Rural entrepreneurship in EuropeA research framework and agenda

Sophia Stathopoulou, Demetrios Psaltopoulos and Dimitris SkurasDepartment of Economics, University of Patras, Patras, Greece

Keywords Rural areas, Entrepreneurialism, Europe

Abstract The present work provides an integrated view of rural entrepreneurship and sets theagenda for future research in the area. Rurality defines a territorially specific entrepreneurialmilieu with distinct physical, social and economic characteristics. Location, natural resources andthe landscape, social capital, rural governance, business and social networks, as well asinformation and communication technologies, exert dynamic and complex influences onentrepreneurial activity in rural areas. Rurality is viewed as a dynamic entrepreneurial resourcethat shapes both opportunities and constraints. Rural entrepreneurship is depicted as a three-stagesequential process highly influenced by specific territorial characteristics. The proposed researchagenda addresses issues related to theoretical studies concerning entrepreneurial processes in ruralareas and more applied issues concerning the formulation of integrated and competent policiessupporting entrepreneurship in such areas.

IntroductionIn recent years, significant changes have been observed in the rural areas of theEuropean Union (EU). These changes mostly concern agricultural policy reforms, thereform of the EU Structural Funds and the strengthening of rural development policies,international trade liberalisation, and (more generally) the processes of globalisation,technological change and localisation. Within the context of these developments, theEU has attempted to ensure an economically efficient and environmentally sustainableagriculture and to stimulate the economic diversification and the integrateddevelopment of rural areas (Commission of the European Communities, 1997a),especially through the so-called “second pillar” of the Common Agricultural Policy(Lowe et al., 2002). Recent and forthcoming developments at the agricultural policylevel and especially the reduction of market support are not expected to affectEuropean rural areas equally. More developed rural areas of the centre, characterizedby relative proximity to the markets and a diversified economic base cannot really beassociated with a potential dramatic adjustment process. On the other hand, remoterrural areas of the periphery including mountainous and less favoured areas, stillcharacterized by depopulation, infrastructural inadequacies and high dependence onfarming, are definitely prone to significant adjustment processes, which wouldcertainly affect their already fragile socio-economic fabric.

Rural under-development in lagging and less favoured areas is detected by a varietyof symptoms and causes a range of problems quite distinct from conventional ruraldevelopment issues. In these areas, the need for economic diversification and

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This publication derives from a FAIR project (FAIR6-CT4169) funded by the EuropeanCommission and entitled “Entrepreneurship in the Mountainous Areas of Southern Europe –EMASE”. The authors are grateful to the editor and two anonymous reviewers of this journal fortheir substantive comments.

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International Journal ofEntrepreneurial Behaviour &ResearchVol. 10 No. 6, 2004pp. 404-425q Emerald Group Publishing Limited1355-2554DOI 10.1108/13552550410564725

integrated development is even stronger, as agricultural adjustment is expected toreduce employment opportunities in farming and increase dependence on welfaretransfers. On the other hand, several opportunities emerge, including increaseddemand for recreation and amenities and quality products from the food and lightmanufacturing sectors. Furthermore, several mountainous rural areas are experiencingsignificant inflows of new residents. This migration consists of lifestylers, retiredpeople and businessmen, all attracted by local conditions, personal choices and theprospect of a better standard of living. These population movements afford ruralcommunities with new investments and an enhanced income, as the newcomers bringentrepreneurial talents, experience, market knowledge and capital to these areas.

Traditional approaches to the development of lagging rural European areas havebeen focusing on combating the main environmental and economic weaknesses andconstraints, by unravelling the factors leading to isolation and providing conventionaldevelopment instruments focused on capital funds (Efstratoglou and Psaltopoulos,1999). The creation of competitive small and medium enterprises (SMEs) especially inthe secondary and tertiary sectors seems a substantiated answer to the problemsinduced by the expected agricultural adjustment. Along these lines, the mobilisation oflocal resources in order to support comparative advantages, and local entrepreneurshipand innovation constitute development strategies that certainly need to be explored(Pezzini, 2001). Recently, the factors influencing (strengthening or threatening)entrepreneurship in rural areas have been analysed more closely (Jack and Anderson,2002). Research on rural entrepreneurship is relatively sparse and thus a deeperknowledge of the processes fostering or inhibiting it will bridge this research gap.Research into the operation and effects of entrepreneurship will certainly assist thedesign and implementation of future development policies and will allow the use ofmore selective and flexible instruments supporting entrepreneurship.

Thus, the objective of this paper is to present an integrated and coherent frameworkthat will facilitate future research in entrepreneurship, especially in mountainous andlagging rural areas of Europe. As in similar papers that have attempted to offer aresearch agenda for entrepreneurship (Low and MacMillan, 1988; Ucbasaran et al.,2001), this paper will review the process and contextual issues associated with theentrepreneurial phenomenon in lagging rural areas. We argue that the basicentrepreneurial processes in rural areas are not different to those found in urban areas.However, rurality reveals diverse opportunities, imposes different constraints andfinally modifies the entrepreneurial process and alters the entrepreneurial outcome.Thus, as opposed to similar previous studies the present work places more emphasison contextual issues and assigns particular importance to the concept of rurality asencompassing a dynamic entrepreneurial resource.

