being "agents of economic change” (Schumpeter), the enterprises bring dynamism to the economy and innovations to the market; create jobs and wealth besides facing competition and risk-taking to starting and operating businesses. The entrepreneurs take advantage of the opportunities that the economies provide, and it reflects in varying degrees of entrepreneurship progress in different countries. Thus, economic, political, social and technological contextual issues affect the country’s level and quality of entrepreneurial activity. To achieve high outcomes and value-added comparative advantages the supportive macro- or microenvironment for venture creation should be widely encouraged and developed.

Since Bulgaria and Romania have almost 30-years of entrepreneurial experience and activities in market-oriented economies’ contexts, questions arise about the entrepreneurship developments and performances in both countries. What are the difficulties and specificities, and what differentiates their socio-economic tissue resulting in particular and effective result-oriented entrepreneurial ecosystems? How the technological context and trends are changing the entrepreneurial aspirations and attitudes in both countries? Is the Romanian Entrepreneurial ecosystem dynamised as the Bulgarian one is in the last several years (Hadjitchoneva, 2018a, 2018b)? What are the main entrepreneurship trends and challenges for Bulgaria and Romania’s policies and economies? The current research attempts to give few answers to those many and broad scope questions.

Entrepreneurship is not a concept that is defined unambiguously. Thus, it could not be measured directly. More, to compare entrepreneurial activities on a cross-country basis, it is primary to evaluate how to measure them. Literature review discloses different methodological approaches. Synthetic indexes provide a starting point for analysis. Also, the availability of statistical data and datasets are prior for the confirmation of the period under review. A challenge could arise to mix them in a meaningful way so to extract or outline essential developments and trends.

Hence, the current paper addresses the raised issues in three tracks aimed at 1) reviewing the up-to-date methodological approaches to measuring entrepreneurship on a cross-country basis, 2) examining the entrepreneurial contexts and impacts in Bulgaria and Romania in the recent years, and 3) emphasizing the Bulgarian and Romanian entrepreneurship developments and performances for the last decade in a comparative perspective and, discussing some trends and challenges for both Eastern European economies and societies.

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Comparative Analysis of Entrepreneurship in Bulgaria and Romania

Methodological Approaches to Measuring Entrepreneurship on a Cross-country Basis

As the entrepreneurship is a multidimensional concept, the scholars are using various methodological approaches to measure the entrepreneurial activities and make comparative cross-country analysis recognizing that there is no consensus, which complicates the theoretical discussions and empirical studies; and more, the measurement of entrepreneurial activities and levels is continuously a contentious matter (Ahmad & Hoffman, 2007; Justo et al., 2008; Godin et al., 2008, Iversen et al., 2008; Kukoc & Regan, 2008; OECD, 2008).

Composite indexes to measuring entrepreneurship

Criteria for entrepreneurship’s measurement come from its general common aspects, including 1) enterprise, 2) innovation, 3) process, 4) risk-taking, 5) spectrum of entrepreneurial action and, 6) economic change covered by entrepreneurship indexes such as Global Entrepreneurship Monitor (GEM), GEM’s Total early-stage Entrepreneurial Activity (TEA) Index, Kauffman Index of Entrepreneurial Activity, Entrepreneurship Index of Denmark (Godin et al., 2008).

The conceptual framework of GEM is based on the identification of the national political, economic, social and cultural contexts impacting the entrepreneurship. Both entrepreneurship intentions and activities are measured through national experts surveys (NES) and adult population surveys (APS). GEM's database is mostly explored and discussed by scholars and policy analysts for comparative analysis and policy-making. It is also a source for advanced studies and synthetic indexes elaborated by international organisations.

Using the GEM dataset, the composite indicator Global Entrepreneurship Index (GEI) is intended to measure the quality of entrepreneurship and the health of entrepreneurial ecosystems spreading out on 14 components and introducing three levels of scores: overall GEI score, Individual and Institutional scores, and components scores. Fundamental factors that influence entrepreneurship are assessed, namely: the opportunities to start a business, risk-taking, entrepreneurial skills, and human capital, technologies’ impacts, and innovation, internationalisation, networking, and finance. Each component is evaluated by two identified variables – individual and institutional, covering three main facets - entrepreneurial attitudes, entrepreneurial abilities, and entrepreneurial aspirations.

A positive aspect of the composite indexes is that they provide long-term comparative studies of the developments proposing an initial wide-range picture incorporating socio and economic variables for further debates and analysis. However, the ranking of the countries largely depends on the choice of the components and their relative weights. Also, since the datasets unify qualitative and quantitative data, their quality is determinant as they input subjective and biased responses (ex. NES and APS), and different levels and nuance of positive or negative perceptions based on diverse cultural identities.

