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Institutions, entrepreneurship, and regional development in Russia

Author

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  • Zemtsov, S.

    (Russian Presidential Academy of National Economy and Public Administration (RANEPA), Moscow, Russia
    Gaidar Institute for Economic Policy, Moscow, Russia)

Abstract

The role of small and medium-sized enterprises (SMEs) in the Russian economy remains modest and declined in 2019. In 2020, due to the crisis and anti-covid-19 measures, the share of SMEs in GDP and employment will significantly decrease. Why is this happening, and is it worth supporting a seemingly insignificant sphere of the economy? The article describes the factors and patterns of entrepreneurship development in Russia and their relations with the regional development. The development of SMEs is negatively affected by uncertainty of the economic situation and decline in demand. High investment risks and a low level of trust narrow the possibilities for productive and opportunity entrepreneurship development. As a result, the share of informal employment and necessity entrepreneurship is high and will grow in Russia, especially in the least developed regions. Although in the pre-crisis years, there was a tendency toward an improvement in formal institutions, an increase in the availability of financing, but not in all regions. Informal institutions and norms change more slowly, they determine low involvement in entrepreneurial activity. A crisis can lead to a reduction in the number of entrepreneurs, which will have a negative long-term effect on sustainable regional development. The sectoral structure of the SME has diversified, and the share of internet services has grown. These processes because of forced digitalization during the epidemic may accelerate, especially in large agglomerations. Direct state support previously had little effect on the SME development due to the lack of awareness and distrust, small scale, so there is doubt that it will be able to radically change the situation in the current period. If the crisis and anti-epidemic measures continue in the summer, the worst negative consequences should be expected in the southern regions, where more than 50% are employed in the entrepreneurial sector, but entrepreneurial ecosystems and digitalization are poorly developed. Our calculations show a potential reduction in the number of small and medium-sized enterprises by 50-60%, which could lead to a decrease in gross regional product by an average of 3-10%.

Suggested Citation

  • Zemtsov, S., 2020. "Institutions, entrepreneurship, and regional development in Russia," Journal of the New Economic Association, New Economic Association, vol. 46(2), pages 168-180.
    • Handle: RePEc:nea:journl:y:2020:i:46:p:168-180
    DOI: 10.31737/2221-2264-2020-46-2-9
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    Cited by:

    1. Diego Norena-Chavez, 2020. "The Mediation Effect of Innovative Behavior on the Relationship Between Entrepreneurial Self-Efficacy and Entrepreneurial Intention," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(4), pages 238-252.
    2. Larissa M. Batrancea, 2022. "Determinants of Economic Growth across the European Union: A Panel Data Analysis on Small and Medium Enterprises," Sustainability, MDPI, vol. 14(8), pages 1-17, April.
    3. Olga Demidova & Elizat Kamalova, 2021. "Spatial Econometric Modeling of Economic Growth in Russian Regions: Do Institutions Matter? [Пространственно-Эконометрическое Моделирование Экономического Роста Российских Регионов: Имеют Ли Значен," Ekonomicheskaya Politika / Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 2, pages 34-59, April.
    4. Mubariz Mammadli, 2022. "Environmentally Responsible Business Approaches in Azerbaijan," Sustainability, MDPI, vol. 14(10), pages 1-25, May.
    5. S. Zemtsov & V. Barinova & R. Semenova & A. Mikhailov, 2022. "Entrepreneurship Policy and SME Development during Pandemic Crisis in Russia," Regional Research of Russia, Springer, vol. 12(3), pages 321-334, September.
    6. Zemtsov, S., 2021. "New technologies and regional development in the modern period," Journal of the New Economic Association, New Economic Association, vol. 51(3), pages 196-207.
    7. A. N. Bufetova, 2022. "The Heterogeneity of the Spatial Development of Asian Russia: What the Indicators of Interregional Inequality Are Silent About," Regional Research of Russia, Springer, vol. 12(4), pages 459-468, December.
    8. Zemtsov, S., 2022. "Technological entrepreneurship as a development factor of Russia," Journal of the New Economic Association, New Economic Association, vol. 53(1), pages 212-223.
    9. Stepanova, A. & Podukhovich, D., 2023. "CEO decision-making horizon and R&D investments. Evidence from Russia," Journal of the New Economic Association, New Economic Association, vol. 59(2), pages 85-118.
    10. Vera A. Barinova & Stepan P. Zemtsov & Alexander A. Mikhaylov & Yulia V. Tsareva, 2022. "Пересмотр Долгосрочных Трендов Развития Малого И Среднего Предпринимательства В России И Регионах В Постсоветский Период," Russian Economic Development (in Russian), Gaidar Institute for Economic Policy, issue 7, pages 29-44, July.
    11. Vera A. Barinova & Stepan P. Zemtsov & Alexander A. Mikhaylov & Yulia V. Tsareva, 2022. "Reconsidering Long-term Trends in the Development of Small and Medium-Sized Enterprises in Russia and the Regions in the post-Soviet Period [Пересмотр Долгосрочных Трендов Развития Малого И Среднег," Russian Economic Development, Gaidar Institute for Economic Policy, issue 7, pages 29-44, July.

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    More about this item

    Keywords

    small and medium business; economic development; institutional conditions; trust; crisis; covid-19; state support; Russian regions; digitalization;
    All these keywords.

    JEL classification:

    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • L53 - Industrial Organization - - Regulation and Industrial Policy - - - Enterprise Policy
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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