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Entrepreneurship and small businesses in Russia: A review of empirical research
Ojala, Arto; Isomäki, Hannakaisa
Ojala, A., & Isomäki, H. (2011). Entrepreneurship and small businesses in Russia: A
review of empirical research. Journal of Small Business and Enterprise Development,
18 (1), 97-119. doi:10.1108/14626001111106451
2011
Final draft
1
Entrepreneurship and small businesses in Russia:
A review of empirical research
Arto Ojala and Hannakaisa Isomäki
University of Jyväskylä
ABSTRACT
Purpose ! Entrepreneurship and small businesses in Russia have been of academic interest for
over fifteen years. This paper brings together current knowledge concerning the phenomenon,
and suggests further directions for research.
Design/methodology/approach ! The study consists of a systematic review of forty-eight
refereed empirical articles on entrepreneurship and small businesses in Russia.
Findings ! From the articles reviewed it appears that entrepreneurs in Russia use non-material
resources to overcome the financial and institutional obstacles which still seem to afflict the
market. However, theoretical and methodological issues are, in many cases, poorly reported and
this undermines the scientific rigor of the studies they report.
Research limitations/implications – Because of the wide scope of the studies reviewed the
results included here provide somewhat broad-brush descriptions of the phenomenon. However,
we believe that the findings are valuable for an understanding of the current situation for
entrepreneurship and small businesses in Russia. The findings may also stimulate more in-depth
research in this increasingly important topic.
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Originality/value ! To the best of our knowledge, no literature review on this topic has
previously been published in academic journals.
Keywords Entrepreneurship, SME, Russia, literature review, small firms, transition economy
Paper type Literature review
1. Introduction
Entrepreneurship and small businesses started to emerge in the Soviet Union after the economic
reconstruction that took place in the late 1980s and at the beginning of the 1990s. The changes in
the Soviet system led to the privatization of government-owned companies and created new
possibilities for individuals to launch entrepreneurial activities (Ageev et al., 1995; Hisrich and
Grachev, 1993; McCarthy et al., 1993). The changing situation gave an impetus to academic
research related to entrepreneurship and small businesses in the former Soviet Union and in
today's Russia. Research related to this topic is of real value, since it increases our understanding
of entrepreneurial activities in transitional countries adapting to a free market economy. In a
practical sense, it may also help local firms to develop their operations by revealing opportunities
and constraints in the market. For foreign firms, a better understanding of entrepreneurship and
small businesses in Russia may make it possible to develop new strategies for survival in the
Russian market and for cooperation with Russian firms. However, although changes in Russian
government policy and in the economic environment have led to expectations of increasing
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entrepreneurial activity (Seawright et al., 2008), entrepreneurship and small businesses in Russia
lag behind the leading transitional countries in Eastern Europe (Kihlgren, 2003).
Now that entrepreneurship and small businesses in Russia have been of academic interest for
over fifteen years, it is time to gather together current knowledge on the phenomenon and to
suggest further directions for research. This is all the more important in view of the fragmented
nature of the literature, mainly due to the wide scope of the phenomenon. Hence, the objective of
this paper is to conduct a systematic review of the empirical literature related to entrepreneurship
and small businesses in Russia.
In this review, we aim to answer the following questions: What is the current state of
knowledge concerning entrepreneurship and small businesses in Russia? What kinds of theories
and methodologies have been applied in studies related to this phenomenon? How should
entrepreneurship and small businesses in Russia be studied in the future? In our analysis, the
main points of interest will be the factors hindering or fostering entrepreneurship and small
businesses in Russia. In addition, we shall evaluate how these factors have changed during the
seventeen-year period covered in the review.
The study is organized as follows: first of all, we shall outline our methodology (for selecting
the relevant literature, and for analyzing the studies selected). Thereafter, we shall present the
findings from the review in two sub-sections: (i) research topics of the studies included, plus
their main findings, (ii) theoretical frameworks and methodology of the studies included. Finally,
we shall propose further directions for research, and provide a general summary of the literature.
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2. Methodology of this review
The first real entrepreneurial opportunities did not emerge in the former Soviet Union until the
beginning of the 1990s (Hisrich and Grachev, 1995), hence this review focuses only on the
period following the collapse of the Soviet Union in 1991. Although entrepreneurship and small
businesses can be seen as different fields of study, there is still a high degree of overlap, and the
literature in these fields focuses on fairly similar issues.
In the review process, we adopted the basic principles of a systematic review as
recommended by e.g. Pittaway and Cope (2007) and Tranfield et al. (2003), namely (1) planning
the review, (2) conducting the review, and (3) reporting and dissemination. We first conducted a
keyword search based on the scope of the study, the literature, and the discussion of the authors
in the main electronic databases (EBSCO host, Emerald, JSTOR, Inderscience, ISI Web of
Knowledge, ProQuest, ScienceDirect, Springer, and Wiley/Blackwell). We used the keywords
“Russia”, “Moscow”, and “St. Petersburg” with a combination of the following keywords:
entrepreneurship, entrepreneurial, small business, small firms, SMEs. These keywords had to
occur in the title, as keywords, and/or in the abstract section of the articles in the databases.
Whenever we found a candidate article in a database, the following criteria were used to assess its
eligibility for the full review: (1) published between 1991 and 2009; (2) published in English in
an academic, peer-reviewed journal; (3) focusing on entrepreneurship or small businesses in
Russia, and (4) empirical in nature, indicating clearly how quantitative or qualitative methods
were applied. Both of the authors of this paper double-checked all the articles included within the
review, with a view to ensuring the accuracy of the findings.
Because the focus here is on empirical works with a well-defined methodology, some
important contributions were excluded. For instance, this review does not include articles that
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used illustrative cases with a practical focus (e.g. Beamish, 1992; Hisrich and Grachev, 1993),
secondary data without a clearly defined methodology (e.g. Astrakhan and Chepurenko, 2003;
Kontorovich, 1999), or purely conceptual articles (e.g. Orlov, 2003; Rehn and Taalas, 2004). We
also excluded articles where the Russian market was only one out of several markets examined
(e.g. Johnson et al., 2000; Welter et al., 2004).
Altogether, we found 48 eligible empirical articles focusing on entrepreneurship and small
businesses in Russia. The articles included were published between 1993 and 2009 in 34
academic journals, giving some idea of the wide scope of the phenomenon. Out of the articles, 19
were published in entrepreneurship journals, 11 in economics journals, 6 in management journals,
and the remaining 12 articles in other social science journals. Eight of the articles were published
in journals (American Economic Review, Entrepreneurship Theory & Practice, Journal of
Business Venturing, Journal of International Business Studies, and Journal of Small Business
Management) ranked by the Financial Times as prestigious journals in the business field.
3. Characteristics of the studies reviewed
Table 1 summarizes the methodological approaches used in the studies reviewed, the research
topics addressed in the studies, and the main findings of the studies.
