Projection of enterprise survival rate in dynamics of regional economic sustainability: Case study of Russia and the EU

Abstract

Discussing the problem of economic sustainability, we are in general deal with life cycles and economic activity. Factors causing dynamics in entrepreneurial ventures, their duration and process rate depend on environmental conditions, including institutional, market, infrastructure, and resource aspects. A cumulative impact of all of these factors appears at a specific level of enterprise survival, which becomes a universal characteristic of sustainable economy. Going from official statistics on business demography and complementary empirical data, in this research, we focus on enterprise survival trends in Russia and the EU. The results obtained for Russia assume that in a number of industries, there is an intensive turnover of companies. Over the past two years, a medium-term trend towards a reducing number of enterprise births and increasing number of enterprise deaths in Russia has had a negative ratio. The average enterprise survival rate within a horizon of one year (2013/2014) was 74% in Russia and 77% in the EU. For a five-year period of 2009/2014, the average enterprise survival rate was less than 55% and 45% respectively. In general, in countries with a low average enterprise survival rate, in the first year, there is a persisting low rating in almost all of the industries, assuming that trends in enterprise sustainability dynamics depend on an overall economic situation instead of specifics in a particular sector. An important conclusion from the research is that the long-term survival rate of Russian companies is clearly higher, while the short-term one is lower than that of companies in the EU.