Summer school “Entrepreneurship in Russia: theory and practice, research methodology” Golits y no August 2009 Russian Early Entrepreneurship Under Global Crisis Conditions Moscow GEM team State University – Higher School of Economics

2 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 Research Conceptual Model: GEM Methodology Production declinesUnemployment rate increases Incomes decreaseDemand goes down Narrowing of financial markets Limited access to financial resources Changes in structure and strategies

3 GEM Data Description and Analytical Opportunities Two-step proportional stratified sample survey of adult populationTwo-step proportional stratified sample survey of adult population Unified questionnaire adjusted to national peculiaritiesUnified questionnaire adjusted to national peculiarities Data collection Early entrepreneurs = nascent (adult people, actively involved in managing business solely or jointly, but who have been receiving income for no more than 3 months) + new business (3 months to 3,5 years)Early entrepreneurs = nascent (adult people, actively involved in managing business solely or jointly, but who have been receiving income for no more than 3 months) + new business (3 months to 3,5 years) Focus 2006 – “1894” 2008 – “1660”2006 – “1894” 2008 – “1660” 2007 – “1939” 2009 – “1695”2007 – “1939” 2009 – “1695” Sample size Comparisons possibilities Analytical opportunities Global aims Level of entrepreneurial activity in RussiaLevel of entrepreneurial activity in Russia contribution of the entrepreneurial activity to the economic growthcontribution of the entrepreneurial activity to the economic growth Internal structure of entrepreneurship (socio-demographic etc.) Entrepreneurial framework conditionsInternal structure of entrepreneurship (socio-demographic etc.) Entrepreneurial framework conditions Level of entrepreneurial activityLevel of entrepreneurial activity National level Dynamics comparisonsNational level Dynamics comparisons International levelInternational level

4 Some main indicators of EE in Russia Indicators Sample values and low bound of confidence interval (95%) TEA index* 3,922,992,452,072,832,423,483,04 EBO index* 1,260,730,990,520,960,491,530,95 Nascent entr.* 2,711,931,460,891,691,071,771,14 Team entr., % 60,78 60, 48 47,3747,01 32, 69 32,2836,2835,94 Opport. entr., % 33,6024,6122,4014,1027,6017,4824,0015,95 Male entr., % 65,19 54,6257,5444,8164,6552,5652,0841,26 Social entr., % ,830,00 Index of EE turnover 2,640,101,190,841,510,680,890,72 Exp. returns (EE), times 6,173,992,483,415,572,884,892,85 Exp. Returns (inf. Inv.), times 2,551,451,190,491,110,471,360,52 * % of adult population

5 “A social enterprise is any business venture created for a social purpose– mitigating/reducing a social problem or a market failure–and to generate social value while operating with the financial discipline, innovation and determination of a private sector business” “A social enterprise is any business venture created for a social purpose– mitigating/reducing a social problem or a market failure–and to generate social value while operating with the financial discipline, innovation and determination of a private sector business” Virtue Ventures The Phenomenon of Social Entrepreneurship: new, urgent and multifaceted Accepted approaches: Social Entrepreneurship as an institution that provides support to particular stratas of society Social Entrepreneurship as a method of economic growth stimulation Social Entrepreneurship as a system of solving social problems in contrast to Government Moscow 3 Saint Petersburg 3 Volga 5 Urals 9 Siberia 5 Other Central Cities 6 IndicatorsSocial EntrepreneursAll Entrepreneurs Gender55,9% females (19 of 34)48% females (40 of 83) Age37 years38 years Educational level Secondary South 3

6 EE distribution by types of settlement: Tendencies Revelation

7 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 2: Hypothesis 2: Change of financial resources accumulation under crisis Hypothesis 1: Hypothesis 1: Additional reasons for business discontinuation under crisis

8 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%) Shares of nascent and discontinued entrepreneurs in the sample Chi-square criterion 5,137,825,801,59 P-value0,270,090,210,80 Cramer's contingency coefficient 0,050,06 0,03 Shares of discontinued entrepreneurs, by type of settlement

9 Team Entrepreneurship: Tool to Accumulate Financial Capital 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

10 Summary and Implications Entrepreneurial activity has risen mostly due to the necessity-based motives Team entrepreneurship: under crisis important form of risk mitigation Discontinuation rate is decreased mostly because of crisis conditions Some evidences: Recommendations to: Novice entrepreneus: check opportunities of team and social entrepreneurshipNovice entrepreneus: check opportunities of team and social entrepreneurship Government: spend in entrepr. education, support social networks (business angels, venture capitalists etc.) to combine or join financial resourcesGovernment: spend in entrepr. education, support social networks (business angels, venture capitalists etc.) to combine or join financial resources Researchers: crisis impact factors identification and broader outlook at the processResearchers: crisis impact factors identification and broader outlook at the process

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