Rural entrepreneurs in Russia and the Ukraine: origins, motivations, and institutional change.

Author:Kalantaridis, Christos
Position:Rural business management

One of the key issues confronting both Russia and the Ukraine during the transformation process is the emergence of economic agents that could operate in a market economy. The origin and motivation of entrepreneurship are fundamental issues for researchers and policy makers. However, a historical hostility toward private business--that in large parts of Russia and the Ukraine predates socialism--combined with a shortage of capital and the skills necessary to engage in the process of business enterprise underline the magnitude of the task of generating entrepreneurial talent. In response, there has been a growing body of literature exploring these questions (Agreev et al. 1995; Green et al. 1996; Shulus 1996; Radaev 1997, 2001; Kusnezova 1999, Luthans et al. 2000; Smallbone and Welter 2001). Not unexpectedly the bulk of this literature drew upon the experience of socio-economic milieus that were at the forefront of the transformation process. These included capital cities and major regional centers, where there was greater opportunity for the realization of entrepreneurial talent than in geographically peripheral and sparsely populated environments.

None of the previous works, published in English, address directly the issue of entrepreneurship in a rural setting. One plausible explanation for the neglect of rural entrepreneurs is that rurality "does not matter at the early stages of reform." This means that the main constraints in the emergence of entrepreneurs emanate from the magnitude of institutional change and the volatility of the macro-economic setting. As a consequence, the influence of the rural, in the sense of the predominance of agriculture, low population densities, and distance from the main markets, is of secondary importance. There is some evidence to support this argument (Johnson et al. 2000). However, as the process of reform advances--though admittedly at a different pace between as well as within countries--the characteristics of the rural become more salient.

Within this context we aspire to make a positive contribution in the literature by focusing exclusively upon rural entrepreneurship. Our paramount objective is to explore the origin and motivation of entrepreneurs in a rural setting and explore to what extent it corresponds to the general pattern of entrepreneurial development observed in core metropolitan areas of post-Socialist regimes. In doing so, we draw upon the findings of extensive fieldwork investigation in rural areas from three diverse regions: Trascarpathia in westernmost Ukraine, the Republic of Bashkortostan at the edge of European Russia, and the Novosibirsk region in Western Siberia (figure 1). The paper, unlike the bulk of previous research on entrepreneurship in Russia and the Ukraine, aspires to be inclusive: exploring entrepreneurial behavior in all its manifestations. This pursuit of representativeness is in contrast to the approach adopted by many--but by no means all--other scholars who have tended to concentrate upon entrepreneurs that are economically significant in terms of employment and income generation. Thus, one of the main contributions of this study is to examine relatively neglected entrepreneurial groupings, such as the females and the petty traders, alongside the more conventional, and extensively researched in an urban setting, new generation businessmen and old soviet leaders.


In order to capture these features the paper is organized in the following way. The next section reviews the literature on post-socialist entrepreneurship in Russia and the Ukraine. In the absence of any published research on rural entrepreneurship we focus upon the experience of their urban-based counterparts, with the underlined aim of identifying opportunities for comparisons. The third section discusses how the key concepts of entrepreneurship and rurality were operationalized during the field research, as well as the main research methods deployed. In the next three sections we introduce each of the study areas and identify entrepreneurial groupings with distinct features. Finally, we offer some conclusions regarding entrepreneurial processes in the countryside.

