Entrepreneurship and Small Business Development in Post-Socialist Economies This book examines entrepreneurship and small business in transition economies in Central and Eastern Europe and the former Soviet Union, showing how far small businesses have developed, and discusses how far ‘market reforms’ and a market mentality have been taken up by ordinary people in the real everyday economy For each of the countries highlighted – Russia, Ukraine, Belarus, Poland and Estonia – the book reviews the progress of market reforms within the wider context of social and economic transformation, surveys the development of entrepreneurship and small firms so far, and assesses the role of government in the process, and the strengths and weaknesses of the small business sector Drawing on entrepreneurship theory and institutionalist approaches, this book conceptualises the distinctiveness of entrepreneurship in transition conditions and discusses the implications for entrepreneurship theory – as well as for policy It critically assesses the nature and extent of entrepreneurship and small enterprise development in economies which, until 1990, operated under central planning In addition to its conceptual contribution, the book presents original empirical evidence (including survey material and previously unpublished case studies) from a number of large-scale research projects conducted by the authors in Central and Eastern Europe Each chapter highlights different facets of small enterprise development and entrepreneurship, including employment relations, innovation and strategic behaviour, as well as government policies and their influence on entrepreneurship David Smallbone is Professor of Small Business and Entrepreneurship in the Small Business Research Centre at Kingston University, UK and Visiting Professor in Entrepreneurship at the China University of Geosciences, Wuhan Friederike Welter is Professor in the Centre for Innovation Systems, Entrepreneurship and Growth at Jönköping University, Sweden and holds the TeliaSonera Professorship for Entrepreneurship at Stockholm School of Economics in Riga, Latvia They co-edited Enterprising Women in Transition Economies Routledge studies in small business Edited by David J Storey Centre for Small and Medium Sized Enterprises, Warwick Business School, UK Small Firm Formation and Regional Economic Development Edited by Michael W Danson Corporate Venture Capital Bridging the equity gap in the small business sector Kevin McNally The Quality Business Quality issues and smaller firms Julian North, Robert A Blackburn and James Curran Enterprise and Culture Colin Gray The Financing of Small Business A comparative study of male and female small business owners Lauren Read Small Firms and Network Economies Martin Perry Intellectual Property and Innovation Management in Small Firms Edited by Robert A Blackburn Understanding the Small Family Business Edited by Denise E Fletcher Managing Labour in Small Firms Edited by Susan Marlow, Dean Patton and Monder Ram 10 The Foundations of Small Business Enterprise Gavin C Reid 11 The Internationalization of Small Firms A strategic entrepreneurship perspective Shameen Prashantham 12 The Formation and Development of Small Business Issues and evidence Peter Johnson 13 Information Technology and Competitive Advantage in Small Firms Brian Webb and Frank Schlemmer 14 Entrepreneurship and Small Business Development in Post-Socialist Economies David Smallbone and Friederike Welter Entrepreneurship and Small Business Development in PostSocialist Economies David Smallbone and Friederike Welter First published 2009 by Routledge Park Square, Milton Park, Abingdon, Oxon OX14 4RN Simultaneously published in the USA and Canada by Routledge 270 Madison Ave, New York, NY 10016 Routledge is an imprint of the Taylor & Francis Group, an informa business This edition published in the Taylor & Francis e-Library, 2008 “To purchase your own copy of this or any of Taylor & Francis or Routledge’s collection of thousands of eBooks please go to www.eBookstore.tandf.co.uk.” © 2009 David Smallbone and Friederike Welter All rights reserved No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging in Publication Data Smallbone, David Entrepreneurship and small business development in post-socialist economies / David Smallbone and Friederike Welter p cm – (Routledge studies in small business; 14) Includes bibliographical references and index Entrepreneurship–Case studies Small business–Case studies Post-communism–Economic aspects–Case studies I Welter, Friederike II Title HB615.S635 2008 338.6'420947–dc22 2008006797 ISBN 0-203-89256-9 Master e-book ISBN ISBN10: 0-415-33653-8 (hbk) ISBN10: 0-203-89256-9 (ebk) ISBN13: 978-0-415-33653-6 (hbk) ISBN13: 978-0-203-89256-5 (ebk) Contents List of illustrations x Introduction Aims of the book in context The research approach Methodological perspectives The rest of the book PART I Setting the scene Entrepreneurship, SME development and the transformation process 11 Introduction 11 Processes of market reform 12 Variation in the pace of transformation 20 The roles of entrepreneurship and SMEs in the transformation process 24 Public policy and the development of entrepreneurship 30 Concluding remarks 37 Entrepreneurship in transition economies: a conceptual review Perspectives on entrepreneurship 38 Key influences on entrepreneurship in transition conditions 40 Entrepreneurship from an individual perspective 47 The embeddedness of entrepreneurship in a transition context 53 The entrepreneurial process in transition conditions 60 Outlook 65 38 viii Contents PART II Entrepreneurship and small business development in former Soviet republics Employment in new and small firms: the example of the Russian Federation 67 69 Introduction 69 Market reforms and the development of private entrepreneurship 69 Who are the Russian entrepreneurs? 74 Government policies and SME support: the environment for SME development 75 Patterns of employment in small Russian firms 77 Job quality in Russian SMEs 86 Employment relations and human resource issues in Russian SMEs 91 Conclusions 100 Coping with adversity: the case of Belarus 102 Introduction 102 Progress with market reforms 102 Development of the private sector during the transition period 104 Regional variations in SME development 109 Role of government in the development of the private sector and support needs of SMEs 113 Entrepreneurial behaviour and SME strategies in the context of institutional deficiencies 117 Conclusions 127 Innovation and entrepreneurship under transition conditions: the example of Ukraine Introduction 129 Economic development and SMEs during the 1990s 129 Policies to support SME development 134 Patterns of innovation in Ukrainian SMEs 136 Innovation processes in SMEs 146 Innovating in a transition context: towards a market-oriented innovation system? 151 Conclusions 158 129 Contents ix PART III Entrepreneurship and small business development in Central and Eastern Europe 161 163 Poland: entrepreneurship development and EU accession Introduction 163 The development of SMEs in Poland 163 Contemporary characteristics of the SME sector 169 The role of government in SME development 171 Implications of EU accession for Polish SMEs 178 SME development in rural areas 183 Concluding remarks 186 From the former Soviet Union to membership of the European Union: the case of Estonia 187 Introduction 187 The context 187 The development of the SME sector 190 An open economy with export-oriented SMEs 194 Developing an institutional framework 197 Government policy and SME development 202 The state of the SME sector at the time of EU accession 207 Conclusions 219 PART IV The way forward 223 225 Conclusions Diversity of experience along a common path 225 Implications for entrepreneurship theory 227 Entrepreneurship and public policy 231 Final thoughts 235 Appendix: summary of the main research projects referred to in the book 236 Notes Bibliography Index 244 248 273 .. .Entrepreneurship and Small Business Development in Post- Socialist Economies This book examines entrepreneurship and small business in transition economies in Central and Eastern Europe and. .. Technology and Competitive Advantage in Small Firms Brian Webb and Frank Schlemmer 14 Entrepreneurship and Small Business Development in Post- Socialist Economies David Smallbone and Friederike Welter Entrepreneurship. .. Cataloging in Publication Data Smallbone, David Entrepreneurship and small business development in post- socialist economies / David Smallbone and Friederike Welter p cm – (Routledge studies in small