MałgorzataGodlewska
,JudytaLubacha-Sember 1 ISSN2071-789X
RECENTISSUESINECONOMICDEVELOPMENT
Economics&Sociology,Vol.11,No.3,2018 Lubacha-Sember,J.,&Godlewska,M.
(2017).TheRoleofLocalFormalandInformalInstitutionsinMicrofirms’Develo pment:EvidencefromPoland.EconomicsandSociology,11(3),43-
58.doi:10.14254/2071-789X.2018/11-3/3
THEROLEOFLOCALFORMALANDIN FORMALINSTITUTIONSI N MICRO FIRMS’DEVELOPMENT:EVIDENCEFR
OMPOLAND
JudytaLubacha-
Sember,InstituteofEconomics, Finance,andManagement,Facu ltyofManagementandSocialCo mmunication,JagiellonianUnive rsity,Krakow,Poland, E-mail:judyta.lubacha- sember@uj.edu.pl
ORCID:0000-0002-4195-6530 MałgorzataGodlewska,C ollegium ofBusinessAdmini stration,
WarsawSchoolofEconomics,W arsaw, Poland,
E-mail:mgodlews@sgh.waw.pl ORCID:0000-0001-7413-0674
Received:December,2017 1 s t Revision:March,2018Ac cepted:June,2018
DOI:10.14254/2071- 789X.2018/11-3/3
ABSTRACT.MicrofirmsplayasignificantroleintheCent ral/EasternEuropeaneconomies,comprising86%oft h e totala m o u n t ofactivef i r m s . Developmentofmicrofir msi s influencedbyt h e localentrepreneuriale n v i r o n m e n t . Thisarticlediscussestheroleofthelocalformal(re gulations,localactsoflaw)andinformal( c u s t o m s , s o c i a l normsandvalues)institutionsi n t h e d e v e l o p m e n t of microfirms.Syntheticexplorationofthecoexistenceofform alandi nf or m al institutionsonthe e x a m p l e ofMasovi anandSwietokrzyskievoivodeshipsinP o l a n d hasbeencar riedout.Topresentamultifacetedperspective,thefollowing researchmethodswereused:as u r v e y amongformallocalinstitu tions,individualindepthinterviewswithm i c r o f i r m s ’ ownersa n d RegionalChambersofCommerceandalsoacas estudyonthelocall a w a c t s . Thefindingssuggestt h a t t h e developmentinstrumentsu s e d byformallocalinstitution sa r e i n a d e q u a t e fortheneedsofMF's.Furthermore,t hec r u c i a l roleoff a m i l y support,andt h e importanceof knowledgesharinghasbeenfound.
JELClassification:K23,R
1 1 , B52,O18 Keywords:formal institutions,informalinstitutions,
microfirms,l o c a l andregionaldevelopment,entrepreneurialenvi ronment.
Introduction
IntheCEECs1economy,microfirms(hereafterMF’s),definedasenterpriseswithlessthan10em ployeesandanannualturnoverbelow€2million(CommissionRecommendation2003/361/ECasof 6May2003)playasignificantrole.In2014,intheCEECsmicrobusinessesconstituted8 6 % o f thet o t a l populationo f activefirms(includingB - N _ X _ K 6 4 2 N A C E 2
MałgorzataGodlewska
,JudytaLubacha-Sember 2 ISSN2071-789X
RECENTISSUESINECONOMICDEVELOPMENT
Economics&Sociology,Vol.11,No.3,2018
1 CentralandEasternEuropeanCountries(CEECs)isanOECDterm(https://stats.oecd.org/glossary/detail.asp?
ID=303)fort h e groupofcountriescomprisingAlbania,Bulgaria,Croatia,CzechRepublic,Hungary,Poland,Romania,Slovakia,Slo venia,a n d t h e t h r e e Baltic States:Estonia,LatviaandLithuania.