In this framework, the entrepreneurial process is at the centre of a theoretical modelthat attempts to account for all influences imposed by rurality as an entrepreneurialmilieu. The next section of this work attempts to review and integrate contemporarycontributions to all those factors that characterize rurality and contribute to thecreation of a rural entrepreneurial milieu. Taking account of existing conceptualshortcomings, the third section provides an integrated framework for the analysis ofrural entrepreneurship, which deals with both entrepreneurs and the entrepreneurialprocess in rural areas. The concluding section includes both areas for future researchand initial policy recommendations.

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Rurality as an innovative and entrepreneurial milieuRurality is a widely defined concept. Rurality may be defined in traditional descriptiveterms including the level of population density, the rate of population loss or gain,settlement size, local economic structure and landscape (Skuras, 1998). Populationdensity and settlement size is the most widely quoted and official measure in Europeanadministration. At a European Union level, lagging rural areas, the so-called 5b areasof the 2nd Community Support Framework, were designated using a range of economiccriteria. Contemporary approaches to define rurality however, avoid traditionaldefinitions and rely on more modern and vague views of rurality as a dynamicentrepreneurial resource (Bryant, 1989) or as an abstract “social representation”, a setof rules and resources existing out of space and time and drawn upon both discursiveand non-discursive actions (Halfacree, 1995).

Rurality offers an innovative and entrepreneurial milieu in which rural enterprisesmay flourish and prosper or become inhibited. This section examines the dynamiclinkages between the rural milieu and entrepreneurship in the light of the mostcontemporary retrospect on rurality. Camagni’s concept of the “innovative milieu” wasfirst applied to European lagging areas (Camagni, 1995), and its applicability was latterextended to rural and peripheral areas in the UK. (Mole and Worrall, 2001; North andSmallbone, 2000a,b). Camagni (1991; 1995) used the term “innovative milieu” todescribe areas that have an environment conducive to innovation and defined them ashaving, first of all, strong elements of local entrepreneurship (Camagni, 1995, p. 318).When the combined level of entrepreneurship and innovation is high, it produces apowerful spur to local development. Elements of rurality viewed as an externalphysical and socio-economic environment are important conduits of opportunities aswell as weaknesses to local entrepreneurship and innovation. Rurality and theentrepreneurial process form a dense, complex and dynamic netting of mutualinfluences and thus, the separate presentation of each of the dimensions of ruralityinteracting with the entrepreneurial process is applied in this work because itfacilitates the clarification of an entrepreneurial paradigm in rural areas. For purposesof presentation, we may assemble the elements of rurality affecting the entrepreneurialprocess into three major groups: factors unveiled by the physical environment andfactors revealed by the dynamics of social and economic structures.

The physical environmentThree major features of the physical environment highly affect entrepreneurship:location, natural resources and landscape. Location is related to the distance frommajor markets and accessibility to customers, suppliers, information sources andinstitutions. Distance and proximity to main urban centres affect transportation costsof inputs and outputs and have implications on information dissemination and thediffusion of policy instruments. This constitutes an important shortcoming, as itcontributes to rather “uncompetitive” transaction costs, hinders economies of scale andthe diffusion of certain forms of new technology and limits labour movements. Thischaracteristic influences both interactions between rural less favoured and urban areasand the balance between tradition, modernization and migration, all being factors thatsignificantly influence sustainable rural development (Ruoss and Thompson, 1999).The remoteness of a rural location has its effect on different aspects of businessinnovation and consequently on rural business growth and the creation of employment

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(North and Smallbone, 2000a). Keeble and Tyler (1995) argue that accessible rural areaspossess economic, physical and institutional characteristics that enable enterprisingbehaviour to occur more readily, and Phelps et al. (2001) suggest that accessible rurallocations offer a possibly unique and complementary relationship between access toboth pecuniary and technological externalities at the scale of conurbations.

On the other hand, the existence of important natural resources, the climate and thetopography-relief of the area as well as the landscape affect entrepreneurial activity bypresenting opportunities for the environmentally sound utilization of resources.Distance and remoteness have favoured the preservation of unique landscapes andenvironmental features, important traditions or traditional methods of production thatmay give rise to entrepreneurial opportunities.