[Table 1 about here]
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3.1 Research topics of the studies reviewed, and findings of the studies
The topics of the studies reviewed can be divided into eight groups (Table 1). The main interests
of the papers were (i) the impact of institutional issues on entrepreneurship in Russia (14 articles),
(ii) strategic issues related to firms in a transitional market (11 articles), (iii) psychological
characteristics of Russian entrepreneurs (7 articles), and (iv) networks and social capital (6
articles). In the remainder of the papers reviewed, the aim of the study was related to (v)
managerial styles and practices, (vi) financial issues, (vii) perceptions of entrepreneurship, and
(viii) cultural issues. Below, we shall elaborate the research topics and findings in more detail.
(i) Fourteen of the papers were interested in institutional issues and in the impact of the
transitional economy on entrepreneurship in Russia. These aspects were seen as important
because entrepreneurs adapt their activities according to the opportunities and limitations set by
the institutional environment (North, 1994). These particular studies focused on the institutional
environment for entrepreneurship in Russia, the effect of governmental regulations on
entrepreneurship and small businesses, informal entrepreneurship, and the impact of
entrepreneurial activity on economic growth in Russia. Institutional issues related to
entrepreneurship were also studied in their historical context and by comparing entrepreneurial
activity in rural and urban areas. These studies on institutional changes and their impact on
entrepreneurship found both positive and negative changes. At the macro-level, the changes were
reported as very positive. However, several of these studies indicated that the unstable
institutional situation, inconsistent regulations, and absence of business laws still inhibit
entrepreneurial activities in Russia.
(ii) Eleven papers analyzed the strategic issues affecting entrepreneurs or small firms. As
Barney (1991) argues, firms can be seen as a combination of various resources – physical, human,
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and organizational – that can provide important competitive advantages. In the papers reviewed,
the main purpose was to study the resources of the Russian firms and to find out how these
resources may impact on further growth and performance, the success of Russian entrepreneurs,
and the difficulties faced by Russian entrepreneurs or small firms. The findings in the studies
indicate that intellectual capital, including human and structural capital, is seen as the major
determinant of the performance of small and innovative enterprises, and of their further success.
The difficulties of Russian entrepreneurs and small firms were found to be related to the Russian
government, difficulties with suppliers, financial problems, high interest rates, finding a good
location, production constraints, and internationalization.
(iii) The psychological characteristics of Russian entrepreneurs were investigated in seven
studies. These characteristics are important, as they can explain entrepreneurs' decision-making
processes (Simon et al., 2000), opportunity recognition (Shane and Venkataraman, 2000), locus
of control (Perry, 1990), and other aspects. The studies reviewed here were interested in the
psychological characteristics of Russian entrepreneurs and possible differences between Russian
entrepreneurs and entrepreneurs from other countries. These comparisons were made mainly with
entrepreneurs from the U.S., or between entrepreneurs and non-entrepreneurs. The findings
indicated that Russian entrepreneurs have a lower education level than their U.S. counterparts.
Russian new ventures used more of their own capital, had fewer earlier entrepreneurial
experiences, and were more likely to be in the service sector than U.S. entrepreneurs. However,
the studies also indicated that the personal characteristics of Russian entrepreneurs are rather
similar to those of U.S. entrepreneurs.
(iv) Entrepreneurs’ social capital and networks in Russia were the main focus in six of the
articles. Networks and social capital were regarded as very important for entrepreneurs, since
relationships between entrepreneurs can be used in different ways, for purposes that create value
8
for actors within the network (Adler and Kwon 2002; Nahapiet and Ghoshal 1998). Burt (1992)
in fact claims that social capital, rather than financial or human capital, is the most significant
factor contributing to competitive advantages for firms. In the context of Russia, the main interest
of these studies was related to how entrepreneurs’ networks affect the start-up phase, financial
performance, and investment decisions by venture capitalists. The findings revealed that social
networks are important for entrepreneurial opportunities because persons whose relatives or
friends are entrepreneurs have a greater chance of becoming entrepreneurs. This was argued to be
important in transitional markets where the risk for new market entries is high. It was also found
that Russian entrepreneurs were satisfied with their existing networks. This was indeed the reason
why they did not actively form new relationships: it is more effective and less risky to maintain
existing networks as long as they provide valuable resources.
(v) The managerial styles and practices of entrepreneurs were studied in three of the articles
reviewed. This was seen as important because leadership styles have a direct impact on a firm’s
performance (Bass, 1990). The focus of these studies was on leadership styles, decision making
processes, differences in the leadership styles of entrepreneurs and managers in Russia, and the
development of managerial practices in small businesses in Russia. The findings in this group
indicated that Russian entrepreneurs were likely to use their peers rather than their subordinates
in collective decision making. It was also found that entrepreneurs exhibited inspirational and
charismatic leadership behavior, whereas managers of large firms had a more passive and laissez-
faire leadership style. The studies also indicated that managers in Russia adapt their management
practices to changes in the business environment in which they operate.
(vi) Three of the studies reviewed focused on the financial resources of entrepreneurs and
small firms in Russia. This topic was seen as important because financial resources have an
important role in establishing firms and expanding businesses (Gratchev and Bobina, 2001). The
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studies investigated the credit market arrangements and the role of non-financial firms as the
source of capital for small firms in Russia; they looked at shortcomings in credit markets, the
security of property rights, and the financial resources of new ventures in the Russian market.
The studies in this group argued that younger firms face higher information costs than is the case
with established firms, and that their expansion is more related to the internal funding available.
The findings also suggested that Russian financial markets are actually more developed than is
typically assumed, and that there was a positive shift in the Russian economy in 2000 which
created new financing opportunities for new ventures and SMEs.
(vii) Three of the studies focused on Russians’ perceptions of entrepreneurship. Because the
intentions of people impact on a particular behavior, these intentions are important in the decision
to become an entrepreneur (Bird, 1988). The studies in this category were interested in the
attitudes of entrepreneurs, managers, and students toward enterprise culture in Russia, and the
issues influencing students’ choices between entrepreneurial careers and employment in
organizations. The findings revealed that among Russian students attitudes, subjective norms, and
perceived behavioral control have a significant role in the choice of becoming an entrepreneur –
factors that would indicate a good potential for entrepreneurship in Russia. It was also found that
young people in Russia have a more enterprising culture.
(viii) Finally, only one of the studies focused on cultural issues, revealing differences in
work-related values between entrepreneurs and non-entrepreneurs in Russia and Georgia.
Cultural values are of interest because these values have an effect on entrepreneurial behavior
and innovativeness (Shane, 1993). The findings indicated that non-entrepreneurs differed from
entrepreneurs in three of Hofstede’s five cultural dimensions, with entrepreneurs in some cases
being similar to managers and in other cases similar to employees. It was suggested that
distinctions between entrepreneurs and non-entrepreneurs are not as useful as commonly assumed.
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3.2 Theoretical frameworks and methodological approaches in the studies reviewed
This sub-section will cover the theoretical frameworks applied in the studies reviewed, and
elaborate the data collection methods, sample sizes, and key informants. It will then look at the
sizes of the firms and target industries included in the studies. Finally, there will be consideration
of the analytical approaches and types of research that the studies applied.