activities,Eurostat,indicatorcodebd_9bd_sz_cl_r2).TheoverallcontributionofSMEs2tothetotalEU -27valueaddedwasmorethan57%
(€3.4trillion)in2012(Coxetal.,2013:14).Theprocesso fdevelopingM F ’ s i s s t r o n g l y correl atedwithl o c a l entrepreneurialenvironment(Littunen,2 0 0 0 ) . M a n y economists,p o l i c y m akers,a n d e n t r e p r e n e u r s , a n d n o t o n l y f r o m CEEC’s,haveattemptedtodetermineho wtobuildthelocalentrepreneurialenvironmentandclaimedtheimportantroleoflocalinstitutionsint hisregard(formal–forexample,rulesoflawa n d enforcementmechanisms;informal-
forexample,customs,valuesandnorms)
(Putnam,1 9 9 3 ; Gorynia,1995;Gorzelaketal.,1999;Kłodziński,2006;Skica,2008;
Fogeletal.,2008;
Mitra,2012;Wilkin,2016;Williams,&Gurtoo,2017).
Therelationbetweeninstitutionsandentrepreneurshipismostlyanalysedinthenational- levelresearch(seeresearchreviewsbyGnyawali,&Fogel,1994;Salimath,&Cullen,2 0 1 0 ; Hayton ,&Cacciotti,2013).Therelationshipbetweenlocalformalinstitutionsandthef o u n d i n g offir mswasinvestigatedbySerarols-Tarresetal.(2007)andBrunoetal.
(2008).D a v i d s s o n andWiklund(1996),Lauenteetal.
(2007),Nyström(2008),showedtheimportanceo f informalinstitutionstothefoundingoffirmsandentr epreneurialbehavioursattheregionallevel.However,coexistenceo f f o r m a l a n d informalinstituti ono n thelocallevela n d theirimpactonlocalMF’sdevelopmenthasnotyetbeenexaminedindetail.
Aregionalandlocallevelofanalysishasbeenseenasmoreappropriatewhenconductingresearchinsoc ialsciences( S t o r p e r , 1 9 9 7 ; Pike, 2007).
Themainmotivationbehindconductingthisresearchwasthequestionwhichformala n d i nformallocalinstitutionscaninfluenceM F development.A thoroughanalysiso f t h e coexistenceof formalregulationsandsocialcustomsandconventionsmaybringaboutbetterunderstandingofwh ichkindoflocalenvironmentMF'scanoperatein.Theadditionalvalueofthisresearchisthatitprovide saholisticperspectiveduetothe researchmethodschosen: as u r v e y amongformalinstitution s,individualindepthinterviews(IDI)withMFowners,andIDIwithRegionalChambers
ofCommerce(RCsC) and acasestudyonlocallaws’records.
Themainresearchobjectivehasbeentoidentifylocalformalandinformalinstitutionsw h i c h canplayapositiveornegativeroleinMFdevelopment.Themainresearchquestionsare:whichf ormalandinformallocalinstitutionsinfluenceMFs’development?
Theobtainedresultsmayhaveimprovetheunderstandingontheimportanceoffamilysupportand knowledge-
sharingformicroentrepreneurs,alsohighlightingtheinstrumentsusedbyformalinstitutionst o i n f l u e n c e M F s ’ developmentbeings e e n d i f f e r e n t l y bylocalauthoritiesa n d entrepreneurs.
1. Conceptual framework
Newinstitutionaleconomicsfocusonmeasuringinstitutionsandtheirimpactonsocioeconom icdevelopment.North(1990,p.3)definedinstitutionsas‘therulesofthegamei n asociety’.Hodg son(2006,p.2)characterisedinstitutionsinabroadsenseas‘systemsofestablishedandprevalent socialrulesthatstructuresocialinteractions’.Argandona,
(1991,p.3)synthesisingpreviousresearch,proposedthefollowingcatalogueofinstitutions:soci alcustoms,socialconventions,socialnorms,sharedunderstanding,socialstandards,spontaneouso r d e r s , andlegalnorms.Scott(1995)distinguishedbetweencognitive,normativeandregulati vepillarsofinstitutions.Kostova(1997,p.180)builtaconceptofastateinstitutionalprofileconsistin gof:aregulatorycomponent(existinglawsandrules),cognitivecomponent(cognitives t r u c t u r e s a n d s o c i a l k n o w l e d g e ) , normativecomponent( s o c i a l norms,values,beliefs).T h e presentedanalysisc o v e r s theset h r e e dimensions.T h e selectiono f informal
2 SMEs-SmallandMedium-SizedEnterprises.
institutions(Table1)andformalinstitutions(Table2)toanalysewasbasedonfindingsfromprevio usresearchatthenational level.
