Only Six Federal Subjects have Conditions Favorable for Entrepreneurialism, HSE Study Says

Paul Goble

            Staunton, October 30 – The decision to become an entrepreneur is inherently a personal one, but it is affected in many ways by the environment where the individual is located. At present, only six of Russia’s more than 80 federal subjects have one which makes that decision easier. The rest more or less actively discourage entrepreneurialism.

            That is the conclusion of a new study by Aleksandr Chepurenko and Olga Obraztsova (“Entrepreneurial Activity in Russia and Its Inter-Regional Differences” (in Russian), Zhurnal NEA 2:46 (2020): 199-211 at publications.hse.ru/mirror/pubs/share/direct/373079548.pdf; summarized by Svetlana Sultanova at iq.hse.ru/news/412421651.html).

            On the basis of a survey they conducted with the Russian Economics University, the two  Higher School of Economics scholars say that there are only six federal subjects where conditions exist that encourage young Russians to go into business with the remaining ones being either neutral or hostile to such aspirations. 

            In St. Petersburg, there are 427 small and mid-sized enterprises per 10,000 population, far above the all-Russian figure of 181 and within the range of many Western countries; but in the North Caucasus, there are only 20 – less than five percent of the Northern Capital’s number – and microscopically small compared to say Estonia’s 681.

            In gathering data for the period 2005 to 2019, Chepurenko and Obraztsova found that in the early years, the number of people entering business rose, then it stabilized, but in recent years it has contracted both in places where the numbers were initially high and in those where they were still low.

            Those where growth was initially high has suffered less than those where it was low, but the numbers of regions in the two other categories – the second which includes 41 regions with investment problems and the third which includes 32 with specific social and political obstacles – continue to drag the country down on this measure.

            These disparities prompt some people to decide not to go into business at all and others to move from areas where starting a business is difficult to others where it is less so, exacerbating both internal migration and the differences between the business-friendly minority and the business-hostile majority.

            “To want to become an entrepreneur and to become one are very different things, especially now,” the scholars write. When prospects are uncertain, many will refrain from taking the step even if they would like to. Many studies have focused on how to make Russians more inclined to become entrepreneurs, but what is needed is more attention to the conditions under which people will actually do so.

            That has not happened in much of the country, and Russia as a whole is paying a price for this gap.