3.2.1 Theoretical frameworks
The studies used a broad range of theoretical frameworks. This is unsurprising, given the various
perspectives taken on the entrepreneurship and small businesses in Russia. However, only a few
of the studies can be categorized as theoretical in a strict sense, and there was great variation in
the extent to which theories or frameworks were rigorously applied or clearly defined. The
commonly used background theories consisted of the network/social capital theory (4 articles),
the resource-based view (4 articles), and Hofstede’s cultural dimensions (2 articles). In some of
the papers reviewed, the theoretical background was constructed through a combination of
different theories or frameworks. It is important to note that altogether 17 studies were without
any background theory or theoretical framework that could be used for empirical investigation.
These studies were somewhat descriptive, lacking well-argued theoretical underpinnings.
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3.2.2 Data collection method, sample size, and key informants
Altogether 38 out of the 48 studies reviewed used a personally administered survey for data
collection. In these studies, research assistants, trained students, survey firms, or trained
volunteers personally delivered and collected questionnaires, or gathered data by interviewing
informants. This kind of data collection method was found to be more effective in Russia where
traditional mail surveys do not generate a sufficient sample size. This was reported to be due to
inexperience and to a resistant attitude towards surveys (see e.g. Gratchev and Bobina, 2001;
Jumpponen et al., 2008; Sommer et al., 2000), the latter feature being mainly due to the desire of
firms to protect their sensitive information from the mafia and from government (Bruton and
Rubanik, 1997). Secondary data from various sources was used for empirical analyses in five of
the studies, in-depth interviews were used in four qualitative studies, and a traditional survey
method was used in only one study.
The final sample size in the quantitative studies reviewed varied between 15 and 2590, and in
the qualitative studies from 1 case firm to 40 informants. Unfortunately, most of the studies did
not provide information on the response rate. In those studies where it was mentioned, the
response rate varied between 45 percent and 95 percent. However, because a personally-
administered survey method was used in many articles, we can assume that the response rate was
fairly high. In the study by Gratchev and Bobina (2001) in which the authors used a traditional
survey method, the response rate was only 26 percent.
The informants used for the studies reviewed came from different kinds of groups, including
(mainly) entrepreneurs, managers, owners, students, and employees. Two or more informant
groups (included according to the research purpose of the study) were used in 17 studies. The
largest individual informant group was that of entrepreneurs, a group used in 10 studies.
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Altogether, 10 of the articles reviewed did not provide information on the informants used in the
studies they reported. In these thirteen studies, the author(s) either used secondary data or else the
informants were not reported.
3.2.3 Firm size and industry in the studies reviewed
Data on the size of the firm used in the analysis was missing in several studies, or else it was
defined rather broadly. Altogether, 8 of the studies used firms of various sizes, covering small
and large firms. In other studies, where information on the number of employees was available, it
was from 0 to 1540 employees. Altogether, 28 of the studies reviewed did not give information
on the sizes of the firms covered. Some of the studies used students as one of the groups of
informants and, hence, could not report the firm size (see e.g. Tkachev and Kolvereid, 1999).
Information on the target industry was provided in 25 studies. However, 9 out of these 25
studies were referred to as being cross-industrial or as covering more than 5 industries. In
addition, 3 of the studies mentioned the main industries covered, but did not give exclusive
information on other industries involved (Ardichvili and Gasparishvili, 2003; Frye and Shleifer,
1997; McCarthy et al., 1993). Altogether, only 14 studies gave detailed information on the target
industries, and only 7 studies focused on a single industry.
3.2.4 Analytical approaches and types of research in the studies reviewed
A quantitative research approach was applied in a total of 44 papers. However, the level of the
quantitative analyses varied from tabular analysis (see e.g. Hisrich and Grachev, 1995) to
regression analysis (see e.g. Batjargal, 2007a). A qualitative approach was taken in only 4 papers
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(Bruton and Rubanik, 1997; Kapustkina et al., 2008; Molz et al. 2009; Rogers, 2006). The
reasons for selecting a particular analytical approach were poorly reported in most of the studies.
Altogether, 27 of the studies reviewed were descriptive in nature. These studies used
statistical analyses to identify patterns or trends in the data. In 17 studies, the type of research
was confirmatory, meaning that certain hypotheses were statistically verified. Only the 4
qualitative papers used an exploratory research approach aimed at theory building.
4. Discussion
In this section, on the basis of the articles reviewed, we shall first assess the current state of
knowledge concerning entrepreneurship and small businesses in Russia. Thereafter, we shall
discuss the theories, models, and methodologies applied in the papers reviewed.
4.1 Current state of knowledge concerning entrepreneurship and small businesses in Russia
Most of the 48 articles reviewed for this study focused on institutional issues in Russia, strategic
issues in a transitional market, the social capital of entrepreneurs, and the psychological
characteristics of Russian entrepreneurs. The first three topics received attention because they can
generate new knowledge on how institutional changes and instability impact on entrepreneurs
and small firms, how entrepreneurs and small firms develop their strategies to overcome
problems in the transitional Russian market, and how resources acquired though networks can be
used to compensate for a lack of other resources in the market. The psychological characteristics
of Russian entrepreneurs received attention because the authors were interested in possible
differences between entrepreneurs in Russia and other countries.
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From the papers examined it appeared that entrepreneurship as a phenomenon and the
psychological characteristics of entrepreneurs are fairly similar in Russia to what they are in other
countries and especially among American entrepreneurs. The differences are mainly related to
environmental differences and to the education level in the countries compared, not in actual
behavior. Given the similarities in these respects, it would appear that the slow development of
small businesses in Russia is more related to the business environment in which entrepreneurial
activities are conducted. Thus, more generally, this finding indicates that the business
environment in a certain country inhibits entrepreneurship more than the psychological
characteristics of entrepreneurs.
Studies related to the market environment and actions taken by entrepreneurs have mainly
considered the factors fostering and hindering entrepreneurship in Russia. The findings here
indicate that the performance and growth potential of Russian small firms is based mainly on
their social capital and network relationships, their intellectual capital, and the human-based
resources available. These “non-material” resources are important in fostering entrepreneurship
and overcoming obstacles in the transitional market. Most of the obstacles confronting
entrepreneurship and small businesses are related to financial problems and governmental
restrictions. Although some studies indicated positive changes in Russia for entrepreneurship and
small businesses at the macro-level, it seems that the business environment there is still highly
unstable. For instance, the studies reviewed found that growth is still restricted by environmental
and institutional instability, high interest rates, inconsistent regulations and laws, the mafia, and
corruption. This has also led to a high amount of informal, unregistered entrepreneurs in Russia.
This finding also indicates that in countries with an unstable institutional environment, the
amount of entrepreneurship might be much higher than the formal registers indicate (see also
William and Round, 2008, 2009; William et al., 2006).
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4.2 Theories, models, and methodologies applied in the studies reviewed
Because entrepreneurship and small businesses are diverse and multi-disciplinary, the studies
reviewed used a wide range of different models, theories, frameworks, and combinations of these.