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Mixed and Statistic datasets to measuring entrepreneurship

The Doing Business database (DB) has a new additional focus on entrepreneurship profiles, collecting data directly from the Company Registrars aiming at measuring entrepreneurial activity on the number of newly registered firms and supporting analysis of trends in new firm creation across regions and income groups, the relationship between entrepreneurship and the business environment and financial development, etc. It displays the new business entry density that is the number of newly registered corporations - private, formal sector companies with limited liability (LLC), calculated per 1000 working-age people aged between 15 and 64 of the countries’ population).

Eurostat, OECD, and national statistical institutes cooperate to provide 18 indicators for entrepreneurship identified as most important by the Eurostat-OECD entrepreneurship indicator programme (EIP). They collect internationally comparable statistics to enabling the entrepreneurship state analysis containing entrepreneurial performance, determinants, and impacts, and becoming the most important data source for the entrepreneurial performance indicators in its three dimensions – enterprises, employment and wealth. The comparative studies compare data on new enterprise creation, bankruptcies, employment, value added, trade, productivity, business financing, and venture capital, motivation to set up a business but Bulgaria and Romania are not included (OECD, 2018).

It is assumed that further indicators for entrepreneurship performance are GDP growth, GINI coefficient, employment, and average salary; export growth, self-employment, and relative poverty (OECD, 2008).

Other approaches to measuring entrepreneurship

Justo et al. (2008) propose a theoretical model to complete the existing measures on entrepreneurship so that to reach a consistent overall notion and provide a reliable indicator on its pervasive effects using variables that reflects both the individual’s entrepreneurial propensity and his social entrepreneurial environment. The individual’s entrepreneurial propensity is linked with his likelihood of engaging in venture creation, while his entrepreneurial propensity may be affected by such elements of his social environment as business angel activity, to know an entrepreneur or good startup opportunities in the area. Such an approach could be defined as familiar with the concept of entrepreneurial ecosystems evaluation, especially for the cultural and social dimensions of entrepreneurship. Another attributes to measure the determinants of entrepreneurship are the regulatory framework, market conditions, access to finance, R&D and technology, entrepreneurial capabilities (Hadjitchoneva, 2018a, 2018b).

Also, more data for business creation and operations, business R&D expenditures, business development and expansion, business ownership, business losses could be added as additional empirical indicators. Indeed, some information could be provided through statistic datasets or calculated, but other is more sensitive and difficult to compare. However, it could be of use to mention

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indicators for venture capital investment per capita, total initial public offerings (IPO), number of patents per capita, academic R&D expenditures, self-employment.

Based on this unexhaustive review of methodological approaches to measuring entrepreneurship on a cross-country basis and taking into account the limitations of the current research as purpose and scope, we consider applying a framework of available indicators for comparative analysis of the entrepreneurship in Bulgaria and Romania stemming from both sources – entrepreneurship synthetic indicators and indexes, such as GEI and GEM, and comparable statistics data from the specialized platform of Eurostat-OECD’s EIP on the entrepreneurial performance on enterprises, employment and wealth.

All such measurements are situated and should be analysed within the general economic and entrepreneurial contexts of the countries. Therefore, we will concentrate the next part of the study on a limited set of general indicators representing the dynamics of socio-economic environments in Bulgaria and Romania in which the entrepreneurship activities take parts.

Entrepreneurship Contexts and Impacts in Bulgaria and Romania Entrepreneurship contexts and impacts refer to general economic

developments. Thus, they could be described by the macro indicators for economic growth, job creation and poverty reduction as it is suggested by OECD works (Ahmad & Hoffman, 2007; OECD, 2008). Here we are focusing on a comparatively narrow set of macroeconomic indicators and selected composite indexes and sub-indexes that provides for the general texture of the main developments and entrepreneurship impacts on the macroeconomic environment, innovation, technology, the institutional framework for starting and operating a business.

General Socio-Economic Contexts

Exploring the recent macro impacts indicators for 2017, we note that annual GDP is 3.68 times higher in Romania in comparison with Bulgaria. Still, as for GDP per capita, the difference is only 1.33 in advance for Romania; yet, GDP per capita (PPP) is 1.25 higher than in Bulgaria. However, the Romanian population is 2.76 times bigger and denser than the Bulgarian one. Such contexts introduce the questions about availability and quality of human resources, labour productivity, and value-added inputs for the entrepreneurial initiatives and developments directly.

Some additional indicators to complete the macro pictures are the inflation rates, the unemployment rates, and the debts levels. In October 2018 the Romanian inflation rate is 4.3% against 3.7% in Bulgaria, but the unemployment rate is in favour of Romania (4% against 5.9% in Bulgaria). The debt reaches 35.1% of the Romanian GDP (3 741 USD per capita) higher than the Bulgarian, which is 25.6% (2 123 USD per capita). Though, the trends of all of them mark augmentation.