Table1.Typesand role oftheselectedinformal institutions,priorresearchreview
Typeandroleofaninformalinstitution Previousresearch examples Attitudetowardsentrepreneurship–
apositiveattitudeinal o c a l s o c i e t y a n d s u c c e s s f u l b usinessmana s a rolemodelworkaspositivemotivationforpeopl ewhowantstostartabusiness;conversely,anegativeattitudecan discouragep e o p l e .
Busenitzetal.,2000;Manolovaetal.,2 0 0 8 ; Rondinelli1991;Spencer,Gomez,20 04;Swanson,Webster,1 99 2; Vesper,1 983.
Familialsupport–familial
supportandencouragementfromf a m i l y membersincreaset h e probabilityo f startinga business;familymembersp r o v i d e s upporti n problem-s o l v i n g (discussingdifficult issues).
Brüderl, Preisendörfer, 1998;
Davidsson, Honig, 2003.
Networkinga n d t h e e x c h a n g e o f knowledge–
a n entrepreneurneedsotherentrepreneurs’experienceandexper tiseinordertodevelop;informalnetworksareregarded
as
a usefulsource of information.
Chell, Baines, 2000;
Kingsley,Malecki,2004;Klyver,Foley 2012.
Source:Authors’o w n compilationb a s e d o n B r ü d e r l , Preisendörfer(1998);Busenitze t a l . (2000);Chell,Baines(2000);Davidsson,Honig(2003);Gnyawali,Fogel(1994.pp.49-50);
Kingsley,Malecki(2004);Klyver,Foley(2012);Spencer, Gomez(2004).
Table2.Typesandroleoftheselectedformalinstitutions,previousresearchandworldwideI n d e x review
Typeandroleof formalinstitution PreviousresearchorIndexe xamples
Theruleoflaw-
relevantroleingeneratingsustainableg r o w t h anddevelo
Acemoglue t al.,2 0 0 5 ; R o d r i k et al.,2004;Gutmann,Voigt2016.
Institutionalenvironment( e . g . governmentaleffectiven ess,politicalstability,a b s e n c e o f violence,controlofc orruption)-generatesplace-
specificformso f trustamongMF’sandformalinstitutionst hatleadtoeconomicg r o w t h a n d t o thereductiono f tran sactionc o s t s .
Fukuyama,2000;Gertler,1997;
Giddens,1990;North,1990,2005;
Storper, 2005;Streeck,1991.
RegulatoryQ u a l i t y – determinesthel e v e l o f income
and growth prospects.
Kaufmannetal.,2010.
Source:Authors’owncompilationbasedonAcemogluetal.
(2005);Fukuyama(2000);Gertler(1997);Giddens(1990);Gutmann,Voigt(2016);Kaufmannetal.
(2010);North(1990,2005);
Rodriketal.(2004);Streeck(1991);Storper(2005).
Institutionscanalsobedefinedinthecontextoflocalandregionaldevelopmentandintherecog nitiono f t e r r i t o r y (Rodriguez-
Pose,2 0 1 3 ) . Legalg e o g r a p h y authorsl i k e , B l o m l e y ( 1 9 9 4 ) , Bravermanetal.
(2014),Graham(2011),alsoplacedformalinstitutions(regulations)i n thecontextofterritory.
Formalinstitutionsandinformalinstitutionscoexista n d interactw i t h eacho t h e r . Info rmalinstitutionscanplayacomplementary,accommodating,competitiveorreplacement
roleforformalinstitutions(Helmke,Levitsky,2003).Voigt(2013)encouragedtoinvestigatethebot htypes(formal andinformal)ofinstitutions.Grodzicki (2016,p.31)discussed, thatformali nstitutionsshouldbe‘tailoredtothelocalcontext’.Furthermore,BoettkeandCoyne( 2 0 0 9 ) u nderlinedthatformalinstitutionsshouldbegroundedinaninformal one.
