Influence of state participation on business conditions and entrepreneurship in the EU countries of the former eastern bloc
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Domańska, Ada; Zajkowski, Robert Article Influence of state participation on business conditions and entrepreneurship in the EU countries of the former eastern bloc e-Finanse: Financial Internet Quarterly Provided in Cooperation with: University of Information Technology and Management, Rzeszów Suggested Citation: Domańska, Ada; Zajkowski, Robert (2018) : Influence of state participation on business conditions and entrepreneurship in the EU countries of the former eastern bloc, e-Finanse: Financial Internet Quarterly, ISSN 1734-039X, Sciendo, Warsaw, Vol. 14, Iss. 2, pp. 9-17, https://doi.org/10.2478/fiqf-2018-0008 This Version is available at: https://hdl.handle.net/10419/197407 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may be saved and copied for your personal and scholarly purposes. You are not to copy documents for public or commercial purposes, to exhibit the documents publicly, to make them publicly available on the internet, or to distribute or otherwise use the documents in public. If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. https://creativecommons.org/licenses/by-nc-nd/3.0
www.e-finanse.com University of Information Technology and Management in Rzeszów 9 Ada Domańska1, Robert Zajkowski2 Abstract Thepurposeofthispaperistoshowtheextenttowhichstateinterferenceintheeconomyaffects theconditionsoffunctioningforsmallandmedium-sizedenterprisesineconomiesoftheformer easternblocwhichhavealreadygonethroughtheEUaccessionprocess.ThedataonSMEs’situationweretakenfromtheFactSheetsoftheEUprogramSmallBusinessAct.Duetothefactthat thevariablesproposedtodescribethebusinessenvironmentdiffersignificantlyitwasnecessary tostandardizethem.Thezerounitarizationmethodwasappliedtorankcountriesproperly.Special attentioninthispaperisdevotedtoPolandandthesituationofbusinessesoperatinginthiscountry.Theresearchhasidentifiedsomeareasrequiringurgentchanges.Itiscrucialtoimprovethe situationsothatcompaniescanplayaproperroleintheeconomy.Acountrywhichcouldbean exampleofgoodsolutionsthatsupportbusinessdevelopmentisalsodescribed. 1 MariaCurie-SkłodowskaUniversityinLublin,FacultyofEconomics,DepartmentofBanking,e-mail:[email protected],ORCID:0000-00028239-4319. 2 MariaCurie-SkłodowskaUniversityinLublin,FacultyofEconomics,DepartmentofBanking,e-mail:robert.zajk[email protected],ORCID:00000002-0021-7977. INFLUENCE OF STATE PARTICIPATION ON BUSINESS CONDITIONS AND ENTREPRENEURSHIP IN THE EU COUNTRIES OF THE FORMER EASTERN BLOC Financial Internet Quarterly „e-Finanse” 2018, vol. 14/ no. 2, s. 9-17 DOI: 10.2478/fiqf-2018-0008 JEL classification: L26, O57, P20 Keywords: SMEs, Small Business Act, formemr Eastern Bloc Received:20.11.2017 Accepted:26.03.2018
www.e-finanse.com University of Information Technology and Management in Rzeszów 10 „e-Finanse” 2018, vol. 14 / no. 2 Ada Domańska, Robert Zajkowski Influence of state participation on business conditions and entrepreneurship in the EU countries of the former Eastern bloc Introduction The purpose of this paper is to show the extent to which state interference in the economy affects the conditions of functioning for small and medium-sized enterprises(SMEs)operatingintheformereasternbloc countries,whichnowbelongtotheEuropeanUnion.The SMEsectorplaysaspecialroleindevelopmentofindividual economies. SMEs are considered to be stimulants fora country’seconomicsituation.Theiroperationisasignof faircompetitionandreflectsasociety’sentrepreneurship (Ignatiuk,2011). The companies that have been prepared to take opportunities offered by globalization and acceleration of technological change are significant elements for further