The social environmentFrom those socio-economic factors which affect entrepreneurship and which are closerto the “socio” side of the term, one may distinguish social capital, governance, andcultural heritage. The contemporary connotation of social capital refers to qualitativecharacteristics of civic society, centred on certain social values and norms supportingassociational behaviour, networks of cooperation and civic activity (Commins andMeredith, 2002). Social capital offers a useful umbrella term for those aspects of societywhich, though difficult to measure, are seen as important determinants of long runeconomic success (Temple, 2001). Whiteley (1998) defined social capital as “thewillingness of the average citizen to trust others” and concluded that, given high levelsof social capital, citizens are likely to imitate or accept technological innovation, and tobe considerably less averse to risk than individuals living in societies with low levels ofsocial capital. Furthermore, Knack and Keefer (1997) used indicators of trust and civicnorms to reflect social capital proxies in a sample of 29 market economies and foundthat such dimensions of social capital are stronger in countries with higher and moreequal incomes, and with formal institutions that protect property and contract rights.Cooke and Wills (1999) found that, for a sizeable proportion of programme-fundedfirms in Denmark, Ireland and Wales, social capital building was associated withenhanced business, knowledge and innovation performance.

Social capital is directly linked to both the operation of business and other networksas well as to the quality of local governance. Clustering of industries, networking andcommunication outside formal channels, and linkages between firms and institutions,all contribute to a trustful sharing of information and a consequent build up of socialcapital (OECD, 2001). Putnam (1993) stressed the idea that social capital is an essentialprerequisite when investigating conditions for establishing responsive and effectiverepresentative public institutions. Often, less developed rural areas are steeped incultural traditions in which social trust, norms of reciprocity, i.e. people’s willingness towork for the welfare of others when they feel assured that their own altruistic actionswill be rewarded at some time in the future, networks of cooperation and civicengagement have been largely absent (Wall et al., 1998).

According to Goodwin (1998), rural governance may be described as: a complex setof institutions and actors compiled by government authorities, agencies andnon-govermental organizations (NGOs); the blurring of boundaries andresponsibilities for tackling social and economic issues; the power relations betweeninstitutions involved in collective action; the autonomous aspects of self-governing

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networks of sectors; and finally, the accomplishment of set goals without theinvolvement of direct authority. Le Gales (1998), in an urban context, definesgovernance as the capacity to integrate and give form to local and regional interests,organizations, and social groups. Thus, the meaning of governance transcends whathappens to organizations in a region, it addresses issues related to the capacity torepresent regions and organizations outside the region, it develops more or less unifiedstrategies and organizes collective action, it builds coalitions and partnerships directedtowards specific goals. Local governance representing the notions of new agglomerateforces at a local level is one of the fundamental elements of what has been described inthe international literature as “untraded interdependencies” (Storper, 1997), i.e. thenotion that a firm’s activities are not carried out individually but work towards takingup formal and informal information networks, relations through local labour markets,and common conferences and rules for developing infrastructure and understandingthe processes of knowledge accumulation (Keeble and Wilkinson, 1998; Keeble et al.,1999), “institutional thickness” (Amin, 1999), “institutional capacity” (Healey, 1997) or“qualities of interaction networks” (Lasko and Kahila, 2001). Such forces may facilitateentrepreneurship by creating a business environment favouring innovation, assistingentrepreneurship and appeasing locational, environmental and economic obstacles. Incontrast, the absence of such forces may restrain entrepreneurship. Finally, as Loweet al. (1993) argue, where a strong regulatory framework exists then public sectorplanners and state agencies act as the gatekeepers of the development process. In thelight of the territorial development of business, institutional factors may preventexternal competitors from imitating unique regional factors that underpinentrepreneurial opportunities (Malmberg and Maskell, 1997).

The richness of European culture provides a plethora of territorially traceable signsand symbols which may be used to market local culture in the process of culturaldelocalisation (Ilbery and Kneafsey, 1999; Kneafsey et al., 2001). Valorisation, i.e. theprocess of exploiting local potential, has been highly confined in the utilisation of localquality added value by using local breeds or varieties, local materials or specialenvironmental conditions, or even human input and know how. To this end, Ray’s(1998) argument on the need to commoditise local culture and revalorise place throughits cultural identity is a potential strategy for the development of ruralentrepreneurship and innovation. Indeed, several researchers have noted that onepotential development strategy for marginal rural areas lies in the arena of quality foodmarkets (AEIDL-LEADER, 2000; Barham, 2003; Ilbery and Kneafsey, 1998). Onepossible strategy within the broader market of quality products would be to promotespecialty products, which have a distinct territorial, local and/or regional, identity. Inthis way, the promotion of regional food can be achieved through the commodificationof local culture and the promotion of regional cultural images. Linking products to“cultural markers” or local images such as cultural traditions and heritage enhancesthe product’s value because consumers come to identify certain regions with certainproducts. Of course, fluid and inclusive notions of the “local” may defy the effortsaiming at creating and maintaining distinctive food identities for local places (Hinrichs,2003). Goodman (2003) argues that in Europe the turn to food quality, being associatedwith alternative agro-food networks, has provided significant opportunities for newentrepreneurial activity in a new economic space, more capable of withstanding thedisembedding forces of globalisation.

