Summer school “Entrepreneurship in Russia: theory and practice, research

methodology”Golitsyno

August 2009

Russian Early Entrepreneurship

Under Global Crisis Conditions

Moscow GEM teamState University – Higher School of

Economics

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Entrepreneurship – any attempt to start new business – e.g. self-employment, creating a new business venture or expanding of existing business – made by an individual, a group of people or a company.

Crisis conditions:

• w

• w

• w

Research Conceptual Model: GEM Methodology

Production declines

Unemployment rate increases

Incomes decrease Demand goes down

Narrowing of financial markets

Limited access to financial resources

Changes in structure and strategies

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GEM Data Description and Analytical Opportunities

• Internal structure of entrepreneurship (socio-demographic etc.)Internal structure of entrepreneurship (socio-demographic etc.) Entrepreneurial framework conditionsEntrepreneurial framework conditions

• Level of entrepreneurial Level of entrepreneurial activityactivity

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Some main indicators of EE in Russia

IndicatorsSample values and low bound of confidence interval (95%)

2006 2007 2008 2009

TEA index*TEA index* 3,923,92 2,992,99 2,452,45 2,072,07 2,832,83 2,422,42 3,483,48 3,043,04

EBO index*EBO index* 1,261,26 0,730,73 0,990,99 0,520,52 0,960,96 0,490,49 1,531,53 0,950,95

Nascent entr.*Nascent entr.* 2,712,71 1,931,93 1,461,46 0,890,89 1,691,69 1,071,07 1,771,77 1,141,14

Team entr., %Team entr., % 60,7860,78 60, 4860, 48 47,3747,37 47,0147,01 32, 6932, 69 32,2832,28 36,2836,28 35,9435,94

Opport. entr., %Opport. entr., % 33,6033,60 24,6124,61 22,4022,40 14,1014,10 27,6027,60 17,4817,48 24,0024,00 15,9515,95

Male entr., %Male entr., % 6565,19,19 54,6254,62 57,5457,54 44,8144,81 64,6564,65 52,5652,56 52,0852,08 41,2641,26

Social entr., %Social entr., % -- -- -- -- -- -- 14,8314,83 0,000,00

Index of EE Index of EE turnoverturnover 2,642,64 0,100,10 1,191,19 0,840,84 1,511,51 0,680,68 0,890,89 0,720,72

Exp. returns Exp. returns (EE), times(EE), times 6,176,17 3,993,99 2,482,48 3,413,41 5,575,57 2,882,88 4,894,89 2,852,85

Exp. Returns Exp. Returns (inf. Inv.), times(inf. Inv.), times 2,552,55 1,451,45 1,191,19 0,490,49 1,111,11 0,470,47 1,361,36 0,520,52

* % of adult population* % of adult population

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““A social enterprise is any business A social enterprise is any business venture created for a social purpose–venture created for a social purpose–

mitigating/reducing a social problem or mitigating/reducing a social problem or a market failure–and to generate social a market failure–and to generate social value while operating with the financial value while operating with the financial

discipline, innovationdiscipline, innovation and and determination of a private sector determination of a private sector business” business” Virtue Ventures

The Phenomenon of Social Entrepreneurship:

new, urgent and multifaceted

Accepted approaches:Accepted approaches:

Social Entrepreneurship as an institution that provides support to particular stratas of societySocial Entrepreneurship as a method of economic growth stimulationSocial Entrepreneurship as a system of solving social problems in contrast to Government

Moscow 3

Saint Petersburg 3

Volga 5

Urals 9

Siberia 5Other Central Cities 6

Indicators Social Entrepreneurs All Entrepreneurs

Gender55,9% females (19 of

34)48% females (40 of 83)

Age 37 years 38 years

Educational level

Secondary Secondary

South 3

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EE distribution by types of settlement: Tendencies Revelation

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Impact of Crisis: Main Hypotheses

Increase in business discontinuation rate in small and medium towns

Due to the worsening of macroeconomic situation rate of business discontinuation increases

Diminishing of possibilities for self-investing and growing importance of informal financing

Narrowing of financial markets leads to increase of ‘team entrepreneurship’ being a strategy of economic capital accumulation

Hypothesis 2Hypothesis 2: : Change of financial resources accumulation under crisis

Hypothesis 1Hypothesis 1: : Additional reasons for business discontinuation under crisis

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Business Discontinuation by Type of Settlement

•The level of discontinued businesses has risen significantly (t-criterion, 95%)

•The changes in the discontinuation rate are not statistically significant across different settlement types (Chi-square criterion, α = 5%)

1,1% 1,0% 1,0%

2,0%

2,90%

1,19%

1,51%1,77%

0,0%

0,5%

1,0%

1,5%

2,0%

2,5%

3,0%

2006 2007 2008 2009

Refused Nascent

Shares of nascent and discontinued entrepreneurs Shares of nascent and discontinued entrepreneurs in the samplein the sample   20062006 20072007 20082008 20092009

Chi-square Chi-square criterioncriterion 5,13 7,82 5,80 1,59P-valueP-value 0,27 0,09 0,21 0,80Cramer's Cramer's contingency contingency coefficientcoefficient 0,05 0,06 0,06 0,03

Shares of discontinued entrepreneurs, by type of Shares of discontinued entrepreneurs, by type of settlementsettlement

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Team Entrepreneurship: Tool to Accumulate Financial Capital

61%

47%

33%36%

0%

10%

20%

30%

40%

50%

60%

70%

2006 2007 2008 2009

Team entrepreneurship rate (TER) dynamics

•According to T-criterion at the 95% confidence level the changes in TER are substantial

•Lack of own funds is one of the factors of the team entrepreneurship growth (Chi-square nonparametric test, 95%)

•According to T-criterion at the 95% confidence level the concentration of informal funds is increasing

•Expected returns doesn’t define the readiness of informal investors to put money into business (Chi-square nonparametric test, 95%)

Financial sources attracted by early

entrepreneurs

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Summary and Implications

Some evidences:Some evidences: Recommendations to:Recommendations to:

•Novice entrepreneus:Novice entrepreneus: check check opportunities of team and opportunities of team and social entrepreneurship social entrepreneurship

•Government:Government: spend in spend in entrepr. education, support entrepr. education, support social networks (business social networks (business angels, venture capitalists angels, venture capitalists etc.) to combine or join etc.) to combine or join financial resourcesfinancial resources

•Researchers:Researchers: crisis impact crisis impact factors identification and factors identification and broader outlook at the broader outlook at the process process

Thank You for Your Kind Attention!