improvement of competitiveness and dynamic developmentoftheEUeconomy,allowingcreationofnew jobsandensuringahigherlevelofsocialcohesion.The abilitytoexploitthepotentialofsmallandmedium-sized enterprises will be decisive for the future prosperity of theEuropeanUnion(EuropeanCommission[EC],2008a). BecauseoftheimportantroleoftheSMEsectorfor thefurtherdevelopmentoftheEU,itwaspositionedinthe centeroftheLisbonStrategyforgrowthandjobsthrough theuseofapartnershipapproach(EuropeanCommission, 2005). Diversity of the environment in which individual economic entities operate makes it very important to create the right program to support SMEs - a program whichwouldtakeintoaccountthediversity.Thus,inJune 2008 the European Commission presented an initiative whichwouldfurtherstrengthensustainablegrowthand competitiveness of SMEs, called the Small Business Act (SBA)forEurope(EuropeanCommission,2008b). The fundamental assumption of the SBA was that most important to achieving success is to change the perceptionofentrepreneursinsociety.Positiveperception ofaspectsconcerningtheSMEsfunctioning,intheformof increasedemploymentandeconomicprosperity,should encouragepeopletostartabusiness.Itisapivotalpoint, crucial for creation of a business-friendly environment, which is why the culture of entrepreneurship and the associatedwillingnesstotakeriskshouldbesupportedby politicalleaders,themedia,andtheauthorities. Theprogramaimstocreateanewpolicyframework, consolidatingalreadyoperatingsupportinstrumentsfor businesses. Its implementation is to take place through the political partnership between the EU and Member States that respects the principles of subsidiarity and proportionality. A comprehensive policy framework is based on 10 principles employed to guide the development and implementation of policies at the EU andMemberStateslevel.Theseprinciplesareessentialto contributeaddedvalue,ensureequalconditionsforSMEs and improve the legal and administrative environment throughouttheEuropeanUnion(EuropeanCommission, 2008b). Literature review Research shows that due to the fact that former Easterbloceconomieswereoperatingundertheideology ofcommunismandlaterwentthroughtheEUaccession process,anumberofsimilaritiesmaybenoticedbetween them(Czarnecka,2007). Forthisreason,manyresearchersbringupthesubject of functioning conditions of entrepreneurship in these countries.Thefinalshapeofthebusinessenvironmentin eachcountryistiedtohistoricalandculturalissues.This situationledtodevelopmentofsolutionswhichappeared not to be efficient enough in post-socialist countries (Estrin & Mickiewicz, 2012). The strong attachment of post-socialist countries to the past (path dependency) is referred to in Douglass North’s theory (North, 1990). Other studies confirm that historical burden in these countries enhances a tendency towards corruption, which is intensified by weak institutions, bureaucracy andinefficientlaw(Tonoyan,et.al.,2010).Furthermore, thereisaloweracceptanceforentrepreneurialactivities (Manolova,Eunni&Gyoshev,2008). Moreover, it is pointed out in literature on the issue of entrepreneurship in countries of the former Eastern bloc that the transition economies have lower rates of entrepreneurship than are observed in other economies (Estrin & Mickiewicz, 2010). Some other studies also confirm this state of affairs (McMiIllan & Woodruff,2002;Estrin,Meyer&Bytchkova,2006;Aidis &Mickiewicz,2006).Therearealsosignificantdifferences that occur among the countries. The development of entrepreneurship in a given country corresponds to its level of economic development. Innovation-driven economieshavehigherinstitutionalandindividuallevels ofdevelopmentthansimilarlydevelopedefficiency-driven economies (Trumbull & Szerb, 2016). It is important to recognisethereasonsforthisdifferentiation.
