Entrepreneurship as a potential driving force for the further development of rural areas – good examples from Visegrad countries

Abstract

Entrepreneurial human capital and entrepreneurship are crucial elements for the further development of rural areas. In order to understand the role of rural enterprises it is essential to learn the characteristics of successful companies in local economies. The main aim of this paper is to demonstrate through the introduction of the activity, everyday practice and production procedure how non-agricultural and non-tourism enterprises can foster the development of rural and peripheral areas in the Visegrad countries. Nine local enterprises of different size, profile and development pathway were examined in order to highlight main experiences and lessons being vital for and adaptable in other disadvantaged areas. The results and company descriptions provided in the article are based on in-depth interviews, online data collection and statistical analyses. Key-words: rural entrepreneurship, rural economy, rural periphery, microenterprises and SMEs, local products. 104 T. Egedy • D. Cerić • M.Konopski • S. R. Kučerová • M. Kulla • J. Nestorová-Dická • R. Svobodová tally influence their impact on the local economy on the one hand and the degree of their local economic integration on the other. With regard to the size of firms we can point out that smaller and less productive firms tend to source more supplies locally and they sell more locally as well. Thus they exhibit stronger ties to their locality compared to larger companies (Curran and Blackburn 1994; Courtney and Errington 2000). Considering the role of ownership Courtney and Errington (2000) pointed out that independent enterprises source a higher proportion of their supplies locally and are therefore more strongly linked to the local economy than bigger national and multinational ventures. The characteristics of the owner can fundamentally influence the spatial behaviour of rural firms, because there is clearly a negative relationship between the distance from the owner's previous residence and the degree of local sourcing (Mills 2002). Owners and managers living in the area for many years generally tend to source and sell goods and materials locally. This is strongly related, of course, to their embeddedness into local networks. Regarding the age of the company North and Smallbone (1996) found that rural SMEs turn to the local market predominantly in the initial and early stages of operation. More productive and dynamic enterprises show weaker levels of local integration because they have access to wider markets and they are better embedded into global economic processes. Although these firms spend a greater proportion of their revenues on intermediate goods and raw materials, they generally have a limited local supply base. Actually, higher intensity in intermediate goods reduces the degree of local upstream integration. International experience shows that the greater the gap between the local supply and the demand for intermediate goods, the stronger the non-local economic behaviour of firms. However, these enterprises may source locally to reduce their transaction costs or to stay loyal to local suppliers and networks to the detriment of purchasing costs. Courtney et al. (2008) found that the more traditional the firm is (ie. smaller, older, lower labour productivity) the more strongly integrated into the local economy. Mitchell et al. (2005) also found that firms located in remote rural peripheries exhibit stronger linkages to locality in terms of employment, sales and purchases. According to Courtney et al. (2008) the sectorial profile of the enterprise is decisive for its spatial behaviour. While firms belonging to construction or producer service sectors show strong connectivity to local (input) markets, manufacturing firms are more often linked to the wider economy, their partners come frequently from the regional markets and they often sell their products in the regional or international economy. Consumer services have stronger direct upstream linkages than all other sectors and business services source more locally than manufacturing (Williams 1994). There is a certain relation between the size and sector of the enterprise: many empirical studies (eg. Kasimis and Papadopoulos 1997; Anderson 2000) suggest that there is a negative relationship between the size of holding and the incidence of entrepreneurial ventures outside agriculture. Bigger firms with higher labour productivity and a higher level of intermediate goods are more likely to perform non-local business behaviour. Therefore the largest and most productive companies have the least potential to stimulate rural development. Taking into consideration the impact of different entrepreneurship characteristics we can conclude that small businesses can especially foster the rural economy. In the article below we introduce nine small and medium sized enterprises representing best practices for rural non-agricultural and non-tourism entrepreneurship in Visegrad countries (Fig. 1). During the selection procedure we took into consideration all the diffe105 Entrepreneurship as a potential driving force for the further development of rural areas... rent definitions and criteria on rural and peripheral areas introduced by Novotný et al. (2015). In this respect less the type of settlement (village or town), but much more the characteristics of the broader localisation (rural/peripheral or not) was pivotal for the selection of practices. According to the objectives of the project efforts were made during the selection procedure to avoid and exclude economic activities related to agriculture, forestry and fishing, mining and quarrying, accommodation and food service activities, arts, entertainment and recreation and activities financed by the public sector like public administration and defence, compulsory social security, education and human health activities. Enterprises operating in other economic branches were welcome for selection. Case study descriptions focus on the one hand on basic information on the enterprises (eg. location, economic branch, number of employees, establishment and financing of the enterprise, classification of the enterprise as successors of socialist enterprises, new start-ups, social enterprise etc.), on the other hand on characteristics of the procedure and description of the practice (eg. everyday activity, products of the enterprise, pre-conditions and main obstacles to carry out such a practice, future perspectives of the enterprise etc). Fig. 1. Location of case studies in relation to population density of LAU 2 units Source: designed by M. Mazur. 106 T. Egedy • D. Cerić • M.Konopski • S. R. Kučerová • M. Kulla • J. Nestorová-Dická • R. Svobodová traditional old knife-factory with regional certification Full name Mikov Limited Liability Company Production knives and office supplies Location Mikulášovice, Czechia Website www.mikov.cz, www.regionalni-znacky.cz Established in 1955 (privatized and transformed after 1989)