2. Dataset and Methodology
ThisstudyusedtheMasovianandŚwiętokrzyskievoivodeshipsinPolandasexamples.T h e M asovianvoivodeshipwaschosendeliberately–
in2015ithadthehighestnumberofMF’sp e r 1000capita(64MF’s),andthehighestnumberofpersonsempl oyedinMF'sper1000capita( 1 2 3 p e r s o n s employed).T h e Świętokrzyskievoivodeshipi s among v o i v o d e s h i p s withthelowestvalueofmentionedindicators–
39MF'sper1000capita,and75personsemployedinM F ' s per1000capita(CentralStatisticalOffi ceofPoland,2016).Thepurposeofthestudywast o identifyacoexistenceofformalandinformalinstitut ionsinthevoivodeshipswithdifferenteconomica n d g r o w t h potential,n o t thecomparisono f fig uresbetweentheMasoviana n d Świętokrzyskievoivodeships.Theformalandinformalinstitutions wereanalysedonNUTS-4(districtlevel)andNUTS-
5(communitylevel)levels(NomenclaturedesUnitésTerritorialesStatistiques)of theabove- mentionedvoivodeships.
Intheliterature,thereisadisputeofwhatkindofresearchmethodologyisappropriatef o r reg ionalstudies( f o r exampleP i k e , 2 0 0 7 ) . I n thisr e s e a r c h , a qualitativea p p r o a c h w a s sele cteddeliberately.GartnerandBirley(2002),andHindle(2004)underlinedtheneedforthegreateruseofq ualitativemethods,pointingoutthatmanyoftheimportantquestionsconnectedwiththedevelopmento f entrepreneurshipcano n l y b e addressedthroughq u a l i t a t i v e approaches.Inorderto identi fyinformalinstitutions,direct,indirect,andprobing questionsw e r e used(Kvale,1996)in theform
ofastructuredinterview,whichenablestheresearchertocomparefindingsacrosscases(Edwards,Hol land,2013).Duringtheinitialphaseofresearch,w h e n thestudiedphenomenonisnot
wellunderstoodandtherelationshipsbetweencategoriesa r e unknown,theuseofquantitativemet hodscanleadtoerroneousconclusions(Yin,2003;Brycz,Dudycz,2010).
Aqualitativestudy,theresultsofwhicharepresentedinthispaper,wasconductedinf i v e st ages.
1. Analysingandresearchingsecondarydata
2. A case studyof 52actsoflocallawindistrictsandmunicipalities.
3. AsurveyofdistrictsandmunicipalitiesofŚwiętokrzyskieandMasovianvoivodeships( n =4 72).Alldistrictsandmunicipalitiesfromtheanalysedvoivodeshipswereincludedi n thesamplep ool.Theresponseratewas9.7%
(n=46).Afterreceivingtheresponses,thep r o c e d u r e o f largew e i g h t w a s u s e d i n o r d e r t o a d a p t t h e samples t r u c t u r e t o population(TableA1intheMethodological Annex).Thesmallestgroupofentities-district-levelcities-
didnotparticipateinthesurvey.
4. IDI(interviewquestionnaireinTableA3)withMFowners(n=10).TheMF'sprofilesareprese ntedinTableA2.
5. IDIwithRCsC fromtheanalysedvoivodeships (n = 2).
Insum,thed a t a s e t f o r Świętokrzyskiea n d Masovianv o i v o d e s h i p s u s e d i n r e s e a r c h c o n s i s t s of:surveyofdistrictsandmunicipalitiesn=46;IDIwithMF'sownersn=10;IDIwithR C s C n=2;casestudyoflocallawofdistrictsandmunicipalitiesn=52.T h e surveywasconductedfro mAugusttoSeptember,2016.TheIDIwereconductedfromSeptember-November,2016.