Ada Domańska, Robert Zajkowski Influence of state participation on business conditions and entrepreneurship in the EU countries of the former Eastern bloc www.e-finanse.com University of Information Technology and Management in Rzeszów 11 „e-Finanse” 2018, vol. 14 / no. 2 The literature indicates that a large public sector has a negative impact on the functioning conditions of enterprises, both due to high taxes and high state spending (Henrekson, 2005; Minniti, 2008, Afonso, et. al., 2005, Boix, 2001, Warne, 1997, Van Thiel & Leeuw, 2002). High public debt can lead to limitation of funds availabletoprivateentitiesforfinancingtheirspending, i.e. the phenomenon of “crowding out” (Markiewicz & Miłaszewicz, 2006, Benedek, et. al., 2014, Zegarowicz & Wildowicz-Giegiel, 2017, Gaweł, 2004, Rogalska, 2012). On this basis, it was decided to formulate the hypothesis(H1),thatastate’sconsiderableparticipation intheeconomyhasanegativeeffectonthefunctioning conditionsofenterprises.However,itisworthnotingthat simultaneouslywithageneral“crowdingout”effectthere aresome contradictory examples such as Germanyand Norwaywherewecanobservehighinvolvementofthe publicsectorintheeconomyandarelativelylowlevelof publicdebt. On the other hand, business support programs carried out by the state have a significant impact on improvement of the functioning conditions and developmentofenterprises.Apositiveimpactofpublic programs on the level of employment was noted in Sweden(Norrman&Bager-Sjögren,2010).Theimpactof localinitiatives,launchedbytheEnterpriseInsight,onthe newlyformedenterprisesandself-employmentrateswas examinedinGreatBritainandturnedouttobepositive (Botham,2012).Thesecondhypothesis(H2)assumesthat businesssupportprogramscarriedoutbytheStatehave apositiveeffectonfunctioningconditionsofenterprises. Methodology As a part of the study an analysis was carried out on small and medium-sized enterprises in countries of theformerEasternblocwhicharenowmembersofthe EuropeanUnion. Relyingon the literature,11countries were selected for a detailed analysis of the functioning conditionsofenterprises:Bulgaria,Croatia,CzechRepublic, Estonia, Lithuania, Latvia, Poland, Romania, Slovakia, Slovenia,andHungary.ThecountriesoftheformerEastern blocalsoincludethestatesoftheformerYugoslavia.What ismore,itshouldbetakenintoconsiderationthatBaltic Countries are former Soviet republics and additionally verysmallgeographicalentities.Duetotheculturaland political past they have quite different background and positionthane.g.Poland,Hungary,ortheCzechRepublic. Hence sometimes solutions that are workable in Baltic countriescouldfailinothereconomicenvironmentsand cannotbeimplementedinothereconomies. The information used in this article comes from theFactSheetsofindividualcountriesonthedegreeof implementationoftheProgrammeoftheSmallBusiness Actin2015.Theadvantagesofemployingthissourceare: statistical credibility, completeness of contained data, and high comparability. A significant drawback, on the other hand, are emerging delays in publishing parts of informationbycertaincountriesortheirtotallack. AsapartoftheSmallBusinessActprogram,different areasconcerningthefunctioningof smallandmediumsizedenterprisesarepresentedinaccordancewithits10 principles.Theyinclude: 1) Entrepreneurship, 2) “Secondchance”, 3) “Thinksmallfirst”, 4) “Responsiveadministration”, 5) Stateaidandpublicprocurement, 6) Accesstofinance, 7) SingleMarket, 8) Skillsandinnovation, 9) Environment, 10) Internationalisation. Because of the large extent of these analyses, aspectspresentedin the article focusonly on flexibility ofadministrationandavailabilityof financing for SMEs. Theseareaswereselectedbecauseoftheirimportance forfunctioningandformationofbusinessentities. Due to the fact that the variables proposed to describe the business environment differ significantly it wasnecessarytostandardizethem.Thezerounitarization method was applied to rank countries. This method is applicablewithbothquantitativeandqualitativevariables anditssimplicityleadstoeasyinterpretationofresults. Moreover,thismethodfulfilsthreeimportantcriteria: 1) After normalisation lengths of intervals of variabilityforallfeaturesarethesame. 2) Thelowerandupperlimitsofintervalsofvariability forallfeaturesarethesame:[0,1]. 3) Features which have a zero value can be also normalised(Kukuła,2012). In the case of boosters (their growth causes the growthinthelevelofanalysedphenomena)thedistance indicatorwasusedwhichdividesindividualcountriesfrom