Post-Socialist Entrepreneurship in Russia and the Ukraine

This section sets out to review the accumulated body of literature on entrepreneurship in Russia and the Ukraine with the aim of tracing patterns of entrepreneurship development in postsocialist regimes. In doing so, it draws upon findings emanating from urban conurbations, which remained at the center of scholarly inquiry throughout the past decade or so. However, attempts at comparisons between the mostly urban-based literature and our rural study are hampered by the use of different sample selection criteria. Many previous studies concentrated upon entrepreneurs that are economically significant, in other words, individuals responsible for the creation of relatively large numbers of salaried/wage jobs (Ageev et al. 1995; Shulus 1996). As a consequence, marginal entrepreneurial ventures have received much less attention in the main body of the accumulated literature. Some other researchers introduced other restrictive criteria regarding the age of the firm (Smallbone and Welter 2001) or the age of the entrepreneur (Roberts and Tholen 1998) that undoubtedly influence results. Another factor that may influence the results of empirical research on postsocialist entrepreneurship is time. More specifically, the fieldwork research of previous published works was conducted between 1994 and 2000, a very long and diverse period in the framework of Russia and the Ukraine, during which change in the external environment was very rapid and multidirectional. Thus, our attempt to compare our findings emanating from rural locations with those of studies drawing upon different geographical settings will be cautious and will acknowledge the impact of diverse methodologies and time.

There is near universal agreement among researchers regarding the characteristics and motivation of entrepreneurs in Russia. A. Shulus argued that he is "a man aged between 30 and 40 with a university degree" (1996, 105). (1) He went on to suggest that entrepreneurs in Russia are driven either by opportunism or more "mainstream" business objectives. Drawing from a study of thirty-two successful Muscovite entrepreneurs, A. Ageev et al. claimed that "the majority of the entrepreneurs (84 percent) were male with an average age of 34.1 years.... [S]ixty-six percent had a college degree and the remainder the equivalent of a high school degree or some college" (1995, 371-372). For Ageev et al., like Shulus, pull factors (2) provide the main incentive behind the decision to start a business. Push factors such as necessity are reported only by 16 percent of what is admittedly a small sample. More or less at the same time, R. Green et al. posited that 79 percent new generation entrepreneurs in Moscow were males, while their mean age was thirty years and nearly 60 percent possessed a higher education qualification (1996). They went on to argue that internal locus for control and need for achievement are the main drives of entrepreneurs. In an influential study of Russian entrepreneurship, the OECD reported that most entrepreneurs are males aged between thirty-six and forty-five years old (1998). This is despite the growing involvement of females and younger individuals in the process of business enterprise during the latter stages of reform. As far as educational attainment is concerned, 80 percent of Russian entrepreneurs hold university diplomas, while one in ten have doctoral degrees (OECD 1998).

A similar picture emerges from the handful of published studies of Ukrainian entrepreneurship to date. K. Roberts and J. Tholen claimed that the entrepreneurs are overwhelmingly male (82 percent), have some higher education qualifications, and are brought up in families involved in intelligentsia, managerial, and professional jobs (1998). (3) More recently, D. Smallbone et al., exploring entrepreneurship in predominantly urban areas of two regions (Kiev and Vinitsa), reported that 80 percent of the total are males, while most fall within the thirty-six to forty-five years age group (1999). Ukrainian entrepreneurs also appear to be better educated individuals: 85 percent possess some higher education qualifications. Pull factors, such as independence, the desire to increase personal and family incomes, and personal fulfillment, are by far the most important. Unemployment and disappointment with the previous job are reported by just over one in ten of the respondents--though this low incidence of push factors could be explained in part by the exclusion of enterprises that were less than one year old and most personal services.

While researchers agree on the personal characteristics and motivation that drives entrepreneurship, they identify somewhat different groupings of entrepreneurial talent--a disparity influenced in large part by temporal differences. Table 1 summarizes the main entrepreneurial groupings identified in the literature and draws more or less exclusively upon the case of Russia. (4) The first cluster comprises directors of state enterprises--mainly older males with higher technical qualifications. From as early as the 1970s and 1980s these individuals were forced to behave entrepreneurially in an increasingly deficient and complex system. According to N. Kusnezova (1999), during the early 1990s, individuals falling in this category were among the main beneficiaries of privatization, as they were able to gain control of often large industrial enterprises and make a significant economic contribution during the postsocialist era (Khotin 1996). Another grouping, also comprising well-educated males, of entrepreneurs that emerged during the early stages of the reform comprises state and regional party officials, who controlled the conversion of state into...

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