However, the theoretical richness of the papers reviewed was, in many cases, relatively low, and
in fact, only a few of the studies could be regarded as highly theoretical. In addition, the
presentation of the various theories and models applied was very often inadequately reported. It is
also important to note that altogether seventeen studies were without any well-argued theoretical
framework at all. Thus, researchers in the field should pay more attention to the theoretical
frameworks applied in empirical analyses, since this will be the only way to improve theoretical
understanding of the phenomenon.
It is also important to note that, in many cases, methodological issues were poorly reported.
Most of the studies did not give information on the response rate in the data collection. In many
papers, information on informants, firm size, and/or target industry was missing or loosely
defined. The reasons for the selection of a certain research approach were also poorly reported,
making many of the papers somewhat deficient in this respect. This presents a challenge, not only
to authors in the field, but also to the reviewers and editors in academic journals, in relation to
improving the scientific rigor of published papers.
On the basis of papers reviewed, it seems that out of all data collection methods, personally
administered data collection works best in Russia, where the response rate for traditional surveys
is very low. For this reason, 38 out of the 48 studies reviewed applied surveys that were
personally administered. However, this left other data collection methods with a much smaller
share. For instance, the qualitative case study method (see e.g. Yin, 1994) was used only in four
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exploratory studies, although it can provide detailed information, including information on the
cause-and-effect relationships of entrepreneurial activities in Russia. Through the use of the
qualitative case study method, researchers could get a better and deeper understanding of the
phenomenon, with a focus on “how” and “why” questions. Thereafter, these findings could be
tested, validated, and generalized using quantitative research methods. In the literature reviewed,
it seems that authors collected the data using ready-made survey questions that do not reveal
issues beyond the scope of the questionnaire. Hence, open interviews could give a much wider
understanding of the phenomenon and the reasons behind a certain behavior.
5. Conclusions
It seems that there have not been many changes in the factors fostering and hindering
entrepreneurship and small businesses in Russia during the seventeen-year period covered in the
articles reviewed. McCarthy et al. (1993) argued that the Russian government is the major factor
inhibiting business. In line with this, more recent studies by Aidis et al. (2008) and Molz et al.
(2009) revealed fairly similar results, indicating that the institutional environment creates barriers
for business and entrepreneurship. This conclusion is also supported by the study of Zhuplev and
Shtykhno (2009) indicating that obstacles and problems for small business remains fairly similar
during the fifteen-year period studied. Similarly, the factors fostering entrepreneurship and small
businesses have remained fairly constant over the time period covered. For instance, skillful
employees and network relationships (social capital) are seen as the major sources for
overcoming institutional weaknesses and other problems in the market. The overall picture is that
the same factors fostering and hindering entrepreneurship and small businesses can be found in
17
the studies, regardless of the year of publication. These findings suggest that there have been very
few changes in Russia’s business environment since the collapse of the Soviet Union.
Although the studies related to entrepreneurship and small businesses in Russia examined
highly important research areas, there are topics for further research. First of all, because
institutions and the business environment in Russia seem to be the most important inhibitors for
entrepreneurship and small business, it is important to study the interaction between
entrepreneurs and institutions. As North (1994, 361) pointed out, “If institutions are the rules of
the game, organizations and their entrepreneurs are the players.” Hence it is important to know
how successful entrepreneurs play this game – in other words, establish and maintain
relationships with different institutions to facilitate their growth. In these studies, researchers
should focus on informal constraints (e.g. norms of behavior), since these change much more
slowly than formal constraints (e.g. laws and rules), and are based on interpretations of formal
rules (see North, 1994).
Secondly, comparative studies that focus on changes in institutional environment are
important when one is seeking to determine why entrepreneurship and small businesses in Russia
lag behind other transitional markets. Such studies would provide knowledge on how the
institutional environment in Russia should be developed to make it more favorable to
entrepreneurship. In addition, it is important to convince political decision makers about the
importance of entrepreneurship in Russia for the generation of economic growth.
Thirdly, more studies are needed on entrepreneurship training and how it should be
implemented in Russia. As earlier studies have confirmed, it is important to adapt training
programs to local cultural values and ways of doing business (Ojala and Heikkilä, in press), since
Western practices cannot be applied indiscriminately to the Russian business environment
18
(Ardichvili et al., 1998). By taking into account entrepreneurs’ specific needs and problems, these
studies could benefit organizations implementing training programs for entrepreneurs.
Fourthly, it should be noted that the internationalization of Russian small enterprises was the
focus of attention in only some of the studies reviewed. Moreover, the studies that did focus on
internationalization concentrated mainly on the obstacles encountered in the internationalization
process of Russian small firms. More studies are needed in relation to the foreign market
selection and entry modes applied by Russian small firms in different countries and sectors.
Studies of that kind could help Russian entrepreneurs to develop their international activities by
revealing best practices in foreign markets. It is also very important to study the inward
internationalization activities (Welch and Luostarinen, 1993) of Russian small enterprises, due to
the fact that Russia is well known for its offshore outsourcing in various industry sectors (see e.g.
Pries-Heje et al., 2005). Studies related to the inward internationalization and offshore
outsourcing activities of Russian small firms could generate important knowledge for, on the one
hand, foreign firms that are looking for Russian firms to provide them with offshore outsourcing
services, and on the other hand, for Russian small firms that are able to implement offshore
outsourcing activities. This could also help to increase the number of offshore outsourcing firms,
and consequently lead to a more general increase in entrepreneurship in Russia. The inward
internationalization of Russian small firms would also increase the potential for outward
internationalization, as these firms would have to learn to deal with foreign firms.
6. Summary
This paper seeks to advance knowledge of the current state of entrepreneurship and small
businesses in Russia. It reports on a review of forty-eight empirical studies in the field. The
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studies as a whole indicated that entrepreneurs in Russia use non-material resources to overcome
the financial and institutional obstacles that still seem to afflict the market. The review further
revealed the wide range of background theories and methodologies that have been used to study
the phenomenon of entrepreneurship and small businesses in Russia. However, in many of the
articles examined, theoretical and methodological circumstances were poorly reported,
decreasing the scientific quality of the studies in question. Finally, this paper presents
considerations that may advance future research.
The present study is not without its limitations. Total coverage of all the empirical articles in
this specific field of study may not have been achieved, despite the use of numerous databases
and a wide variety of key words. Nevertheless, it seems reasonable to assume that the review
process did cover a major proportion of the academic articles in the field. Due to the wide range
of the phenomenon and the different reporting styles in the forty-eight articles reviewed,
identifying the essential information needed for this study was often demanding. The assessment
of the theoretical frameworks and methodological concerns was particularly difficult. In addition,
because of the wide scope of the studies, the results included here provide somewhat broad-brush
descriptions of the phenomenon. However, we would hope that further studies could benefit from
the more general findings presented here and focus on more specific issues, for example by
comparing the development of entrepreneurship in Russia with the situation in other transition
economies.