www.e-finanse.com University of Information Technology and Management in Rzeszów 12 „e-Finanse” 2018, vol. 14 / no. 2 Ada Domańska, Robert Zajkowski Influence of state participation on business conditions and entrepreneurship in the EU countries of the former Eastern bloc thebestresult(includingtheEUaverage).Thefollowing formulaofstandardizationisusedthenintheform: where: xs,K– value of a normalized variable x for a given country, xK–valueofarawvariablexforagivencountry, xKmin,xKmax–valueofindicatorintheweakestandthe bestcountryforavariablex. Inthecaseofinhibitors(ifitincreases,thevalueof analysedphenomenadecreases)oppositescalingformula forstandardizingwasapplied.Ittooktheformof: By using this type of standardization data can be comparedandaggregated.Inaddition,thediversification ofscalingforboostersandinhibitorsallowustodetermine the correct direction and strength of an occurring phenomenon. Dataconcerningtheparticipationofthestateinthe economyandbusinesssupportprogramsweretakenfrom the Global Entrepreneurship Monitor (Kelley, Singer & Herrington,2016).Spearman’srankcorrelationcoefficient which is a nonparametric measure of rank correlation, wasemployedtoverifythehypotheses(Lieberson,1964). Results and discussion The formation of the SME sector and its impact on the functioning of economies proceed differently in individualcountries.Itsspecificitydependsonthe level ofdevelopmentandsocio-politicalsystemachievedbya givenstate.Evenifthereisagreatsimilarityofoperating conditions,theroleofsmallandmedium-sizedenterprises willbedifferent,andthedegreeofdevelopmentwillbe differentiated(Ignatiuk,2011). When analyzing the proportion of the number of smallandmedium-sizedenterprisesinthetotalnumber ofeconomicentitiesitmustbemadeclearthatitstoodat asimilarlevelinselectedcountriesoftheEuropeanUnion (theyaccountedformorethan99.5%ofallcompaniesin allanalyzedeconomies),sotheinformationwasnotthe subjectofdeeperinquiry.However,presentationofdata concerningparticipationofpeopleemployedintheSME sector in relation to the total number of employees in enterprisesandshareintheaddedvalueofthevarious typesofentitiesshouldbegivenmoreattention(Table1). Smallandmedium-sizedenterprisesemployedfrom 67% to almost 79% of all company employees in 2015, sothis sharewassignificantlydifferentinthe countries Table 1: The share of employed in the micro, small and medium enterprises in the total number of employees in enterprises and share in the added value of individual entities in selected EU countries Country Micro Small Medium - sized SME Employed Value added Employed Value added Employed Value added Employed Value added Poland 35,80% 15,00% 13,90% 13,90% 18,20% 21,60% 67,80% 50,50% Bulgaria 30,20% 19,30% 23,80% 20,60% 22,10% 22,10% 76,10% 62,00% Croatia 30,30% 18,70% 19,10% 17,50% 18,10% 19,00% 67,40% 55,20% CzechRepublic 32,60% 19,20% 18,10% 15,30% 18,90% 21,00% 69,60% 55,50% Estonia 30,90% 25,20% 24,20% 23,70% 23,00% 26,60% 78,00% 75,60% Lithuania 26,60% 15,40% 25,70% 24,10% 24,30% 29,20% 76,70% 68,50% Latvia 29,40% 18,60% 25,70% 23,40% 23,60% 26,90% 78,60% 68,80% Romania 22,20% 13,50% 23,30% 16,10% 21,70% 20,00% 67,20% 49,60% Slovakia 39,00% 27,10% 15,80% 17,70% 15,90% 16,50% 70,70% 61,20% Slovenia 35,10% 21,70% 18,20% 19,10% 19,40% 22,30% 72,70% 63,10% Hungary 34,60% 18,70% 18,60% 16,10% 16,30% 18,80% 69,90% 53,60% EU-28 29,20% 21,10% 20,40% 18,20% 17,30% 18,50% 66,90% 57,80% Source: Author’s own elaboration based on 2015 SBA Fact Sheets