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As known, the internationalisation of the Romanian enterprises is better. Bulgarian exports amount only 42% of the Romanian but if we compare the percentage of exports to the GDPs, we will notice that Bulgaria has 51.44% and Romania less - 33.32%. Both countries' exports continue to realise low shares of high-tech products in their total export volumes even that the trends are increasing. Concerning the imports, as expected, also in 2017, they are importing more than exporting (40.21% of Romanian GDP, 58.4% of Bulgarian GDP). All the same time, the trade balance of the neighbouring countries is at a similar level - almost 7%. Both economies have obvious deficiencies to change the economic, competitive advantages paradigms from labour-intensive to value-added perspectives.

Based on the dynamics’ examination of the macroeconomic characteristics, Rangelova & Sariiski (2017) conclude that the achieved effects for both countries, ten years after their accession to the European Union, are controversial. More, they “do not lead to a significant change in the countries potential for quality and sustainable growth” (Rangelova & Sariiski, 2017: 25). Further, more profound and more systematic changes are observed in Romania while Bulgaria is lagging. Problematic for both economies continue to be factors influencing the business environments strongly as property rights protection, judicial independence, public spendings, and others.

Macroeconomic environments, technological readiness, and innovations for competitiveness

According to the Global Competitiveness Index (GCI), Bulgarian and Romanian macroeconomics environments are evaluated as one of the most well-performed factors of the basic requirements for nations’ competitiveness and business environments in the period 2011-2016 (Hadjitchoneva & Georgiev, 2017). In 2017, Bulgaria marks further improvement, while Romania performs slightly worse in the last year after a stable positive trend (Figure 1 and Figure 2).

Figure 1 Ranks of the macroeconomic environment, technological readiness, and

innovation of Bulgaria and Romania 2011-2017

Source: author’s compilation based on GCI 2011-2018.

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The technological readiness of both countries shows notable progress in comparison with other competitiveness efficiency enhancers. Even that they step back in 2017 as ranking (Bulgaria with one position to 39; Romania with three positions to 51); their scores are gradually higher (Bulgaria from 4.1 to 5.1; Romania from 3.8 to 4.8) since 2011. Bulgarian innovation ranks better than the Romanian after 2015 (in 2017, rank 68 for Bulgaria; rank 96 for Romania). However, their innovation scores increase even slowly from 2.9 to 3.3 for Bulgaria and 3.1 for Romania.

Figure 2 Scores of the macroeconomic environment, technological readiness, and

innovation of Bulgaria and Romania 2011-2017

Source: author’s compilation based on GCI 2011-2018.

In general, Bulgaria scores better than Romania for all three sub-indicators – macroeconomic environment, technological readiness and innovation, parts of the different levels of competitiveness assessment. Progress for both countries is reported for all of them in the studied period 2011-2018.

Innovation performance

Further to the GCI Innovation sub-index, we examine the Global Innovation Index (GII) that measures the innovation performance of the countries globally. Bulgaria and Romania are ranked above the upper-middle-income economies. Both are among the ten highest-ranked upper-middle-income economies for 2018 (Bulgaria, 37th; Romania, 49th) and 2017, and among the ten best-ranked upper-middle-income economies across all three main indices. Bulgaria is an innovation leader by income group in line with China and Malaysia in 2018. Both countries are among the eighteen economies that follow among the top 50 and have maintained relatively stable rankings since 2014. Malta (26th), the Czech Republic (27th), Spain (28th), Slovenia (30th), Italy (31st), Portugal (32nd), Hungary (33rd), Latvia (34th), Slovakia (36th) are above Bulgaria, but Poland (39th), Lithuania (40th), Croatia (41st), Greece (42nd), Ukraine (43rd), the Russian Federation (46th), the Republic of Moldova (48th), are after Bulgaria and before Romania that is last in

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this group. Bulgaria along with Italy, Portugal, Latvia, Hungary, Slovakia, Poland, and Lithuania are between the top 30 and 40, while Romania along with Croatia and Greece is in the top 50. Bulgarian innovation performance as rankings and scores in the studied period 2011-2018 is steadily better than the Romanian (Figure 3).

Figure 3 Global Innovation Ranking and Indexes of Bulgaria and Romania 2011-2018

Source: author’s compilation based on GII 2011-2018.

It is essential also to consider the internal innovation performance factors to make the difference (Figure 4).

Figure 4 GII Sub-indexes Ranking and Scores of Bulgaria and Romania for 2018

Source: author’s compilation based on GII 2018.

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In 2018, among the economies in the upper-middle income group, Bulgaria ranks 44 for innovation input sub-index, 34 for innovation output sub-index and 19 for innovation efficiency ratio, Romania is respectively at 49, 48 and 47 positions. In terms of efficiency, Bulgaria is within the top 20 among upper-middle-income economies. Bulgaria and Romania perform similarly concerning the institutions, human capital, and research and infrastructure. They differ in components like market and business sophistication, knowledge and technology outputs, and creative outputs.