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Entrepreneurship and small businesses in Russia: A review of empirical research
Ojala, Arto; Isomäki, Hannakaisa
Ojala, A., & Isomäki, H. (2011). Entrepreneurship and small businesses in Russia: A
review of empirical research. Journal of Small Business and Enterprise Development,
18 (1), 97-119. doi:10.1108/14626001111106451
2011
Final draft
1
Entrepreneurship and small businesses in Russia:
A review of empirical research
Arto Ojala and Hannakaisa Isomäki
University of Jyväskylä
ABSTRACT
Purpose ! Entrepreneurship and small businesses in Russia have been of academic interest for
over fifteen years. This paper brings together current knowledge concerning the phenomenon,
and suggests further directions for research.
Design/methodology/approach ! The study consists of a systematic review of forty-eight
refereed empirical articles on entrepreneurship and small businesses in Russia.
Findings ! From the articles reviewed it appears that entrepreneurs in Russia use non-material
resources to overcome the financial and institutional obstacles which still seem to afflict the
market. However, theoretical and methodological issues are, in many cases, poorly reported and
this undermines the scientific rigor of the studies they report.
Research limitations/implications – Because of the wide scope of the studies reviewed the
results included here provide somewhat broad-brush descriptions of the phenomenon. However,
we believe that the findings are valuable for an understanding of the current situation for
entrepreneurship and small businesses in Russia. The findings may also stimulate more in-depth
research in this increasingly important topic.
2
Originality/value ! To the best of our knowledge, no literature review on this topic has
previously been published in academic journals.
Keywords Entrepreneurship, SME, Russia, literature review, small firms, transition economy
Paper type Literature review
1. Introduction
Entrepreneurship and small businesses started to emerge in the Soviet Union after the economic
reconstruction that took place in the late 1980s and at the beginning of the 1990s. The changes in
the Soviet system led to the privatization of government-owned companies and created new
possibilities for individuals to launch entrepreneurial activities (Ageev et al., 1995; Hisrich and
Grachev, 1993; McCarthy et al., 1993). The changing situation gave an impetus to academic
research related to entrepreneurship and small businesses in the former Soviet Union and in
today's Russia. Research related to this topic is of real value, since it increases our understanding
of entrepreneurial activities in transitional countries adapting to a free market economy. In a
practical sense, it may also help local firms to develop their operations by revealing opportunities
and constraints in the market. For foreign firms, a better understanding of entrepreneurship and
small businesses in Russia may make it possible to develop new strategies for survival in the
Russian market and for cooperation with Russian firms. However, although changes in Russian
government policy and in the economic environment have led to expectations of increasing
3
entrepreneurial activity (Seawright et al., 2008), entrepreneurship and small businesses in Russia
lag behind the leading transitional countries in Eastern Europe (Kihlgren, 2003).
Now that entrepreneurship and small businesses in Russia have been of academic interest for
over fifteen years, it is time to gather together current knowledge on the phenomenon and to
suggest further directions for research. This is all the more important in view of the fragmented
nature of the literature, mainly due to the wide scope of the phenomenon. Hence, the objective of
this paper is to conduct a systematic review of the empirical literature related to entrepreneurship
and small businesses in Russia.
In this review, we aim to answer the following questions: What is the current state of
knowledge concerning entrepreneurship and small businesses in Russia? What kinds of theories
and methodologies have been applied in studies related to this phenomenon? How should
entrepreneurship and small businesses in Russia be studied in the future? In our analysis, the
main points of interest will be the factors hindering or fostering entrepreneurship and small
businesses in Russia. In addition, we shall evaluate how these factors have changed during the
seventeen-year period covered in the review.
The study is organized as follows: first of all, we shall outline our methodology (for selecting
the relevant literature, and for analyzing the studies selected). Thereafter, we shall present the
findings from the review in two sub-sections: (i) research topics of the studies included, plus
their main findings, (ii) theoretical frameworks and methodology of the studies included. Finally,
we shall propose further directions for research, and provide a general summary of the literature.
4
2. Methodology of this review
The first real entrepreneurial opportunities did not emerge in the former Soviet Union until the
beginning of the 1990s (Hisrich and Grachev, 1995), hence this review focuses only on the
period following the collapse of the Soviet Union in 1991. Although entrepreneurship and small
businesses can be seen as different fields of study, there is still a high degree of overlap, and the
literature in these fields focuses on fairly similar issues.
In the review process, we adopted the basic principles of a systematic review as
recommended by e.g. Pittaway and Cope (2007) and Tranfield et al. (2003), namely (1) planning
the review, (2) conducting the review, and (3) reporting and dissemination. We first conducted a
keyword search based on the scope of the study, the literature, and the discussion of the authors
in the main electronic databases (EBSCO host, Emerald, JSTOR, Inderscience, ISI Web of
Knowledge, ProQuest, ScienceDirect, Springer, and Wiley/Blackwell). We used the keywords
“Russia”, “Moscow”, and “St. Petersburg” with a combination of the following keywords:
entrepreneurship, entrepreneurial, small business, small firms, SMEs. These keywords had to
occur in the title, as keywords, and/or in the abstract section of the articles in the databases.
Whenever we found a candidate article in a database, the following criteria were used to assess its
eligibility for the full review: (1) published between 1991 and 2009; (2) published in English in
an academic, peer-reviewed journal; (3) focusing on entrepreneurship or small businesses in
Russia, and (4) empirical in nature, indicating clearly how quantitative or qualitative methods
were applied. Both of the authors of this paper double-checked all the articles included within the
review, with a view to ensuring the accuracy of the findings.
Because the focus here is on empirical works with a well-defined methodology, some
important contributions were excluded. For instance, this review does not include articles that
5
used illustrative cases with a practical focus (e.g. Beamish, 1992; Hisrich and Grachev, 1993),
secondary data without a clearly defined methodology (e.g. Astrakhan and Chepurenko, 2003;
Kontorovich, 1999), or purely conceptual articles (e.g. Orlov, 2003; Rehn and Taalas, 2004). We
also excluded articles where the Russian market was only one out of several markets examined
(e.g. Johnson et al., 2000; Welter et al., 2004).
Altogether, we found 48 eligible empirical articles focusing on entrepreneurship and small
businesses in Russia. The articles included were published between 1993 and 2009 in 34
academic journals, giving some idea of the wide scope of the phenomenon. Out of the articles, 19
were published in entrepreneurship journals, 11 in economics journals, 6 in management journals,
and the remaining 12 articles in other social science journals. Eight of the articles were published
in journals (American Economic Review, Entrepreneurship Theory & Practice, Journal of
Business Venturing, Journal of International Business Studies, and Journal of Small Business
Management) ranked by the Financial Times as prestigious journals in the business field.
3. Characteristics of the studies reviewed
Table 1 summarizes the methodological approaches used in the studies reviewed, the research
topics addressed in the studies, and the main findings of the studies.