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The economic environmentFrom those socio-economic factors that affect entrepreneurship and which are closer tothe “economic” side of the term, one may distinguish investments in infrastructure, theexistence and operation of business networks and the level of information andcommunication technologies operating in the area. Remoteness and consequently hightransportation and subsequent high transaction costs have traditionally imposedsignificant constraints in the establishment of competitive enterprises in rural areas,because they limit accessibility not only to suppliers, but also to customers and newmarkets. This implies that the enterprises established in such places are not ascompetitive as those established in suburban or urban regions. Infrastructure caninfluence rural economic performance in three ways: expanding the use of existingresources, attracting additional resources to rural areas and making them moreproductive (Fox and Porca, 2001). Adequate infrastructure may attract newenterprises, while the expanded level of economic activity may offer employmentopportunities and increase regional output. Rural entrepreneurs consider investmentsin infrastructure as a highly desirable feature and a real need for the development ofentrepreneurship in rural areas (Skuras et al., 2000). Finally, it is worth mentioning thatimprovements in transportation have, in many cases, been seen as a two-edged swordfor rural areas. Improved transportation exposes the local economies of rural laggingareas to the wider non-local economic environment, reduces the output of several localsectors and increases imports, and results in economic leakages that reduce the totalbenefits of economic growth for the local population.

Business networks are important determinants of business performance andresearch in this area has yielded a number of important findings (Hoang and Antoncic,2003). A network is a structure in which a number of nodes are related to each other byspecific threads (Hakansson and Ford, 2000). Both threads and nodes are rich inresources, knowledge and understanding as a result of complex interactions,adaptations and investments within and among firms over time. Business networkingis also a social structure that exists only so far as the individual understands and usesa network (Johannisson, 1995; Monsted, 1995; Chell and Baines, 2000). Other definitionsof business networks and networking tend to focus on the issue of relationships createdamong businesses. In that sense, business networks are defined as “an integrated andco-ordinated set of ongoing economic and non-economic relations embedded within,among and outside business firms” (Yeung, 1994). Several researchers (Aldrich et al.,1987; 1989; Sanders and Nee, 1996) argue that networks and their surroundings(resources, actions, support) are useful when it comes to starting new firms, and thus,social networks motivate entrepreneurship.

Informal business interactions are based on trust, friendship or family relations.The so called “personal network perspective”, focuses on entrepreneurship asembedded in a social context, channelled and facilitated or constrained and inhibitedby people’s positions in social networks (Aldrich and Zimmer, 1986). In contrast,formal networks are composed of business entrepreneurs, banks, accountants,creditors, legal representatives and trade associations (Littunen, 2000a). Personalnetworks are considered central canals for accessing information that is often useful,exclusive and valuable, as it might come from distant and different parts of the socialsystem (Granovetter, 1974; 1985). Enduring personalized relationships convert trustand asymmetrical power into assets that create exclusivity in individuals dealing with

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each other (Kalantaridis, 1996). The family network is a special example of a socialnetwork that is of great importance to the periphery. It admits employees recruitedfrom the family and provides emotional support (Bruderl and Preisendorfer, 1998).

It is acknowledged that especially for SMEs, which are the dominant form ofenterprise in rural lagging and peripheral areas, firms can overcome some of theassumed disadvantages of limited size through accessing and utilizing externalresources in the network (Havnes and Senneseth, 2001). A number of studies indicatethat highly networked small businesses outperform other small businesses (Ostgaardand Birley, 1996; Barkham et al., 1996), and facilitate foreign market development(Johnsen and Johnsen, 1999) and innovation (Dickson and Hadjimanolis, 1998; Freel,2000). Littunen (2000a) found that networks internal to a firm create competitiveadvantages, innovation and efficiency, and networking contributes to the firm’ssurvival. Thus, networking serves or sustains long-term business objectives. Contraryto this position, other studies have failed to reveal any relationship betweennetworking characteristics and business performance (Johannisson, 1995). Havnes andSenneseth (2001) suggest that networking is not associated to high growth inemployment or total sales but there is evidence implying that networking affects therate at which the geographic extension of the firm’s markets occurs.

Another important feature of rural business networks concerns their spatialexpansion. The terminology of vertical and horizontal networks first appears inMurdoch (2000) with the term “vertical networks” referring to those networks linkingrural spaces into the agro-food sector and the term “horizontal networks” referring tothose networks that link rural spaces into more general and non-agricultural processesof economic change. This is a clear sectoral view of network operation with an obviousfocus on the agro-food sector. Building on Murdoch’s (2000) suggestion that theconcept of network can provide a new paradigm of rural development, Kneafsey et al.(2001), have, in a sense, redefined the concept provided by Murdoch and adapted it to aculture economy framework giving it a more spatial focus. According to Kneafsey et al.(2001), vertical networks allow local enterprises to forge alliances with externallylocated consumers, suppliers, distributors, retailers and institutions and arefundamental to the long term prosperity of a marginal (peripheral) region. On theother hand, horizontal networks provide relationships with locally-based producers,institutions, and consumers. Commodity networks are a special variant of networksputting the focus on webs of interdependence that exist among different actors in therural economy (O’Neill and Whatmore, 2000). Commodity networks integrate verticaland horizontal dimensions of commodity movement overcoming problems associatedwith supply chains and circuits (Whatmore and Thorne, 1997; Murdoch, 2000) andtherefore can be seen as a fusion of ideas from commodity chains and geographies ofconsumption (Crewe, 2000; Hughes, 2000).