At European level, according to European Innovation Scoreboard 2018 that assesses strengths and weaknesses of national innovation systems, Bulgaria and Romania are “modest innovators” (4th group). Both countries progress after 2010 in several fields. Romania has better performance (33) than BG (48). It reports performance above 120% in European Union for broadband penetration of Romania (188.9) and Bulgaria (133.3), employment fast-growing enterprises of Bulgaria (134.8), trademark applications of Bulgaria (127), Design application of Bulgaria (121). Still, both are worst then 2010 in finance and support, linkages, sales impact, and others.

Starting and Doing a Business’ Institutional Framework

According to the Doing Business index, Bulgaria’s overall ranking surpasses Romania’s in the period 2010-2015 when it takes inverse and Romania obtains better positions (Figure 5).

Figure 5 Doing Business Ranking and Starting a Business Ranking of Bulgaria

and Romania 2014-2019

Source: author’s compilation based on WB DB 2010-2019.

One aspect that is particularly burdensome for the Bulgarian classification is getting electricity (rank 147 in 2019). In the Romanian case, apart from the getting electricity, it is also dealing with construction permits (respectively, ranks 154 and 146 in 2019). Romania has specific strengths in trading across borders and

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enforcing contracts (respectively, ranks 1 and 17 in 2019). No such classification (under 20) is registered for any Bulgarian case of doing business. Contrariwise, staring a business in Romania is easier till 2019 when Bulgaria takes the lead. According to Doing Business Report, starting a business in 2018 slightly differs between Bulgaria and Romania: procedures needed to pass by are 7 in Bulgaria and 6 in Romania, minimum capital is 0,00 in Bulgaria and 0,50 in Romania, costs are 1,10 in Bulgaria and 0,40 in Romania. As for the time needed to start a business - there is a gap of 12 days between the countries – 23 days needed in Bulgaria and 35 in Romania.

The Bulgarian enhanced business regulations reforms start in 2008 and encompass mostly the period 2009-2015 when the country makes the starting a business easier by creating a centralized electronic database for commercial registration, consolidating registration procedures and eliminating some registration formalities, lowering registration fees, reducing the cost of registration and the minimum capital requirement (from around 2,50 EUR to 1 EUR), and the paid-in minimum capital requirement. From 2008 to 2019, the Romanian reforms are reported to be controversial – easing the starting a business but also complicating it: easier by transferring responsibility for issuing the headquarters clearance certificate from the Fiscal Administration Office to the Trade Registry, reducing the time required to obtain a clearance certificate from the fiscal administration agency, and more difficult by introducing fiscal risk assessment criteria for value-added tax applications, thereby increasing the time required to register as a value-added taxpayer, increasing the time to register for value added tax, requiring a tax clearance certificate for a new company’s headquarters before company registration, implementing several laws that added to the procedures and time required.

Bulgarian and Romanian entrepreneurship developments and performances

For the current research we focus on three basic approaches to measure entrepreneurship, i. e. the internationally known entrepreneurship composite indicator Global Entrepreneurship Index (GEI), the EIP and WB Entrepreneurship data.

Comparative analysis stating on Global Entrepreneurship Index

According to GEI, most similarities between Bulgaria and Romania for 2018 are noticed in the entrepreneurship attitudes; there are same trends in three components: opportunity perception (opportunity identification), startup skills and risk acceptance. Identical results we distinguish for two of four entrepreneurship abilities (opportunity perception rather than necessity and, competition). All other nine components differ, most of them related to entrepreneurial aspirations. Romania scores are higher for high growth, internationalisation and risk capital (Figure 6).

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Figure 6 GEI scores of entrepreneurship dynamics in Bulgaria and Romania for 2018

(scores of 14 pillars in percentage)

Source: author’s compilation based on GEI 2018.

In 2018, Bulgaria ranks at 69 with an overall GEI score of 28%, an individual score of 47% for individual entrepreneurial qualities, and an institutional score of 52% for institutional entrepreneurship support. Main strong areas are process innovation scored 59% for businesses using new technology and having access to high-quality human capital in STEM fields, startup skills scored 51% in relation with perception and education, and networking scored 44% for a small entrepreneurship society. The country shows weaknesses in opportunity perception scored 14% meant on opportunity identification and business-friendly institutions, risk acceptance scored 19% both for individual risk-taking attitude and stability of institutional environment, and product innovation scored 20% as for new products development and technologies introduction, competition (21%), risk capital (22%), human capital (23%).