[Table 1 about here]
6
3.1 Research topics of the studies reviewed, and findings of the studies
The topics of the studies reviewed can be divided into eight groups (Table 1). The main interests
of the papers were (i) the impact of institutional issues on entrepreneurship in Russia (14 articles),
(ii) strategic issues related to firms in a transitional market (11 articles), (iii) psychological
characteristics of Russian entrepreneurs (7 articles), and (iv) networks and social capital (6
articles). In the remainder of the papers reviewed, the aim of the study was related to (v)
managerial styles and practices, (vi) financial issues, (vii) perceptions of entrepreneurship, and
(viii) cultural issues. Below, we shall elaborate the research topics and findings in more detail.
(i) Fourteen of the papers were interested in institutional issues and in the impact of the
transitional economy on entrepreneurship in Russia. These aspects were seen as important
because entrepreneurs adapt their activities according to the opportunities and limitations set by
the institutional environment (North, 1994). These particular studies focused on the institutional
environment for entrepreneurship in Russia, the effect of governmental regulations on
entrepreneurship and small businesses, informal entrepreneurship, and the impact of
entrepreneurial activity on economic growth in Russia. Institutional issues related to
entrepreneurship were also studied in their historical context and by comparing entrepreneurial
activity in rural and urban areas. These studies on institutional changes and their impact on
entrepreneurship found both positive and negative changes. At the macro-level, the changes were
reported as very positive. However, several of these studies indicated that the unstable
institutional situation, inconsistent regulations, and absence of business laws still inhibit
entrepreneurial activities in Russia.
(ii) Eleven papers analyzed the strategic issues affecting entrepreneurs or small firms. As
Barney (1991) argues, firms can be seen as a combination of various resources – physical, human,
7
and organizational – that can provide important competitive advantages. In the papers reviewed,
the main purpose was to study the resources of the Russian firms and to find out how these
resources may impact on further growth and performance, the success of Russian entrepreneurs,
and the difficulties faced by Russian entrepreneurs or small firms. The findings in the studies
indicate that intellectual capital, including human and structural capital, is seen as the major
determinant of the performance of small and innovative enterprises, and of their further success.
The difficulties of Russian entrepreneurs and small firms were found to be related to the Russian
government, difficulties with suppliers, financial problems, high interest rates, finding a good
location, production constraints, and internationalization.
(iii) The psychological characteristics of Russian entrepreneurs were investigated in seven
studies. These characteristics are important, as they can explain entrepreneurs' decision-making
processes (Simon et al., 2000), opportunity recognition (Shane and Venkataraman, 2000), locus
of control (Perry, 1990), and other aspects. The studies reviewed here were interested in the
psychological characteristics of Russian entrepreneurs and possible differences between Russian
entrepreneurs and entrepreneurs from other countries. These comparisons were made mainly with
entrepreneurs from the U.S., or between entrepreneurs and non-entrepreneurs. The findings
indicated that Russian entrepreneurs have a lower education level than their U.S. counterparts.
Russian new ventures used more of their own capital, had fewer earlier entrepreneurial
experiences, and were more likely to be in the service sector than U.S. entrepreneurs. However,
the studies also indicated that the personal characteristics of Russian entrepreneurs are rather
similar to those of U.S. entrepreneurs.
(iv) Entrepreneurs’ social capital and networks in Russia were the main focus in six of the
articles. Networks and social capital were regarded as very important for entrepreneurs, since
relationships between entrepreneurs can be used in different ways, for purposes that create value
8
for actors within the network (Adler and Kwon 2002; Nahapiet and Ghoshal 1998). Burt (1992)
in fact claims that social capital, rather than financial or human capital, is the most significant
factor contributing to competitive advantages for firms. In the context of Russia, the main interest
of these studies was related to how entrepreneurs’ networks affect the start-up phase, financial
performance, and investment decisions by venture capitalists. The findings revealed that social
networks are important for entrepreneurial opportunities because persons whose relatives or
friends are entrepreneurs have a greater chance of becoming entrepreneurs. This was argued to be
important in transitional markets where the risk for new market entries is high. It was also found
that Russian entrepreneurs were satisfied with their existing networks. This was indeed the reason
why they did not actively form new relationships: it is more effective and less risky to maintain
existing networks as long as they provide valuable resources.
(v) The managerial styles and practices of entrepreneurs were studied in three of the articles
reviewed. This was seen as important because leadership styles have a direct impact on a firm’s
performance (Bass, 1990). The focus of these studies was on leadership styles, decision making
processes, differences in the leadership styles of entrepreneurs and managers in Russia, and the
development of managerial practices in small businesses in Russia. The findings in this group
indicated that Russian entrepreneurs were likely to use their peers rather than their subordinates
in collective decision making. It was also found that entrepreneurs exhibited inspirational and
charismatic leadership behavior, whereas managers of large firms had a more passive and laissez-
faire leadership style. The studies also indicated that managers in Russia adapt their management
practices to changes in the business environment in which they operate.
(vi) Three of the studies reviewed focused on the financial resources of entrepreneurs and
small firms in Russia. This topic was seen as important because financial resources have an
important role in establishing firms and expanding businesses (Gratchev and Bobina, 2001). The
9
studies investigated the credit market arrangements and the role of non-financial firms as the
source of capital for small firms in Russia; they looked at shortcomings in credit markets, the
security of property rights, and the financial resources of new ventures in the Russian market.
The studies in this group argued that younger firms face higher information costs than is the case
with established firms, and that their expansion is more related to the internal funding available.
The findings also suggested that Russian financial markets are actually more developed than is
typically assumed, and that there was a positive shift in the Russian economy in 2000 which
created new financing opportunities for new ventures and SMEs.
(vii) Three of the studies focused on Russians’ perceptions of entrepreneurship. Because the
intentions of people impact on a particular behavior, these intentions are important in the decision
to become an entrepreneur (Bird, 1988). The studies in this category were interested in the
attitudes of entrepreneurs, managers, and students toward enterprise culture in Russia, and the
issues influencing students’ choices between entrepreneurial careers and employment in
organizations. The findings revealed that among Russian students attitudes, subjective norms, and
perceived behavioral control have a significant role in the choice of becoming an entrepreneur –
factors that would indicate a good potential for entrepreneurship in Russia. It was also found that
young people in Russia have a more enterprising culture.
(viii) Finally, only one of the studies focused on cultural issues, revealing differences in
work-related values between entrepreneurs and non-entrepreneurs in Russia and Georgia.
Cultural values are of interest because these values have an effect on entrepreneurial behavior
and innovativeness (Shane, 1993). The findings indicated that non-entrepreneurs differed from
entrepreneurs in three of Hofstede’s five cultural dimensions, with entrepreneurs in some cases
being similar to managers and in other cases similar to employees. It was suggested that
distinctions between entrepreneurs and non-entrepreneurs are not as useful as commonly assumed.
10
3.2 Theoretical frameworks and methodological approaches in the studies reviewed
This sub-section will cover the theoretical frameworks applied in the studies reviewed, and
elaborate the data collection methods, sample sizes, and key informants. It will then look at the
sizes of the firms and target industries included in the studies. Finally, there will be consideration
of the analytical approaches and types of research that the studies applied.