It is widely acknowledged that Information and Communication Technologies(ICTs) have an important role to play in helping SMEs in less favoured areas(Commission of the European Communities, 1997b). Storper (1997, p. 28) distinguishesthe three most important “metacapacities” of modern capitalism, i.e. the newcapabilities of contemporary capitalism, which are all related directly or indirectly todevelopments in communication technologies. The first refers to the revolution inproduction, information and communication technologies, permitting a vast expansionof the operation and sphere of control of firms, markets and institutions. The second

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refers to the extension and social insight into the logic of market relations, in partfacilitated by the technological leap and especially the lower prices oftelecommunications. The third combines the effects of the previous two and refersto the expansion of the “grid” of modern organizational methods, bureaucratic rule andcommunicational processes to additional dimensions of economic and non-economiclife. Richardson and Gillespie (2000) suggested that in many rural areas, lower levels ofmobility and awareness of alternatives have developed a confined/limited marketplacecharacterised by higher levels of protection than in the more competitive urbanisedenvironments. The move in the direction of the Society of Information and theutilisation of opportunities offered by ICTs will gradually eliminate the boundaries oflocal markets and expose economic activity to greater competition from the outside(Grimes, 2001; Hetland and Meier-Dallach, 1998) and will enhance the learningcapacities of rural areas by improving access to relevant information (Grimes, 2000).

Taking into account that the limited scale and scope of local markets forces ruralentrepreneurs to develop innovative products and effective marketing to compete withurban-based counterparts (Smallbone et al., 1999), ICTs hold a central role in the thisprocess. On the other hand, areas which fail to participate in developments in ICTs riskincreasing marginalisation (Gibbs and Tanner, 1997). Adoption of ICTs by small ruralbusinesses is also highly dependent upon external pressure and organizational size(Premkumar and Roberts (1999).

Recent research findings underline the importance of proper ICT use for the growthof entrepreneurship in rural areas. Mitchell and Clark (1999) consider adoption of ICTsby firms in rural areas and conclude that rural economies can best be seen as havingtwo tiers, the upper consisting of ICT-intensive outward-oriented firms with extensiveextra-regional and, in many cases, international linkages. Ba et al. (2000) argue thatICTs may benefit small business entrepreneurs by developing core competencies, incollaboration with other small firms with the purpose of designing productsspecifically aimed to suit the unique taste of customers in order to compete efficientlywith larger firms. Berkeley et al. (1996) found significant disparities in the adoption ofICTs among rural SMEs in England, which were the result of awareness and trainingas well as infrastructure, investment costs and business size. Telecommunications canalso deliver advanced, urban-based financial services to rural areas, improve ruraleducation, unite rural residents with common interests across wide areas andstrengthen rural entrepreneurship (Marshall, 2001). Entrepreneurial attitudes towardsICTs were also found to be an influential factor for the adoption of ICTs among smallfirms in five regions of the UK (Blackburn and McClure, 1998).

Traditional economic activities in rural areas (farming, fisheries, and mining)remain at the heart of the context within which rural entrepreneurial activity takesplace. The importance of the farming sector, for example, is multi-faceted. Firstly, thefarming sector provides the raw material for many of the entrepreneurial activitiesconcerned with the food and drinks industry, an industry that is highly localized.Secondly, the farming sector is an extremely important pool of nascent entrepreneursespecially when on farm value adding activities (eg. cheese making on dairy farms) andon farm diversification activities (e.g. agri-tourism) are concerned (Damianos andSkuras, 1996). Finally, the farming sector directly affects and shapes the physical,social and cultural environment of rural areas and provides the context within whichentrepreneurial opportunities emerge.

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A framework for studying rural entrepreneurshipA significant amount of research effort has been devoted in defining the meaning ofentrepreneurship and of the entrepreneur in business economics, sociology,psychology and many other scientific disciplines. Despite the importance assignedto the meaning of entrepreneurship in general, efforts to define rural entrepreneurshipand specify its influential factors have been an even more difficult task, due to a seriesof issues mostly related to the differential forces and impacts exercised by rurality asan entrepreneurial milieu. Hoy (1983) noted that a popular image of a ruralentrepreneur is that of someone who is “ . . . independent, risk-taking,achievement-oriented, self-confident, optimistic, hard working and innovative” andhe stressed the fact that entrepreneurship in a rural context is focused upon creatingnew employment opportunities in rural areas, via the generation of new ventures.Wortman (1990) also developed an interesting definition of rural entrepreneurship, asthe creation of a new organization that introduces a new product, serves or creates anew market, or utilizes a new technology in a rural environment. This particulardefinition encompasses the elements of innovation and creation that can be expected toaffect the wider community within which the entrepreneurial activity takes place. It isargued, however, that due to the fact that the term rural has outlived its usefulness,research should shift its focus onto territories in rural locations and marginalised socialgroups living in rural locations (Ray, 1999). In that sense, a rural entrepreneur issomeone living in a rural location and the difference between them and an urbanentrepreneur may be found in the effects of rurality on the entrepreneurial process.