Unlike Bulgaria, Romania is better performing institutionally than on the individual level. The Romanian global rank is quite good as 46 in 2018 with an overall GEI score of 38%, an individual score of 66% and an institutional score of 48%. Many areas are evaluated as strong: internationalisation and risk capital (68%), startup skills (56%), product innovation (47%), technology absorption (46%), cultural support (45%), human capital (41%). The weakest areas are networking (19%) and risk acceptance (24%).

Surprisingly, in 2017, Bulgaria ranks as 82nd, which is under the middle European level and far away in the classification comparing to Romania (45th). Quite similar to 2018, the country is evaluated as a relatively good performer in

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process innovation, startup skills and networking and, a poor performer for product innovation, opportunity perception and high growth that assesses the business intentions and the capacity to grow. While some aspects of the Romanian entrepreneurship are better than the middle-level European situation as opportunity perception, internationalisation, and high growth, the networking seems again the weakest one.

As it could be expected with such rankings, Bulgaria stands in the most significant gains in GEI Score 2018 in comparison with GEI 2017. It takes the third position after the United Kingdom and Israel, followed by China. A difference of 13 positions in the ranking and 5.1 points in scoring is observed, respectively 27.8 in 2018 and 22.7 in 2017, opening a discussion on the reasons. More, the situation is rather different in 2016, when Bulgaria and Romania rank almost identically as positions, respectively 46 and 42. Still, they carry the same weaknesses and strong aspects as in 2017 and 2018. At the time it is noted that Italy’s ranking is worse than countries with socialist legacies as Bulgaria and Romania.

Studying the methodology, we remark that the individual variable way of calculation for Bulgarian score in 2016 is the average of the Romania and Macedonia’s data. In 2017, it is used the 2015 data and highlighted Bulgaria as a major outlier incident from the high error in TEA. By that time, GEM study starts for Bulgaria producing the first report 2015/2016. In 2018, the average data from 2015/2016 is still the source of GEI ranking.

As for Romania, GEI uses average 2013-2014 data in 2016, average 2014/2015 data in 2017 and still the same information in 2018. We observe that while the first Bulgarian GEM report is the 2015/2016 one and the second is the 2016/2017 one, Romania has its GEM reports from 2007 to 2010 that provide data for GEI.

Obviously, first, there is a mismatch between the periods monitored by GEM in Bulgaria and Romania, the GEI scores are not comparably founded on empirical studies and direct sources for the same periods; second, questions arise about the discrepancy of the 2016 GEI evaluations and the quality input data from GEM studies and results that provide information for 2017 GEI in Bulgaria, and third, in the studied period 2016-2018 it seems no progress is achieved as the weaknesses and strengths are quite the same for both countries with or without using GEM data.

These findings demand a cautious use of the GEI synthetic index for comparative analysis of the entrepreneurship in Bulgaria and Romania. It could be preferably used as a general orienteer taking into account that their data are not accurate and reliable from a comparative perspective. Further estimations are needed, and social researches could be resourceful to deepen the analysis of the quality and dynamics of entrepreneurship and its ecosystems.

Comparative analysis stating on Doing business entrepreneurship dataset

According to Doing Business entrepreneurship dataset, the Bulgarian and Romanian trends are mostly similar, especially after 2010; the number of newly created LLC in Bulgaria and Romania is increasing since 2014 to reach for the first time in the

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period under review 50 753 companies in Bulgaria and 73 889 companies in Romania. However, since 2012 Bulgarian new business density is regularly double to the Romanian one, respectively 10.89 and 5.61 in 2016 (Figure 7).

Figure 7 Number of New LLC Ranking and New Business Density Ranking of Bulgaria

and Romania 2008-2016

Source: author’s compilation based on WB Entrepreneurship 2009-2017.

Comparative analysis stating on Enterprises entrepreneurship performances

Pursuing the established methodological approach, we are comparing the entrepreneurial performance statistics indicators on enterprises, employment and wealth, provided by Eurostat (EIP).

Enterprises indicators

In 2012, total Bulgarian enterprises are 312 608, and Romanian ones are 425 731, which differs with 1.36 in favour of Romania. Almost the same difference (1.38) we observe in 2016 when their number increases respectively to 336 041 and 465 607. The highest rise of the enterprises’ number in both countries concerns those from 0 to 9 persons employed (Figure 8). For all the period there is only one case of decrease – the Bulgarian enterprises with 250 persons employed or more diminished with 11 companies.

Net business population growth of the total business economy (except holding companies) is first negative (2010 and 2011), and then gradually rises (1.19% in 2012 to 2.59% in 2016) for Bulgaria. In Romania, after negative tendencies (2009 and 2010), there is a rapid growth in 2011 with 35.47%, slightly negative in 2015 (-0.15%) and again positive in 2016 (3.21%).