Ada Domańska, Robert Zajkowski Influence of state participation on business conditions and entrepreneurship in the EU countries of the former Eastern bloc www.e-finanse.com University of Information Technology and Management in Rzeszów 13 „e-Finanse” 2018, vol. 14 / no. 2 analyzed. The smallest percentage in this respect was noticed in Romania, Poland and Croatia (about 68%). Nonetheless,itshouldbementionedthatitdidnotdiffer significantly from the EU average and even surpassed it. The largest number of employed in the SME sector wasinLatviaandalsowheresuchcompaniesgenerated high(higherthantheEUaverage)percentageofadded value. This may be due to the almost equal dispersion of employment between the micro, small and medium enterprises. The highestsharein the addedvaluearea, however, belonged to SMEs operating in Estonia (over 75%).Themainassetinfavourofsuchahighlevelseems tobealargepercentageofcompaniesinthe information technology and communication sector. Moreover, the publicsectorofthiscountrycontributedsignificantlyto thedevelopmentofinnovation. The lowest added value in relation to SMEs from other countries was created by the sector in Romania. The problems to which attention was drawn primarily were the lack of a national tourism strategy as well as underdevelopedanduncompetitivehotelinfrastructure. Low participation in this regard was also presented by smallandmedium-sizedenterprisesoperatinginPoland. It was probably due to a high proportion of people employedinthesmallestentities-micro(over35%),as well as the sectoral structure of enterprises itself (low share of companies in the business requiring professional expertise). Subsequently, the impact of the SME sector, expressed through the percentage of created jobs and createdaddedvalue,ontheeconomiesoftheseEuropean Unioncountries,didnotdiffersignificantlyfromtheEU average.Itshouldbenoted,however,thatthesituation innortherncountries(Lithuania,LatviaandEstonia)was muchbetterthaninothercountries.Theycantherefore be a role model for other economies, such as Poland, wheretheSMEsector’sshareingeneratedaddedvalue isstillquitelow. Responsiveadministrationisanimportantelement evaluated in the framework of the Small Business Act which determines the degree of public sector capacity to respond to the needs of SMEs (Table 2). It should be stressed that in this regard the northern countries like Lithuania, LatviaandEstoniaperformthebest.The authorities in these countries try to create a friendly businessenvironment.Therefore,differentsolutionsare implementedsuchastheLatviansinglecustomerservice network, which integrates services of seven national institutions, considerably reducing the administrative burden. It may be accordingly assumed that creating Table 2: Responsive Administration in the selected EU countries (normalized data, marking: BG - Bulgaria, PL - Poland, CZ - Czech Republic, EW - Estonia, H - Hungary, HR - Croatia, LV - Latvia, LT - Lithuania, R - Romania, SK - Slovakia, SLO – Slovenia) Aspects PL BG CZ EW H HR LV LT RSK SLO UE Time to start a business 1,00 0,67 0,78 0,72 0,89 0,78 0,89 0,67 0,89 0,00 0,79 0,72 Cost of starting a business 0,70 0,90 0,00 0,54 0,40 0,04 0,91 0,66 0,75 0,40 1,00 0,22 Paid-in-minimum capital 0,77 1,00 1,00 0,66 0,00 0,51 1,00 1,00 0,99 0,64 0,18 0,79 Time required to transfer property 0,71 0,93 0,80 0,86 0,87 0,35 0,86 1,00 0,85 0,87 0,00 0,78 Cost required to transfer property 0,94 0,42 0,20 0,92 0,00 0,00 0,60 0,84 0,70 1,00 0,60 0,11 Number of taxpayments per year 0,14 0,50 1,00 0,93 0,64 0,07 0,93 0,64 0,43 0,00 0,64 0,59 Time it takes to pay taxes 0,45 0,00 0,11 1,00 0,47 0,66 0,70 0,75 0,79 0,66 0,52 0,71 Cost of enforcing contracts 0,67 0,45 0,00 0,55 0,89 0,95 0,49 0,46 0,20 0,15 1,00 0,56 Fast-changing legislation and policies are a problem for doing business 0,34 0,45 0,20 1,00 0,09 0,06 0,38 0,57 0,00 0,08 0,25 0,28 The complexity of administrative procedures is a problem for doing business 0,34 0,01 0,22 1,00 0,22 0,10 0,59 0,66 0,00 0,12 0,10 0,28 SMEs interacting online with public authorities 0,74 0,53 0,83 0,89 0,55 0,81 0,80 1,00 0,00 0,80 0,81 0,66 Licenses and permit systems 0,55 0,08 1,00 0,78 0,53 0,00 0,60 0,27 0,15 0,44 0,01 0,34 Burden of government regulations 0,67 0,57 0,81 0,00 0,81 1,00 0,43 0,62 0,52 0,90 0,86 0,51 Sum 8,02 6,50 6,95 9,83 6,36 5,32 9,17 9,14 6,27 6,06 6,77 6,57 Source: Author’s own estimations based on 2015 SBA Fact Sheets