In this work, we simplify the acknowledgeable complex entrepreneurial process to athree-stage sequential process depicted at the centre of Figure 1.

The stage of conception refers to the activities leading the entrepreneur to discernan existing or create a totally new economic opportunity. The stage of businessestablishment portrays the entrepreneurial decision to exercise the option of theperceived opportunity observed in the first stage and realise it. At the third stage, theentrepreneur evaluates business performance by comparing achievements to his/herindividual targets and objectives. It is really important to note that conventionalentrepreneurial aims and measures of business performance sometimes come late inthe agenda of entrepreneurial objectives (Greenbank, 2001), since in disadvantagedrural areas establishing a new venture is the only way of providing employment tomembers of the entrepreneur’s family. One should however, also take into account thefact that a growing number of rural entrepreneurs elect to follow a lifestyle, which,while it allows them to make a living, it also permits them to derive personalsatisfaction from their businesses, a goal quite removed from the conventionaldefinition of the ‘rational’, ‘profit maximising’ entrepreneur found in mainstreameconomic theory.

The successful completion of each of these stages depends on entrepreneurialcharacteristics and on the physical, social and economic environment within which theentrepreneurial process takes place. This, of course, happens in a dynamic andinteractive way where entrepreneurial characteristics are shaped by and, at the sametime, exercise influences on the external environment. The lower part of Figure 1captures the main entrepreneurial characteristics at each stage of the entrepreneurialprocess while the top part depicts the influences of rurality as an entrepreneurialmilieu. The ability to conceive an economic opportunity that may possibly lead to the

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establishment of a new venture is highly influenced by the accumulated human capitalcharacteristics of the entrepreneur (Davidson and Honig, 2003). Personality traits,social networks, and prior knowledge (Ardichvili et al., 2003) as well as social capitaland community entrepreneurial culture (Davidson and Honig, 2003; Morrison, 2000)are antecedents of entrepreneurial alertness, a necessary condition for the successfulopportunity identification.

If the entrepreneur decides to exercise the option and realise the conceived venture,then one or more of the characteristics describing the entrepreneur through the historyof entrepreneurial thought may be extremely important depending on the type of thenew enterprise. Thus, at that stage, an entrepreneur may exhibit: risk taking attitudes(Cantillon, 1931; ThUnen, 1826; Mill, 1848; Hawley and Fujii, 1994; Knight, 1921; Mises,1951; Cole, 1959), a high ability to innovate (Schumpeter, 1934; Baudeau, 1768;Bentham, 1793; von Schmoller, 1914; Weber, 1958; Sombart, 1913), features ofindustrial leadership (Say, 1803; Saint-Simon, 1813; Walker, 1866; Marshall, 1930;Wieser, 1994), abilities to co-ordinate the employment of factors of production (Walras,1877; Wieser, 1994; Clark, 1998; Coase, 1937), abilities to supply financial capital(Smith, 1776; Turgot, 1774; Pigou, 1912), sharp decision making (Schultz, 1961;Cantillon, 1931; Menger, 1938; Wieser, 1994; Walker, 1880; Keynes, 1936; Mises, 1951;Shackle, 1970; Cole, 1959), managerial and supervising abilities (Say, 1803; Mill, 1848;Marshall, 1930; Menger, 1938), the ability to contract factors of production (Bentham,1793) and the ability to allocate resources into various uses (Cantillon, 1931; Kirzner,1973; Schultz, 1961).

Figure 1.A three-stage

entrepreneurial process inthe rural milieu

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At the third stage, the most important entrepreneurial characteristics are the humancapital characteristics, which will allow the entrepreneur to monitor, assess andevaluate his/her business performance in relation to entrepreneurial objectives. It isimportant to note that during the different phases of entrepreneurship, theentrepreneur’s personality and personal relationships change as an effect of learningprocesses (Littunen, 2000b). The same entrepreneurial characteristics will enable theentrepreneur to re-consider and reflect on achieved business performance, possiblyre-orient business objectives and targets and review business strategies, if needed.Each stage of the entrepreneurial process is influenced by the geography of the area inwhich this takes place and thus it is specific as far as territory as well as the individualare concerned.

The framework presented in Figure 1 is nothing more than a visual representationof the entrepreneurial process assisting us to understand the effects of the variousdimensions of the rural milieu, presented in the immediately previous section, on eachone of the stages of the entrepreneurial process. For example, proximity andaccessibility to markets, sources of information and institutions are far more a seriousproblem to the rural entrepreneur than it is to his urban based counterpart. Toovercome this problem, the rural entrepreneur has to develop either more intense anddifferentiated use of traditional business networks and C&ITs or to develop innovativeactivities that ameliorate his disadvantaged location by making use of the distinctivesocial and economic environment of his rural area.