The birth rate that presents the number of enterprise births divided by the number of enterprises active is a little upper in Bulgaria since 2012 when it is around 10% keeping it to 2015 except in 2013, and reaching 16.79% in 2016. For the same year, Romania comes again to 9.44% after being around 8% in 2013, decreasing from levels of 20% in 2009-2010. In the last years the birth rate is more pronounced in Bulgaria.

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Figure 8 Increase in enterprises number by size company in Bulgaria and Romania

2012-2016 (percentage)

Source: author’s compilation based on Eurostat.

In Bulgaria, the business churn that compiles employer enterprise’s birth and death rates and reflects business dynamics arises again in 2016 (29.27%) after several years at around 22%. In Romania, it is higher till 2013 (around 25-30%) then diminishes to levels of 19-20% (19.81% in 2016). So, we observe that Bulgaria maintains a slightly higher business dynamics for the period under review.

Figure 9

Survival rates of enterprises for 3 and 5-years in Bulgaria and Romania 2008-2016 (percentage)

Source: author’s compilation based on Eurostat.*No data for Romania in 2008.

After a pic in the survival rate in 3-years (number of enterprises in the reference period (t) newly born in t-3 having survived to t divided by the number of enterprise births in t-3) of Romanian enterprises in 2012 and 2013, and a decrease in 2014-2015, there is again a bond (64.35%) in 2016 (Figure 9).

Around 58-59% of the Bulgarian enterprises survive after three years in the last consecutive years (2014-2016). The percentage of survival companies in Bulgaria is more or less stable around 43-47% for all the period 2009-2016 (no

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data are available in 2008 for both countries). In 2016 Romania comes back to its levels of survival rates from 2009-2013 (40.55% in 2016).

The 3-years-old enterprises' share of the business population in Bulgaria stables on 6-7% in 2013-2016. It is around and less than 6% until 2015 for Romania. In 2016 suddenly the share increases to 9.85%. Both countries settle around 4.50% for 5-year-old enterprises' share of the business population with a slight preponderance for this period and better performance for the previous five years for Bulgaria.

Concerning the employment share of 3-year-old enterprises (number of persons employed in enterprises newly born in t-3 having survived to t, divided by the number of persons), it is around 4% for the last four years for both countries. When we investigate the 5-year-old enterprises, it is a little higher in Bulgaria (4.20% in Bulgaria and 3.03% in Romania in the last four years).

The average size of the three-year-old enterprises (number of persons employed in the reference period (t) among enterprises newly born in t-3 having survived to t divided by the number of enterprises in t newly born in t-3 having survived to t) is around 3.53% in Bulgaria for the last six years, 3.56% in Romania (3.40% in Bulgaria and, 2.88% in Romania in 2016). As for the 5-year old enterprises, it is around 4.5% for the last five years for both countries.

It should be noted that the picture differs for the ICT sector (Figure 10).

Figure 10 Increase in ICT enterprises number by size class in Bulgaria and Romania

2012-2016 (percentage)


The percentages of increase in ICT enterprises number are higher for Bulgarian total and enterprises from 0 to 249 persons employed then Romanian ones. Total Bulgarian ICT enterprises in 2012 are 9 286, while the Romanian are 17 508, a difference of 1.88. In 2016 their number increases, respectively to 12 646 and 22 012, a difference of 1.74, which is a slight drop. The highest rise in Bulgaria concerns enterprises from 0 to 9 persons employed (37.85%), and in Romania – enterprises with 250 persons employed and more (33.33%). It equals 20 Romanian companies more in 2016. As for Bulgaria, they are ten big companies more in 2016.

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Employment indicators

In the period 2013-2016, there is a constant definite increase in the number of employed persons for all Bulgarian enterprises categories (Figure 11). The increase is 4.73% for total enterprises in the period 2012-2016. The more significant augmentation goes to 7.65% for enterprises with 250 employed and more, followed by the enterprises with 0 to 9 persons employed - 4.82% (3.75% for enterprises from 20 to 49 persons employed, 3.12% for enterprises from 50 to 249 persons employed, and 2.08% - for enterprises from 10 to 19 persons employed). In Romania, the total increase is 3.65% for all the period, accompanied by some adverse developments for enterprises from 0 to 9 and 10 to 19 persons employed in 2014-2015. The Romanian situation is similar to the Bulgarian one – a most significant increase for enterprises with 250 employed and more (7.65%), followed by enterprises with 0 to 9 persons employed (4.82%). Still, the other results are lower (0.43% for enterprises from 20 to 49 persons employed, 1.23% for enterprises from 50 to 249 persons employed, and 1.01% - for enterprises from 10 to 19 persons employed).