Topresentawidercontext,indicatorsofformalandinformalinstitutionsfortheselectedCEECsar epresentedbasedonthemostfrequentlyusedscholarindexessuchas:WorldBank
WorldwideGovernanceIndicators(2017),GlobalCompetitivenessIndex2016-
2017(Schwab,2 0 1 6 ) , GlobalEntrepreneurshipMonitor(2017),WorldValuesSurvey(2010- 2014).
3. Results anddiscussion
3.1. Formalinstitutionalenvironment
Institutionsa s w e l l a s a n institutionalenvironmenth a v e playeda keyr o l e i n thehist orical economicdevelopmentofcountriesandfirms(Acemogluetal., 2002).
Accordingt o theWorldB a n k WorldwideGovernanceIndicators( 2 0 1 7 ) f o r 2 0 1 5 (
PercentileRange 0-
100),thecountrieswiththehighestratingin“GovernmentEffectiveness”w e r e Lithuania(85),Lat via(84),Estonia(83)andthelowestwereRomania(51)andAlbania( 5 4 ) . PolandwiththePercent ileRangeof74outof100wasinthemiddleoftheCEECs.TheGovernmentEffectivenessindicatorev aluatesthequalityofpublicservicesorthequalityofp o l i c y formulationa n d implementatio na s thecredibilityof t h e governmentr e g a r d i n g s u c h policies(Kaufmannetal.2010).ForMF development,thequalityofgovernmentpolicyforentrepreneurialdevelopmenti s v e r y impor tant.T h e h i g h e s t ratedcountriesf o r R e g u l a t o r y Q u a l i t y amongtheCEECswereEsto nia(93)andLithuania(88)andthelowestwereAlbania( 5 9 ) , Bulgaria(71),andRomania(72).Pol andwasalsoin
themiddleoftheCEECsaccordingt o regulatoryqualitywiththeresultof80outof100.TheRegulatoryQu alityindicatorestimatestheabilityofthegovernmenttoformulateandimplementpoliciesandregulati onsthatpermitpromotionofprivate sectordevelopment(Kaufmannetal.2010).Regulatory q ualityisalsoessentialforMFdevelopmentbecause,withoutit,theMF' s wouldhavedifficultiest ogrowq u i c k l y intheprivatesector.Asimilarsituationhasbeenobservedinthe“RuleofLaw”whe rethebest-ratedcountrieswereEstonia(87),theCzechRepublic(82) andLithuania(81) andthew o r s t asbeingAlbania(42),Bulgaria(53) andRomania(61).Polandwasalsointhe middleofCEECswithresultof76outof100.TheRuleofLawindicatormeasuresthequalityofcontracten
forcement,propertyrights,thepolice andthecourts(Kaufmann
etal.2010).SuccessfulMFdevelopmentisimpossiblewithoutcontractenforcement.
Moreover,theresultsoftheGlobalCompetitivenessIndex2016-2017(Schwab,2016) ( r a n k 1-
138)whichfocusedoninstitutionsshowedthatCEECshadamajorproblemwithweakinstitutionsassho wninHungary(114),Slovakia(102),Bulgaria(97),Croatia(89),Albania
(76)andPoland(65).OnlyEstonia(23)wasratedamongtheCEEC’sstrongestinstitutions.T h e Institutionscategorywascomposedof21indicatorssuchas“publictrustinpoliticians”( 9 7 i n Hungary,1 0 4 i n P o l a n d o r 1 1 0 i n Slovakia),“efficiencyo f legalf r a m e w o r k ” i n c hallengingregulations( 1 0 2 i n P o l a n d o r 1 3 3 i n theSlovakia),“ B u r d e n o f Government Regulation”(119inPoland,111intheCzechRepublicor131inSlovakia)or“transparencyofgovernme ntpolicy-
making”(109inPolandor136inHungary).Furthermore,weakinstitutionsi n CEECsaredetrimentalt othequickdevelopmentofMFinstitutionalenvironment.Thereisa verystrongcorrelation(0.91)b etweentheinstitutionandbusinesssophisticationcategorieso f
t h e GlobalCompetitivenessIndex forCEECs.