A research agendaThe framework presented above clearly shows that, in order to understandentrepreneurship, research should not consider the rural entrepreneur in isolation butalso investigate the wider economic, social and institutional context within which theentrepreneurial process takes place. Understanding this process will allow the effectivedesign, delivery and implementation of competent entrepreneurial policies in rural andlagging areas, therefore, these are the two major streams of our research agenda.

Basic research: understanding the processesA number of researchers have attempted to examine entrepreneurship in rural areasusing a wide number of theoretical research frameworks drawn from a variety ofscientific disciplines including entrepreneurial management and businessdevelopment, economics, sociology and geography. In this section, we drawattention to contemporary approaches such as the “Actors Network Theory” and“Culture Economy” developed within the discipline of economic geography, and“Structuration Theory” developed within the discipline of sociology.

The Actors Network Theory seeks to understand economic structures as theoutcomes of active attempts to construct and maintain power relations. In that respect,it seeks to bridge the micro-macro dualism by focusing on the heterogeneous sets ofrelationships, i.e. the links or ties between the component parts of the economy thatconfront or enhance the capacity to launch an entrepreneurial activity (Murdoch, 2000).Lockie and Kitto (2000) argue that the Actors Network Theory is a useful theoreticalframework for the understanding of entrepreneurial processes in rural areas byaddressing the most relevant questions in entrepreneurial research such as who is ableto promote entrepreneurial targets and achieve the best interest, what strategies or

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practices are used, what technologies are invented, what institutions are created. Inthat respect, the entrepreneur is an actor processing information and devisingstrategies to deal with other actors and enrol in networks including, besides otheractors, products, finance, technology, knowledge and infrastructure, when the choiceoffered to him/her is better than other choices (Busch and Juska, 1997). According tothe Actors Network Theory, the entrepreneur as an actor directly representshimself/herself economically in the market arena, and politically in the arena ofregulation. In that sense, the Actor Network Theory has close parallels with theregulation theory.

The culture economy approach emphasises territorially-based resources, networksand partnerships, the localisation of economic control and the revalorisation of placewhen elements and markers of its cultural identity are used. The term culture refers toa set of place-specific forms regarded as resources available for social and economiccontrol, forms that are partially re-organized at the geographical level ofculture-territory (Ray, 1998). The term economy denotes the ability to create andrealise relationships between resources, production and consumption (Ray, 1999), andthus directly refers to the ability to create “enterprises”. Besides attaching territorialidentities to products, places themselves may be commodified (Cloke, 1993; Marsdenet al., 1993). Rural entrepreneurs may commodify the countryside either by simplyidealizing the rural way of life as opposed to urbanized industrial life or by recreatingpre-industrial landscapes and reproducing pre-industrial commodities, services andamenities (Mitchell, 1998). The former is basically a promotion strategy while the latteris a diversification business strategy providing enterprises with a comparativeadvantage. Taking into account that localities are fluid, multi-faceted and dynamicterritorial entities, neither culturally nor socio-economically homogenous (Ray, 2000),commodification offers an extremely wide range of entrepreneurial opportunities. Onesuccessful policy response to these entrepreneurial opportunities may be found in theintroduction of products of denominated origin (PDOs) and products of geographicindication (PGIs). This policy re-establishes the link between place and product andcertifies the production of commodities bearing specific characteristics that are highlyvalued by consumers (Skuras and Vakrou, 2002; Dimara and Skuras, 2003).

Giddens’ theory of structuration has been used as a theoretical framework exploringand developing the concept of entrepreneurship as an embedded socio-economicprocess, i.e. a process drawing from the social context which shapes and formsentrepreneurial outcomes (Jack and Anderson, 2002). Giddens (1984) views structuresas the products of social systems and awards them a formative position in socialaction. Embedding mechanisms allow researchers to link structure and agency in adynamic relationship which, in turn, facilitates an examination of how societalinfluences shape entrepreneurial agency and of how agency redefines, reproduces anddevelops structures. Thus, the concept of embeddedness, by identifying the nature,depth and extent of an individual’s ties with the environment and its correspondence tosocial capital and trust (Portes and Landholt, 1996) becomes a configuring element ineither general (Uzzi, 1997; Dacin et al., 1999) or rural specific (Bristow, 2000; Hinrichs,2000; Ilbery and Kneafsey, 1998, 2000; Nygard and Storstad, 1998; Sage, 2003) businessprocesses.