www.e-finanse.com University of Information Technology and Management in Rzeszów 14 „e-Finanse” 2018, vol. 14 / no. 2 Ada Domańska, Robert Zajkowski Influence of state participation on business conditions and entrepreneurship in the EU countries of the former Eastern bloc favourable conditions for the development of the SME sectorbythepublicauthoritiesisconducivetosubsequent highaddedvaluegeneratedbytheseentities. Itisalsoworthpayingattentiontothefactthatthe indicatorscalculatedforPolandarehighaswell.Wecanbe proudoftheshorttimenecessaryfortheestablishment ofanenterpriseandlowcostofsuchaprocess.Problems occurinthetaxsystem,especiallyinthelargenumberand timespentonmakingtaxpayments.Enterprisesalsohave tofacehighvolatilityinlegalprovisionsandstatepolicy, aswellasthecomplexityofadministrativeprocedures. The biggest challenges, however, await the companiesthatoperateinCroatiaandSlovakia.Themost importantissuesthereareaconsiderablelackofstability ofthelawandcomplicatedadministrativepractices.The highcostofstartingabusinessandtimeneededforitalso seemtobeproblematicissues. Theanalysisof accesstofinancingforSMEsinthe selectedEUcountrieswashamperedduetothelackof partialdatafromsomeofthecountries.However,onthe basisoftheavailableinformation,itshouldbenotedthat companiesoperatinginEstoniahavetostrugglewiththe leastproblemsinthisarea(Table3).Problemsareonly causedbyhighlossesfrombaddebts.Otheraspectssuch as the total time of getting paid or banks’ willingness tolenddonotcausesignificantdifficultiestoeconomic entities. Therearealsonomajorimpedimentstotheaccess to financing for small and medium-sized enterprises in Poland. Nonetheless, the area that needs some repair indeed is the amount of venture capital investment in relation to GDP. It should be highlighted though, that thisproblemexistsinmostcountries,theonlyexception beingpreviouslymentionedEstonia. Thebiggestproblemsintermsofacquiringcapital, areenduredbythecompaniesoperatinginSlovakia.This countryhasthelowestlevelofaccesstopublicfinancial support including guarantees, and low willingness of bankstolend.Moreover,theindicatorofstrengthoflegal regulations reached the lowest value in relation to the other countries. It is a measure that indicates whether legalprovisionsprotecttherightsoflendersandhowit affectstheeaseofaccesstocredit.Thehigheritsvalue, theeasieritistoobtainthisformoffinancing(Zalewska &Zalewski,2012). In order to verify the presented hypotheses the Spearman’s rank correlation coefficient was calculated between the functioning conditions of enterprises in respectofflexibleadministration,accesstofinancingand public debt counted in relation to GDP, assessment of statepolicyintermsoftaxesandbureaucracy(carriedout by the Global Entrepreneurship Monitor [GEM]), claims oncentralgovernmentinrelationtoGDP,assessmentof statepolicyintermsofsupportandrelevance(GEM),as Table 3: Access to financing for SMEs in the selected EU countries (normalized data, marking: BG - Bulgaria, PL - Poland, CZ - Czech Republic, EW - Estonia, H - Hungary, HR - Croatia, LV - Latvia, LT - Lithuania, R - Romania, SK - Slovakia, SLO – Slovenia) Aspects PL BG CZ EW H HR LV LT RSK SLO UE Rejected loan applications and unacceptable loan offers 0,64 0,46 1,00 0,87 0,44 0,68 0,27 0,00 0,65 0,70 0,41 0,72 Access to public financial support including guarantees 0,81 0,51 0,91 0,61 0,78 0,54 0,95 1,00 0,79 0,89 0,00 0,57 Willingness of banks to provide a loan 0,86 0,89 1,00 0,76 0,61 