Figure 11 Persons employed by size company in Bulgaria and Romania 2012-2016

(numbers)


Wealth indicators

In 2012 the Bulgarian value added is 38%, in 2013 - 35%, in 2014 - 36%, in 2015 - 42%, in 2016 - 41% of the value added at factor cost of the Romanian one as for the total business economy. Concerning the enterprises with 0 to 9 persons employed, it is 57% in 2012, 52% in 2013, 48% in 2014, 55% in 2015, and 51% in 2016 of the value added of Romanian enterprises. The data shows that in 2012 it is 47%, in 2013 - 42%, in 2014 - 48%, in 2015 - 54%, in 2016 - 43% of the value added of Romanian enterprises (Figure 12).

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Figure 12 Value added at factor cost of Bulgaria and Romania 2012-2016 (million EUR)

Source: author’s compilation based on Eurostat. *No data for Romanian bigger companies with up to 50 persons employed in 2012 and 2016.

The apparent labour productivity is gradually rising in Bulgaria with 20% for the period 2014-2016 (Figure 13).

Figure 13 Labour productivity by size class in Bulgaria and Romania 2014-2016

(thousands EUR)

Source: author’s compilation based on Eurostat.*No data is provided in 2016 for Romanian enterprises from 50 to 249 and 250 and more persons employed.

The gross value added per person employed is 10.5 thousand EUR in 2014, 12.0 thousand EUR in 2015 and 12.6 thousand EUR in 2016 for the total business economy. The most significant rise of productivity is for enterprises of 250 and more employees (26.90%), followed by enterprises with 0 to 9 persons employed (19.72%). In Romania for the same period, the rise is assessed to be only 4.11%

0%10%20%30%40%50%60%70%80%90%

100%


employed


employed


employed

From 50 to249 persons

employed


more

Romania 2016Bulgaria 2016Romania 2015Bulgaria 2015Romania 2014Bulgaria 2014Romania 2013Bulgaria 2013Romania 2012Bulgaria 2012

00 05 10 15 20 25

Total

From 0 to 9 personsemployed




250 persons employed ormore

Romania 2016

Bulgaria 2016

Romania 2015

Bulgaria 2015

Romania 2014

Bulgaria 2014

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for the total business economy, but it should also be noted that no data is provided for the more significant Romanian enterprises (size classes of 50 to 249 and 250 and more employed persons) in 2016. Still, the Romanian productivity as a whole is higher (14.6 thousand EUR in 2014, 14.0 thousand EUR in 2015 and 15.2 thousand EUR in 2016). If we compare available data for enterprises with 0-9, 10-19 and 20-49 persons employed, we observe that there is a difference in 2016 in favour of Romanian performances from 9.65% to 28.24% (9.65% for 20-49 persons employed, 19.05% for 10-19 persons employed and, 28.24% for 0-9 persons employed). However, if we compare the percentages of increases in labour productivity from 2014 to 2016, we notice that those of Bulgarian enterprises with 20-49 and 0-9 persons employed are more pronounced, respectively 15.15% and 19.72% against 9.65% and 14.74% for Romanian companies. The opposite situation we see for companies with 10-19 persons employed (23.76% is the Romanian growth and 10.53% - the Bulgarian one).

The Eurostat data for innovative enterprises (innovation core activities) in the population are available only for 2014 (Figure 14).

Figure 14 Innovative enterprises of Bulgaria and Romania in 2014 (by number and

percentage)


Total innovative enterprises in the population of Bulgaria and Romania is almost equal - around 3 700 enterprises; innovative Bulgarian companies exceed in quantity with 80. As numbers, Bulgaria and Romania are comparable (Figure 14). As a percentage, totally the innovative companies are 26% in the population in Bulgaria and less than 13% in Romania. As such, Romania is assessed as the least innovative country in Europe. In comparison, the entire innovative enterprises are 49% of the population of the European Union.

While the total Bulgarian export amounts 22 043 647 thousand EUR, the total Romanian export figures out 52 482 060 thousand EUR in 2014 (Figure 15), totally, the Bulgarian export is barely 42% of the Romanian; even that the number of Bulgarian export's enterprises (20 963) differs slightly from the Romanian one

00 10 20 30 40 50 60 70 80 90

0

500

1 000

1 500

2 000

2 500

3 000

3 500

4 000

Total From 10 to 49employees

From 50 to 249employees

250 employees ormore

Bulgaria#

Romania#

Bulgaria%

Romania%

88


(22 068). By revenue, Bulgarian companies make only 30% of the Romanian revenue for enterprises with fewer than ten employees, 37% for enterprises with 250 and more employees and, 49% for enterprises with 50 to 249 employees. The lowest difference in revenue (69%) is registered for enterprises with 10 to 49 employees. By enterprises’ number, only the Bulgarian enterprises that have fewer than ten employees export more, exceeding 23% the number of Romanian similar class export's companies.

