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Business under crisis: to start or to discontinue? (The case of Russia)

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Title: Business under crisis: to start or to discontinue? (The case of Russia)


1
Business under crisis to start or to
discontinue? (The case of Russia)
  • Alexander Chepurenko, Prof. Dr.
  • achepurenko_at_hse.ru, Tatiana Alimova, PhD, Ass.
    Prof., Anastasia Chenina, MA student

2
Structure of presentation
  • Crisis impact on Russian economy and SME
  • Objectives
  • Data and methods
  • Hypotheses
  • Key findings
  • Political implications
  • Future research prospects

3
GDP and unemployment data compared (Rosstat)
 GDP 2008 2009 1st quarter 2010as to 1st quarter 2009
Russia 5,6 -7,9 2,9
UK 0,5 -4,9 -0,3
USA 0,4 -2,4 2,5
Unemployment 2008 2009 March2010
Russia 6,3 8,4 8,6
UK 5,6 7,6 8,0
USA 5,8 9,3 9,7
4
SME development under crisis (Rosstat)
Small enterprises, total, Russian Federation Small enterprises, total, Russian Federation Small enterprises, total, Russian Federation Small enterprises, total, Russian Federation
2008 2009 2010
January-March 287027 227560 219582
January-June 286177 227706 219607
January-September 281703 227742  
January-December 282651 227529  
Micro-enterprises, total, as to the end of the year Micro-enterprises, total, as to the end of the year Micro-enterprises, total, as to the end of the year
2008 2009
Total 1052319 1374661
5
Some comments
  • GDP decrease deeper than in most developed market
    economies, whilst unemployment dynamics rather
    moderate less incentives to start up (necessity
    driven activity)
  • The economic crisis in Russia began only in
    autumn 2008 - later than in Western countries,
    therefore
  • Significant SMEs number decrease not in 2008, but
    in 2009 (- 19,5) parallel to increasing number
    of micro-firms ( individual entrepreneurs) 30
  • The proportion of small to micro-firms changed
    from 26.5 to 16.6, while the total number of
    small and micro businesses increased from
    1.334970 to 1.602190, or 20.0
  • Who are the new ventures owners necessity
    driven nascent entrepreneurs owners/managers of
    former juridical firms seeking for tax and
    accounting preferences available for micros (??)

6
Objectives of the paper
  • The impact of economic crisis (2008-2009) on
    populations entrepreneurial activity
    entrepreneurs decisions to start up / continue /
    quit a business?
  • Focus on
  • (1) business entry and exit dynamics of
    entrepreneurs,
  • (2) behaviour of adults with entrepreneurial
    past among non-entrepreneurs
  • (3) future plans of those who quit the business
    under the crisis

7
Data and methodology
  • GEM methodology (Reynolds, P. et al., 2005.
    Global Entrepreneurship Monitor Data Collection
    Design and Implementation 1998-2003. Small
    Business Economics, 24, pp. 205-231)
    differentiating
  • Potential entrepreneurs (willing to establish a
    new venture)
  • Nascent entrepreneurs (making practical steps to
    realize it)
  • Baby (new) business owners ( lt 3 lt 42 months)
  • Established business owners (lt 42 months)
  • Motivation (opportunity / necessity / mixed)
  • Discontinued a business during last 12 months,
    among them
  • Entrepreneurs who discontinued (closed/quit) a
    business temporary - persons, who during last 12
    months closed a business, but not at all any the
    entrepreneurial activity
  • Persons who exited of a business forever
    (escaped) - respondents, who during last 12
    months closed a business and escaped from any
    entrepreneurial activity during last 12 months.
  • GEM APS data for Russia (2006-2009)
  • N of respondents 1850 -1900 annually

8
GEM based entrepreneurship dynamic indicators for
Russia, 2006-2009
Index Measured in 2006 2007 2008 2009
TEA 4,9 2,7 3,5 3,9
Nascent Entrepreneurs 3,5 1,3 1,7 1,8
Baby Business Owners 1,4 1,3 1,8 2,1
Establ. Business Owners 1,2 1,4 1 2,1
TEA_OPP 3,4 1,9 2,5 2,6
TEA_NEC 1,4 0,5 0,7 1,1
Business Discont. Rate 1,1 1,0 1,0 2,0
9
Hypotheses on the impact of economic crisis on
entrepreneurial activity
  • The assessments of the economic slowdown should
    be most negative by baby business owners because
    of still scarce own liquidity and lack of access
    to formal loans etc. (H1).
  • The share of necessity driven becomes higher than
    the share of opportunity driven potential
    entrepreneurs as a result of tensions on labour
    market (H2).
  • Economic reasons to quit dominating among those
    who exit of a business forever during the crisis,
    but it will hardly have a strong impact on those
    discontinuing a business only temporary, as the
    latter represent (serial portfolio)
    entrepreneurs who economically looks better (H3).
  • Firms of those who discontinue only temporary
    survive more often than firms of ex-entrepreneurs
    who escape forever (H4).
  • The difference between entries and exits may
    become negative (H5).
  • Men and persons with higher education are more
    often considering a possible entrepreneurial
    comeback, while women and respondents with lower
    level of education tend to escape from business
    forever (H6).
  • Negative perception of opportunities to do a
    business and low self-efficacy would be the most
    important factors preventing a significant part
    of non-entrepreneurs with entrepreneurial past
    to start up anew (H7).

10
Key findings
  • H1 seems to be neither supported nor rejected no
    signs of more oppressive impact on baby business
    owners.
  • H2 did not receive support by the data however,
    the shares of opportunity vs. necessity driven
    among potential entrepreneurs in 2009 became
    nearly equal.
  • H3 supported those who decided to close and exit
    of any business forever were been more strongly
    affected by the economic slowdown than (serial)
    entrepreneurs discontinuing temporary
  • H4 supported firms of those who discontinue only
    temporary survive more often than firms of
    ex-entrepreneurs who escape forever
  • H5 supported ETP index became lt 1
  • H6 supported a correlation between education and
    current status of persons with entrepreneurial
    experience in the past the higher the education
    status, the more often respondents dont escape
    from entrepreneurial activity forever
    (statistical significance is high) however, only
    a weak negative correlation (ra - 0,12) between
    gender and the decision about future
    entrepreneurial engagement
  • H7 supported negative perception of business
    opportunities and low self-efficacy - most
    important factors preventing a significant part
    of non-entrepreneurs with entrepreneurial past
    to start up anew

11
Political implications
  • (1) to diminish the discontinuation rate of
    serial entrepreneurs, easier access to guarantees
    and co-financing from State development
    institutes needed.
  • (2) the crisis played to some kind a positive
    role pushing less successful entrepreneurs to
    exit forever. Then, the State should use a more
    selective policy promoting only those who are
    able to compete under much harder circumstances.
  • (3) no reasons for special support of baby
    businesses among early entrepreneurship.
  • (4) no evidence of dramatic increase of necessity
    driven entrepreneurship hence, a special
    emphasis on promoting unemployed people to
    establish a new venture - only in special areas
    (so called mono-cities etc).

12
Future research prospects
  • Accumulation of data and cross-national
    comparison of crisis impact on entrepreneurship
    and entrepreneurial potential
  • Post-crisis period how persistent are the
    changes in the structure of entrepreneurial
    potential and early entrepreneurship occurred
    during the economic slowdown?

13
  • Thank you for your attention!
  • ???????!
  • For more detail about the GEM www.gemsonsortium.o
    rg
  • Some findings of the Russian GEM team
    http//www.hse.ru/org/hse/soc/gem/
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