Entrepreneurial activity in the Russian regions: How spatial and temporal effects determine the development of small business

Abstract

The rate of entrepreneurial activity in Russia is characterized by high variability and regional heterogeneity. Some regions are able to maintain a certain level of entrepreneurship development for a long period, in other regions entrepreneurial activity can vary greatly even for several years. Yet growing regions can be located next to the leaders, while weak regions can be close to each other. This paper estimates temporal and spatial effects, which are often ignored in political decisions. The authors identify a group of regions with the largest agglomerations, favorable economic-geographical position and high rates of entrepreneurial activity for the period 1998-2014: St. Petersburg, Moscow, Kaliningrad, Novosibirsk, Samara, Yaroslavl, Sverdlovsk, Belgorod and Omsk regions. At the same time, interregional clusters with the concentration of leading regions (Novosibirsk and Tomsk oblasts) and regions-outsiders (the North Caucasus) were identified. Based on econometric calculations, taking into account level of regional development, institutional environment and structure of economy, the authors find out that entrepreneurial activity largely depends on its level in the previous two years and is influenced by activity in neighboring regions at a distance of less than 300 km. The results of the analysis demonstrate the need for a geographically differentiated policy in the sphere of smalland medium-sized businesses.