Figure 15 Exports of Bulgaria and Romania in 2014 (by number of enterprises and

revenue)


Besides the above reviewed basic economic and entrepreneurship statistics and synthetic indexes, there could be a further interest to widen the research with comparisons adding evaluations and trends about the Bulgarian and Romanian innovation and entrepreneurship performances using data from other sources and relevant studies of national entrepreneurship developments. Supplement data leading to more comprehensive and complete comparative analysis such as EU Survey on the access to finance by enterprises (SAFE), Digital Economy and Society Index (DESI), also Eurobarometer Entrepreneurship in the EU and beyond 2012, EY Start-up Barometers, Startup nation score, European Digital City Index (EDCI), Executive Unit for Funding Scientific Research and Development and Innovation (UEFISCDI), Invest Europe, WEF Tech, and others could enrich the study.

It would be fortifying and accomplishing to complete data for the entrepreneurial communities and ecosystems taking into account the positive impact of factors as education, public policies, networks, role models and successful stories, finance access and risk investments maturity, (Hadjitchoneva, 2018a, 2018b). CESA, Business angels organisations, Risk Ventures Funds, Gust European accelerator report, Startup community events, National statistics institutions and, National banks could source it.

0,00

10 000 000,00

20 000 000,00

30 000 000,00

40 000 000,00

50 000 000,00

60 000 000,00

0

5 000

10 000

15 000

20 000

25 000

Total Fewer than10

employees

From 10 to49

employees

From 50 to249

employees

250employees

or more

Unknown

Bulgaria #

Romania #

BulgariaRevenue

RomaniaRevenue

89


Conclusions Similar Bulgarian and Romanian socio-economic backgrounds impact their

entrepreneurship performances and developments strongly. Comparable achievements or rather lack of such are perceived by different international and European indexes and datasets related to entrepreneurship and business. The dynamised entrepreneurship developments in recent years are still not enough visible and stable tendencies are not yet caught by the indexes. Numbers of weaknesses are accompanying both entrepreneurial contexts and developments at all levels and A’s triptych dimensions (attitudes-abilities-aspirations) that still suppose appropriate policies and decision-making.

Concerning the general economic context, Romania leads to Bulgaria in economic growth and internationalisation performances if we compare directly. Otherwise, Bulgarian ranking and scoring predominantly excel over Romanian in innovations, technology readiness, and macroeconomic environment according to the specialised composite indexes. So, summarizing we observe some controversial performances and trends: mainly overall better Bulgarian performances related to the three competitiveness sub-indexes (CGI); definitive better Bulgarian innovations performances (GII); Romanian better national innovation systems’ performance (EIS); easier to doing business in Bulgaria till 2015, easier to doing business in Romania after 2015, easier to starting a business in Romania, except in 2019 (DB). Thus, innovation aspects are in favour of Bulgaria; there are growing trends for innovation performance since 2015, even that both countries are classified as modest European innovators.

Bulgaria and Romania are assessed to have relatively good skills needed to start a business, based on their perceptions and the availability of tertiary education (GEI). Still, networking is well developed in Bulgaria, but Romanian entrepreneurs take advantage of stronger cultural support.

Romania has distinctive advances when comparing the increase in enterprises numbers for companies with 250 and more, and those with 0 to 9 persons employed, while Bulgaria marks a negative trend for big companies but excels for companies with 10 to 49 persons employed. The new LLC business density in Bulgaria is distinguishing higher. The Bulgarian entrepreneurial tissue is traced by comparatively significant rises of ICT enterprises, except for the companies with 250 and more persons employed where Romanian double. The quantity of the innovative enterprises equals in both countries, but as a percentage, Bulgaria is scoring much higher. Comparing the survival rates of enterprises for 3 and 5-years, we notice that trends differ mostly; Bulgaria maintains consistently flat trends, which is not the Romanian case marked with fluctuations. For five years the countries progress rather modestly at all level of companies' employment.

The internationalisation of the Romanian companies is quite robust and, risk capital access to finances appears to be better. Romania has definitive advances when comparing value added – twice more significant then Bulgarian, and for labour productivity. The quantity of the exporting companies is also the same, but

90


the revenue of the Romanian business is higher for all size companies. Solely the big enterprises perform triple.

Quite obviously the study confirms that stronger reforms are needed to ease the starting a business and enhance entrepreneurship. Almost the same institutional challenges meet both neighbouring countries. Continuing efforts and policies to diminish institutional barriers on businesses are crucial for managing existing inherited and modern economic and business context’s gages. Positive entrepreneurship developments in recent years still need to emphasis on the changes in cultures, primary for entrepreneurial activities. Consistent and persistent endeavours are critical to unlocking the hidden entrepreneurial potential of the economies of Bulgaria and Romania. Further inferences could be useful to formulate froofm an enlarged and deepened research on the policies and practices of Bulgarian and Romanian entrepreneurship ecosystems developments.

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