3.2.1 Theoretical frameworks
The studies used a broad range of theoretical frameworks. This is unsurprising, given the various
perspectives taken on the entrepreneurship and small businesses in Russia. However, only a few
of the studies can be categorized as theoretical in a strict sense, and there was great variation in
the extent to which theories or frameworks were rigorously applied or clearly defined. The
commonly used background theories consisted of the network/social capital theory (4 articles),
the resource-based view (4 articles), and Hofstede’s cultural dimensions (2 articles). In some of
the papers reviewed, the theoretical background was constructed through a combination of
different theories or frameworks. It is important to note that altogether 17 studies were without
any background theory or theoretical framework that could be used for empirical investigation.
These studies were somewhat descriptive, lacking well-argued theoretical underpinnings.
11
3.2.2 Data collection method, sample size, and key informants
Altogether 38 out of the 48 studies reviewed used a personally administered survey for data
collection. In these studies, research assistants, trained students, survey firms, or trained
volunteers personally delivered and collected questionnaires, or gathered data by interviewing
informants. This kind of data collection method was found to be more effective in Russia where
traditional mail surveys do not generate a sufficient sample size. This was reported to be due to
inexperience and to a resistant attitude towards surveys (see e.g. Gratchev and Bobina, 2001;
Jumpponen et al., 2008; Sommer et al., 2000), the latter feature being mainly due to the desire of
firms to protect their sensitive information from the mafia and from government (Bruton and
Rubanik, 1997). Secondary data from various sources was used for empirical analyses in five of
the studies, in-depth interviews were used in four qualitative studies, and a traditional survey
method was used in only one study.
The final sample size in the quantitative studies reviewed varied between 15 and 2590, and in
the qualitative studies from 1 case firm to 40 informants. Unfortunately, most of the studies did
not provide information on the response rate. In those studies where it was mentioned, the
response rate varied between 45 percent and 95 percent. However, because a personally-
administered survey method was used in many articles, we can assume that the response rate was
fairly high. In the study by Gratchev and Bobina (2001) in which the authors used a traditional
survey method, the response rate was only 26 percent.
The informants used for the studies reviewed came from different kinds of groups, including
(mainly) entrepreneurs, managers, owners, students, and employees. Two or more informant
groups (included according to the research purpose of the study) were used in 17 studies. The
largest individual informant group was that of entrepreneurs, a group used in 10 studies.
12
Altogether, 10 of the articles reviewed did not provide information on the informants used in the
studies they reported. In these thirteen studies, the author(s) either used secondary data or else the
informants were not reported.
3.2.3 Firm size and industry in the studies reviewed
Data on the size of the firm used in the analysis was missing in several studies, or else it was
defined rather broadly. Altogether, 8 of the studies used firms of various sizes, covering small
and large firms. In other studies, where information on the number of employees was available, it
was from 0 to 1540 employees. Altogether, 28 of the studies reviewed did not give information
on the sizes of the firms covered. Some of the studies used students as one of the groups of
informants and, hence, could not report the firm size (see e.g. Tkachev and Kolvereid, 1999).
Information on the target industry was provided in 25 studies. However, 9 out of these 25
studies were referred to as being cross-industrial or as covering more than 5 industries. In
addition, 3 of the studies mentioned the main industries covered, but did not give exclusive
information on other industries involved (Ardichvili and Gasparishvili, 2003; Frye and Shleifer,
1997; McCarthy et al., 1993). Altogether, only 14 studies gave detailed information on the target
industries, and only 7 studies focused on a single industry.
3.2.4 Analytical approaches and types of research in the studies reviewed
A quantitative research approach was applied in a total of 44 papers. However, the level of the
quantitative analyses varied from tabular analysis (see e.g. Hisrich and Grachev, 1995) to
regression analysis (see e.g. Batjargal, 2007a). A qualitative approach was taken in only 4 papers
13
(Bruton and Rubanik, 1997; Kapustkina et al., 2008; Molz et al. 2009; Rogers, 2006). The
reasons for selecting a particular analytical approach were poorly reported in most of the studies.
Altogether, 27 of the studies reviewed were descriptive in nature. These studies used
statistical analyses to identify patterns or trends in the data. In 17 studies, the type of research
was confirmatory, meaning that certain hypotheses were statistically verified. Only the 4
qualitative papers used an exploratory research approach aimed at theory building.
4. Discussion
In this section, on the basis of the articles reviewed, we shall first assess the current state of
knowledge concerning entrepreneurship and small businesses in Russia. Thereafter, we shall
discuss the theories, models, and methodologies applied in the papers reviewed.
4.1 Current state of knowledge concerning entrepreneurship and small businesses in Russia
Most of the 48 articles reviewed for this study focused on institutional issues in Russia, strategic
issues in a transitional market, the social capital of entrepreneurs, and the psychological
characteristics of Russian entrepreneurs. The first three topics received attention because they can
generate new knowledge on how institutional changes and instability impact on entrepreneurs
and small firms, how entrepreneurs and small firms develop their strategies to overcome
problems in the transitional Russian market, and how resources acquired though networks can be
used to compensate for a lack of other resources in the market. The psychological characteristics
of Russian entrepreneurs received attention because the authors were interested in possible
differences between entrepreneurs in Russia and other countries.
14
From the papers examined it appeared that entrepreneurship as a phenomenon and the
psychological characteristics of entrepreneurs are fairly similar in Russia to what they are in other
countries and especially among American entrepreneurs. The differences are mainly related to
environmental differences and to the education level in the countries compared, not in actual
behavior. Given the similarities in these respects, it would appear that the slow development of
small businesses in Russia is more related to the business environment in which entrepreneurial
activities are conducted. Thus, more generally, this finding indicates that the business
environment in a certain country inhibits entrepreneurship more than the psychological
characteristics of entrepreneurs.
Studies related to the market environment and actions taken by entrepreneurs have mainly
considered the factors fostering and hindering entrepreneurship in Russia. The findings here
indicate that the performance and growth potential of Russian small firms is based mainly on
their social capital and network relationships, their intellectual capital, and the human-based
resources available. These “non-material” resources are important in fostering entrepreneurship
and overcoming obstacles in the transitional market. Most of the obstacles confronting
entrepreneurship and small businesses are related to financial problems and governmental
restrictions. Although some studies indicated positive changes in Russia for entrepreneurship and
small businesses at the macro-level, it seems that the business environment there is still highly
unstable. For instance, the studies reviewed found that growth is still restricted by environmental
and institutional instability, high interest rates, inconsistent regulations and laws, the mafia, and
corruption. This has also led to a high amount of informal, unregistered entrepreneurs in Russia.
This finding also indicates that in countries with an unstable institutional environment, the
amount of entrepreneurship might be much higher than the formal registers indicate (see also
William and Round, 2008, 2009; William et al., 2006).
15
4.2 Theories, models, and methodologies applied in the studies reviewed
Because entrepreneurship and small businesses are diverse and multi-disciplinary, the studies
reviewed used a wide range of different models, theories, frameworks, and combinations of these.
