Entrepreneurial activity in Russia in cross-national comparison:

Global Entrepreneurship Monitor (2006-2007)

Prof. Dr. Alexander ChepurenkoMrs. Olga Obraztsova, PhD (Ec.)State University – Higher School of Economics (HSE)

Main Points of the Paper• 1. GEM methodology and main indicators

(more details at: www.gemconsortium.org)• 2. GEM APS results for Russia in 2006 and

2007• 3. Cross-national comparison of GEM

countries (2006-2007)• 4. Some evidences

1. GEM methodology and main indicators

1. GEM methodology and main indicators• Following to Kirzner (1973, 1979), GEM views

entrepreneurship as an aspect of human action in which all individual-based acts of arbitrage are, to various degrees, expressions of entrepreneurial attitudes of actors

• Entrepreneurship: ‘any attempt to create a new venture, including self-employment, undertaken by an individual or a group of individuals’

• Tools: (1) Adult population survey (representative for the respective country, confidence interval - 5 %), (2) Experts’ standardized survey, (3) Experts’ in-depth interviews, (4) secondary statistics (WB ‘Doing Business” etc.)

• APS: in Russia – conducted by the HSE, N= 1894 (2006), 1936 (2007)

Social, Cultural,Political Context

General National Framework Conditions

Entrepreneurial Framework Conditions

Micro, Small and Medium Firms(Secondary Economy)

Entrepreneurial Opportunities

EntrepreneurialCapacity•Skills•Motivation

NewEstablishments

New Firms

MajorEstablished Firms(Primary Economy)

National Economic Growth(Jobs andTechnicalInnovation)

The GEM Model of Explaining Entrepreneurship

Ladder of entrepreneurial activity

Entrepreneurial potential of a society

Established business owners – over 42 months (regular business based incomes enabling to maintain it)

Potential entrepreneurs (willing to start-up)

Early stage entrepreneurship (0 – 42 months)

Nascent entrepreneurs (practical steps to start-up)

New, or baby business owners (3-42 months)

Latent entrepreneurs (no incomes or salaries from the business after start-up) 0-3 months

Start-ups (already obtained first incomes from business) 0-3 months

Most important GEM indicators

Total Entrepreneurial Activity index (ТЕА) – share of adult population (18 to 64 aged), taking part at a start-up or being owners/managers of firma younger than 42 months;

Established business ownership rate (EBO)• Percentage of 18-64 population who are currently

an owner-manager of an established business, i.e., owning and managing a running business that has paid salaries, wages, or any other payments to the owners for more than 42 months.

2. GEM APS results for Russia in 2006 and 2007

TEA Russia: Age and Motivation Structure, 2006-2007 (%)

10010016,515,724,235,259,349,1Total

10010014,39,538,157,147,633,345 and older

1001001921,923,840,65737,535-44

10010013,813,527,62758,659,525-34

1001002016,7516,77566,718-24

20072006200720062007200620072006

MixedNecessity drivenOpportunity driven

TotalMotivationAge

Russia: Indicators of entrepreneurial activity in 2006-2007 as for stages and gender (% of adult population)

1,2

0,8

1,9

2006

1,6

0,7

3,0

2006 200720072007200620072006

2,4

1,6

3,6

15,2

12,4

19,7

1,511,29,2Total

1,70,70,66,5Female

1,21,52,213,7Male

Established business owners

New business owners

NascentPotential entrepreneurs

Index

3. Cross-national comparison of GEM countries (2006-

2007)

2 possible attempts to countries comparison

• 1. Modeling of groups based on expert evaluation of socio-economic, historical, mental similarities

• 2. Using of formalized procedures (clustering).

• Both attempts have its advantages…

Indicators of some GEM countries in 2006early established earlyCount

ryTEA male female EBO male female necess

ityopportunity

discontinued

Russia 4,86 7,33 2,57 1,19 1,83 0,61 1,44 3,39 1,27

Hungary

6,04 8,09 4,05 6,72 9,03 4,48 1,33 4,64 1,13

Latvia 6,57 9,41 3,92 5,69 8,12 3,41 1,04 5,05 1,98

Croatia

8,58 12,35 4,87 4,12 5,8 2,46 3,81 4,41 1,81

Slovenia

4,63 6,93 2,29 4,44 6,42 2,44 0,47 4,05 1,02

PRChina

16,19 18,46 13,79 8,98 11,56 6,26 6,27 9,59 6,18

India 10,42 11,6 9,16 5,6 7,26 3,84 2,86 6,71 15,02

Brazil 11,65 13,74 9,61 12,09 14,77 9,45 5,55 5,99 4,55

TEA and GDP per capita compared, GEM 2006

Clusters of GEM participating countries on the basis of TEA 2006

• First step: 6 countries’ clusters - according to Sturges’ rule (see following slide)

• 2nd step: iterative optimization of the contingent of the groups, seeking k-value (K-mean), which yields a step-like increase in the maximal inter-group dispersion (on aggregate). As a result…

Clustering of GEM countries by entrepreneurial activity

Clusters TEA06 EB06 TEA07 EB076 4,79 а 3,18 2,36 b 1,405 9,40 6,64 c 7,27 5,27 d 4 15,69 9,51 12,21 9,023 19,86 12,25 16,75 13,312 22,48 20,38 22,72 15,251 40,15 26,74 28,39 20,91

Mean 9,47 6,9 9,35 6,69Russia 4,86 1,19 2,67 1,68

a ТЕА06 priority group.b ТЕА07 priority group.c ЕВ06 priority group.d ЕВ07 priority group

Example: TEA-Clustering (in 2007)

4. Some evidences (2006)• Russia belongs to the center (at a distance of 0.07) of the cluster

6 of 18 most typical countries with below-average levels of TEA, • Other countries of this cluster - the ‘old Europeans’ like U.K.,

Belgium, Denmark, Switzerland etc. as well as some transitional countries (Croatia, Latvia, Hungary, Romania), and Brazil,

• Among the so-called BRIC – Brazil and Russia have below-average levels of early-stage entrepreneurial activity, whereas

• China belongs to an ‘advanced middle’ cluster 4 (like Netherlands, USA, Sweden) and

• India - to an even more prospecting small cluster 3 (together with Ireland) with high TEA Index rates

• Argentina

4. Some evidences (2006)• No statistically significant dependence of both

TEA and EBO from per capita GDP • Statistically relevant correlation between all

groups of early entrepreneurs and the GDP deflator index (Spearman's Rank Correlation Coefficient - 0,613 by 5%) .

4. Some evidences: TEA and GDP

• Statistical analysis of TEA compared with per capita GDP support a non-linear relationship (the regression parameters are significant at a confidence level of 0.95)

• In countries with high levels of necessity entrepreneurship, there is no direct positive correlation between TEA and per capita GDP

• In countries with higher levels of opportunity entrepreneurship there are higher levels of economic development

4. Some evidences: EBO and GDP• No support for the dependence of established

entrepreneurship on per capita GDP as an aggregate indicator of socio-economic conditions.

• H: it is not the aggregate indicator of established businesses, but rather the structure important: the higher the share of opportunity entrepreneurship - the higher the possibility to belong into clusters with high levels of economic development.

• Non-linear dependence of EBO-index levels on per capita GDP was not supported (with an R2 of 0.114, the null hypothesis was not rejected to a significance level of 5%).

Thank you for attention!

• For more details see: O. Obraztsova, A. Chepurenko, The Development of Russian Private Entrepreneurship in Cross-Country Comparison, in: Voprosy economiki, 2008, No. 8, p. 91-107 (www.vopreco.ru) - in Russian