The common ground of the above mentioned interdisciplinary theoreticalapproaches should be researched, firstly in an effort to avoid considering the

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entrepreneur in isolation but on the contrary, in an effort towards adopting a holisticview to entrepreneurial processes and secondly to break the rigid and strictassumptions of neoclassical economic theory and adopt a more realistic and “down toearth” approach in understanding entrepreneurial processes. The aforementionedcontemporary theoretical frameworks stress the need to consider the environmentwithin which the entrepreneurial process takes place as well as the mechanisms bywhich entrepreneurs interact with the environment. Thus, rurality should be viewed asa dynamic entrepreneurial resource that shapes both opportunities and constraints.Consequently, the individual entrepreneur is a single nexus, located in the structures ofthis resource and the aggregate, territorially specific entrepreneurship is the nexus ofall individual nexuses. Embeddedness seems to be the essential concept and drivingmechanism underlying entrepreneurial ties within rurality as an entrepreneurialmilieu, across all the above cited theoretical frameworks taking, of course, into accountthat the notion of embeddedness requires critical scrutiny before it is applied toresearch on mainstream entrepreneurial phenomena (Winter, 2003; Krippner, 2001;Murdoch et al., 2000).

The second common feature of the above mentioned theoretical frameworks may befound in the need to facilitate the wide range of entrepreneurial activities and aims thatare far away from economic rationality and profit maximization, terms that areexplicitly entrenched in neoclassical economic approaches. One should recognize thatthe imperialism of mainstream neoclassical economic theory has prohibited economistsfrom providing plausible approaches and theoretical frameworks for the integratedstudy of entrepreneurship due to the fact that the wide range of entrepreneurialobjectives, especially in rural areas, are not facilitated nor explained by concepts rootedto economic rationality and profit maximization.

Applied research: an integrated entrepreneurial policyThe aforementioned factors and processes operating in less favoured and mountainousareas, with emphasis on the fact that rural firms tend to differ from urban companiesand business support services are delivered in different ways, should be taken intoconsideration in any attempt to provide an integrated entrepreneurial policy for suchareas (Lowe and Talbot, 2000). Storper (1997, p. 36) notes that economic activity isbased on the pragmatic necessity to coordinate one’s actions with the actions of othersand thus productive activity is, of necessity, a paradox form of collective actionfounded on individual actions. In that respect, coordination among persons presentsitself as the central problem of economic life and thus, it forms a major policy aim. Stateand supra-state policy should attempt to provide mechanisms for the coordination ofactions in various spatial levels including the national, regional and local environment.Bryant (1989) has defined the macro, meso and micro geographic scales as the“enabling” environment for the rural entrepreneur and has pointed to the importancechanges in these environments may have on entrepreneurial activity in ruralenvironments.

An example of coordinating local and regional actions at national and supra-statelevels may be found in the claim to title over territorial resources, i.e. the acquisition offormal intellectual property rights for commoditised local culture (Ray, 2001).Management of conflicts is another area which has not received much attention inapplied research, despite the fact that its effects especially on rural entrepreneurship

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may be significant (Karlsson and Karlsson, 2002; Karlsson and Acs, 2002). The flow ofinformation to remote areas is a policy aim at a national level. Ray (2002) argues thatmechanisms to assist the regional, national and trans-national flow of information areof major importance in the role the state and supra state are to play in a mode ofproduction for fragile rural economies based on the territorial accumulation of variousforms of capital. As a result, Ray (2002) argues that regulation will occur as a functionof production mode logic, information flow and state and supra-state intervention. Athird aim of an integrated entrepreneurial policy for less favoured and mountainousrural areas would address the issue of inter- and intra-territorial redistribution(McRobie, 1994) originating from the differential capacity of territories to instigatesustainable entrepreneurial activity. In that respect, national policy would have tomonitor and ensure that all territories and all local actors within individual territorieshave the chance to participate and benefit from entrepreneurial opportunities andactivities.

The implementation of Structural Policy and the recent decentralisation trends haveresulted in the active involvement of local government in the development process ofmountainous and rural, less favoured areas via the establishment of developmentcompanies and information-dissemination agencies and the participation inentrepreneurial assistance schemes. This restructuring of the local authority hascoincided with a wider social and economic restructuring and has intensified thecontesting of rurality (Woods, 1998). Crego (1985) believes that policy efforts for theeconomic redevelopment of disadvantaged areas must begin at the local level, and thenprogress to regional and national levels. The growing dispute over a rural developmentpolicy suggests the need for a policy that is regionally and spatially orientated, that iscustomized to the internal and external conditions experienced by differentregional-rural spaces (Marsden, 1998). Central institutions have neither the resourcesto administer flexible support programmes nor the local knowledge and expertiseneeded to understand the precise types of assistance required in each territoriallyspecific case. One crucial policy target would be to accelerate capacity-building amonginstitutions in order to design and implement flexible combinations of policyinstruments based on local and regional initiatives and enabling local population toarticulate their attitudes towards entrepreneurial development instruments (Skuraset al., 2000).

Research aiming at the integration of entrepreneurial policy into the wider contextof rural development policies and strategies should thus follow two directions. First,and at various levels of spatial integration, applied research should address new formsof coordinating and regulating entrepreneurial and institutional activity, as well asensuring mechanisms for the fair redistribution of the accrued benefits. Second,research should focus on identifying the correct mechanisms that will support highlevels of institutional thickness and enhance institutional capacity primarily amonglocal institutions and actors (Jenssen and Havnes, 2002).

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Further reading

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