0,67 0,73 0,88 0,75 0,81 0,00 0,48 Cost of borrowing for small loans relative to large loans 0,98 1,00 0,40 0,64 0,57 0,39 0,46 0,49 0,73 0,00 0,60 0,44 Total amount of time it takes to get paid 0,51 0,45 0,46 1,00 0,42 0,00 0,64 0,38 0,57 0,39 0,04 0,17 Bad debt loss 0,98 0,84 1,00 0,00 0,96 0,70 0,92 1,00 0,88 0,97 0,88 0,97 Venture capital investments 0,00 0,00 0,00 1,00 0,01 ND ND ND 0,00 ND ND 0,01 Strength of legal rights index 0,57 0,86 0,57 0,57 1,00 0,29 0,86 0,43 1,00 0,57 0,00 0,39 Sum 5,35 5,01 5,34 5,44 4,79 3,27 4,81 4,17 5,36 4,34 1,93 3,75 Description: ND – no data available Source: Author’s own estimations based on 2015 SBA Fact Sheets
Ada Domańska, Robert Zajkowski Influence of state participation on business conditions and entrepreneurship in the EU countries of the former Eastern bloc www.e-finanse.com University of Information Technology and Management in Rzeszów 15 „e-Finanse” 2018, vol. 14 / no. 2 wellastheassessmentofgovernmententrepreneurship programs. Calculated Spearman’s rank correlation coefficients (Table 4) show that the functioning conditions of enterprisesarestronglynegativelyrelatedwiththelevel ofpublicdebtexpressedinGDP(inrelationtoGDP)and claimsoncentralgovernmenttoGDP.Theyarehowever stronglypositivelycorrelatedwiththeappropriatestate policy on taxes and bureaucracy. This confirms the first hypothesisassumingthatconsiderablestateparticipation intheeconomyhasanegativeeffectonthefunctioning conditionsofenterprises. State policy in the field of support and relevance, as well as government business support programs, are stronglypositivelycorrelatedwithfunctioningconditions ofenterprises,whichconfirmsthesecondhypothesis. Conclusions and recommendations There is a significant difference in the conditions under which businesses in the selected EU countries operate.Thecauseofthissituationisadifferentlevelof stateparticipationinindividualeconomies,aswellasthe different effectivenessof business supportprograms.An exampleofastatewhichtoalargeextentsupportsthe developmentofentrepreneurshipandcreatesconditions for a suitable business environment can be Estonia. LithuaniaandLatviastandoutaswellincomparisonto the other economies. Poland came out quite average however.HenceitfirstshouldberecommendedforPoland thatforallgroupsofstakeholdersitiscrucialtoobserve best practices implemented in neighbouring countries whicharesupportiveofentrepreneurshipdevelopment. Next should be considered the likelihood of successful implementation (instillation) of business condition that arespecificforPoland’seconomy.Thisisaneasierwayto boostandgetmomentumforthesufficientdevelopment ofPolishbusinessentities. On the other hand, in order to improve the functioning conditions of enterprises, the government mustintroducebusinesssupportprograms.Ithastobe stressed however, that an increase in taxes cannot be the source of their funding because it is related to the limitationofincomeintheprivatesector.Itiscrucialto maintain public spending at an appropriate level so as not to trigger a budget deficit, which would lead to an increase in the public debt for it negatively affects the businessenvironment.Itisthereforeimportanttokeep aproperbalancebetweenthestate’sparticipationinthe economy,expressedinpublicdebt,theamountoftaxes, bureaucracyandgovernmentbusinesssupportprograms. Table 4: Spearman’s rank correlation coefficient between examined characteristics. Features Responsive administration Access to finance PublicdebtcountedinrelationtoGDP -0,591 -0,755** Governmentpolicies:taxesandbureaucracy 0,583 0,833** ClaimsoncentralgovernmentinrelationtoGDP -0,745** -0,518 Governmentpolicies:supportandrelevance 0,667* 0,200 Governmententrepreneurshipprograms 0,788* 0,520 Source: Own estimations based on Small Business Act Fact Sheets and Global Entrepreneurship Monitor **Correlation is significant at the 0.01 level *Correlation is significant at the 0.05 level
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