However, the theoretical richness of the papers reviewed was, in many cases, relatively low, and
in fact, only a few of the studies could be regarded as highly theoretical. In addition, the
presentation of the various theories and models applied was very often inadequately reported. It is
also important to note that altogether seventeen studies were without any well-argued theoretical
framework at all. Thus, researchers in the field should pay more attention to the theoretical
frameworks applied in empirical analyses, since this will be the only way to improve theoretical
understanding of the phenomenon.
It is also important to note that, in many cases, methodological issues were poorly reported.
Most of the studies did not give information on the response rate in the data collection. In many
papers, information on informants, firm size, and/or target industry was missing or loosely
defined. The reasons for the selection of a certain research approach were also poorly reported,
making many of the papers somewhat deficient in this respect. This presents a challenge, not only
to authors in the field, but also to the reviewers and editors in academic journals, in relation to
improving the scientific rigor of published papers.
On the basis of papers reviewed, it seems that out of all data collection methods, personally
administered data collection works best in Russia, where the response rate for traditional surveys
is very low. For this reason, 38 out of the 48 studies reviewed applied surveys that were
personally administered. However, this left other data collection methods with a much smaller
share. For instance, the qualitative case study method (see e.g. Yin, 1994) was used only in four
16
exploratory studies, although it can provide detailed information, including information on the
cause-and-effect relationships of entrepreneurial activities in Russia. Through the use of the
qualitative case study method, researchers could get a better and deeper understanding of the
phenomenon, with a focus on “how” and “why” questions. Thereafter, these findings could be
tested, validated, and generalized using quantitative research methods. In the literature reviewed,
it seems that authors collected the data using ready-made survey questions that do not reveal
issues beyond the scope of the questionnaire. Hence, open interviews could give a much wider
understanding of the phenomenon and the reasons behind a certain behavior.
5. Conclusions
It seems that there have not been many changes in the factors fostering and hindering
entrepreneurship and small businesses in Russia during the seventeen-year period covered in the
articles reviewed. McCarthy et al. (1993) argued that the Russian government is the major factor
inhibiting business. In line with this, more recent studies by Aidis et al. (2008) and Molz et al.
(2009) revealed fairly similar results, indicating that the institutional environment creates barriers
for business and entrepreneurship. This conclusion is also supported by the study of Zhuplev and
Shtykhno (2009) indicating that obstacles and problems for small business remains fairly similar
during the fifteen-year period studied. Similarly, the factors fostering entrepreneurship and small
businesses have remained fairly constant over the time period covered. For instance, skillful
employees and network relationships (social capital) are seen as the major sources for
overcoming institutional weaknesses and other problems in the market. The overall picture is that
the same factors fostering and hindering entrepreneurship and small businesses can be found in
17
the studies, regardless of the year of publication. These findings suggest that there have been very
few changes in Russia’s business environment since the collapse of the Soviet Union.
Although the studies related to entrepreneurship and small businesses in Russia examined
highly important research areas, there are topics for further research. First of all, because
institutions and the business environment in Russia seem to be the most important inhibitors for
entrepreneurship and small business, it is important to study the interaction between
entrepreneurs and institutions. As North (1994, 361) pointed out, “If institutions are the rules of
the game, organizations and their entrepreneurs are the players.” Hence it is important to know
how successful entrepreneurs play this game – in other words, establish and maintain
relationships with different institutions to facilitate their growth. In these studies, researchers
should focus on informal constraints (e.g. norms of behavior), since these change much more
slowly than formal constraints (e.g. laws and rules), and are based on interpretations of formal
rules (see North, 1994).
Secondly, comparative studies that focus on changes in institutional environment are
important when one is seeking to determine why entrepreneurship and small businesses in Russia
lag behind other transitional markets. Such studies would provide knowledge on how the
institutional environment in Russia should be developed to make it more favorable to
entrepreneurship. In addition, it is important to convince political decision makers about the
importance of entrepreneurship in Russia for the generation of economic growth.
Thirdly, more studies are needed on entrepreneurship training and how it should be
implemented in Russia. As earlier studies have confirmed, it is important to adapt training
programs to local cultural values and ways of doing business (Ojala and Heikkilä, in press), since
Western practices cannot be applied indiscriminately to the Russian business environment
18
(Ardichvili et al., 1998). By taking into account entrepreneurs’ specific needs and problems, these
studies could benefit organizations implementing training programs for entrepreneurs.
Fourthly, it should be noted that the internationalization of Russian small enterprises was the
focus of attention in only some of the studies reviewed. Moreover, the studies that did focus on
internationalization concentrated mainly on the obstacles encountered in the internationalization
process of Russian small firms. More studies are needed in relation to the foreign market
selection and entry modes applied by Russian small firms in different countries and sectors.
Studies of that kind could help Russian entrepreneurs to develop their international activities by
revealing best practices in foreign markets. It is also very important to study the inward
internationalization activities (Welch and Luostarinen, 1993) of Russian small enterprises, due to
the fact that Russia is well known for its offshore outsourcing in various industry sectors (see e.g.
Pries-Heje et al., 2005). Studies related to the inward internationalization and offshore
outsourcing activities of Russian small firms could generate important knowledge for, on the one
hand, foreign firms that are looking for Russian firms to provide them with offshore outsourcing
services, and on the other hand, for Russian small firms that are able to implement offshore
outsourcing activities. This could also help to increase the number of offshore outsourcing firms,
and consequently lead to a more general increase in entrepreneurship in Russia. The inward
internationalization of Russian small firms would also increase the potential for outward
internationalization, as these firms would have to learn to deal with foreign firms.
6. Summary
This paper seeks to advance knowledge of the current state of entrepreneurship and small
businesses in Russia. It reports on a review of forty-eight empirical studies in the field. The
19
studies as a whole indicated that entrepreneurs in Russia use non-material resources to overcome
the financial and institutional obstacles that still seem to afflict the market. The review further
revealed the wide range of background theories and methodologies that have been used to study
the phenomenon of entrepreneurship and small businesses in Russia. However, in many of the
articles examined, theoretical and methodological circumstances were poorly reported,
decreasing the scientific quality of the studies in question. Finally, this paper presents
considerations that may advance future research.
The present study is not without its limitations. Total coverage of all the empirical articles in
this specific field of study may not have been achieved, despite the use of numerous databases
and a wide variety of key words. Nevertheless, it seems reasonable to assume that the review
process did cover a major proportion of the academic articles in the field. Due to the wide range
of the phenomenon and the different reporting styles in the forty-eight articles reviewed,
identifying the essential information needed for this study was often demanding. The assessment
of the theoretical frameworks and methodological concerns was particularly difficult. In addition,
because of the wide scope of the studies, the results included here provide somewhat broad-brush
descriptions of the phenomenon. However, we would hope that further studies could benefit from
the more general findings presented here and focus on more specific issues, for example by
comparing the development of entrepreneurship in Russia with the situation in other transition
economies.
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