InP o l a n d , accordingt o article8 p a r a g r a p h 1 o f the“Lawo f EconomicF r e e d o m Activity”(Ustawazdnia2lipca2004r.)municipalitiesanddistrictswereresponsibleforthedevel opmentoflocalentrepreneurship.Theyhadtocreatefavourableconditionsthatwouldencourageec onomicactivityofMF'stoensurethatMFdevelopmentwasinthecentralpointo f interestineachPo lishmunicipalityanddistrict.
Formallocalinstitutionsrepresentedbydistrictsandmunicipalitiesissuingactsoflocallaw(Ta ble3)gavethepublictasksthattheyhadtoperformthehighestpriorityandtheincreaseo f
b u d g e t revenuesasecondarypriority.ThedevelopmentofMF's wasgiventheleastpriority
inissuingactsoflocallawbymunicipalities.Anothersignificantfactorwhichhadanegativeimpact onMFeconomicactivityandstabilityconnectedwiththepredictabilityoftaxesandfeechangeswasthefa ctthatlocaltaxesandfeeschangealmosteveryyearinmanymunicipalities.Accordingtothedistrictsan dmunicipalitiesaswellastheMFowners,localtaxesaswellasthedevelopmentp l a n (zoningplan )o f economicactivityw e r e themostinfluentiali n t h e developmento f localmicroenterprises.Ho wever,accordingt o theinterviewswiththef i r m o w n e r s , theotherperceptionofinstitutionale nvironmentcouldbeconcluded.TheMFownersclaimedthatmunicipalitiesa nd districtsw e r e o nl y interestedin attractingbiginvestorsa nd w e r e notinterestedintheproblemsofMF's.TheInstituti onalenvironmentineachmunicipalitya n d districtfavoredo n l y largei n v e s t o r s . M F ' s coul dn o t a p p l y f o r similardiscountsa n d exemptionsfromlocaltaxesandfeesbecausetheycouldnoto fferthehighnumberofnewjobsrequiredf o r eligibility.I n thepointo f viewo f MF's,municipalitiesa n d districtsw e r e n o t interestedi n d e v e l o p i n g thespecialconditionsa n d theentrepreneuriale nvironmentw h i c h w o u l d accomodatetheirneeds.Themainconclusionbased
onthefindingsofthecase
studyofactsoflocallawwasthatdistrictsandmunicipalitieswithahighunemploymentrateweremuchm oreeagert o r e d u c e taxesa n d feesi n o r d e r t o stimulatet h e localdevelopmento f M F ' s . Furth ermore,fromtheinterviewswiththeRCsC,themainconclusionwasthattheinstitutionalenvironmentc ouldhaveapositiveimpactonthedevelopmentofMF'sbutuntilnow,municipalitiesanddistrictsdid notpayenoughattentiontoit.
Table3.Institutionalenvironment accordingtoformallocalinstitutions
Administrative
What factorsaretakenintoconsiderationbyformalinstitutionswhen theyissueactsof locallaw?
Answers
unit Increase Publictasks The Theresident’sincome
budget revenues
thatthe entity has toperform
development oflocalMF's
increase
Ruraldistricts 20% 20% 20% 40%
Urbanmunici
palities 25% 50% 25% 0%
Urban-
ruralmunicipa 23.81% 38.10% 19.05% 19.05%
Ruralmunicip
alities 26.92% 42.31%
21.79%
8.97%
Administrative
Whichactsoflocallawhavethegreatestimpactonthedevelopmentof localMF's?
Answers
unit Local
taxes Localfees Orderre
gulations Development
plan Lackofk
nowledg
Ruraldistricts 50% 0% 0% 50% e 0%
Urbanmunici
palities 100% 0% 0% 0% 0%
Urban-
ruralmunicipa 62.50% 0% 12.50% 25% 0%
Ruralmunicip
alities 35.29% 11.76%
2.94%
47.06%
2.94%
Source:Authors’owncalculation.
Fuentelsazetal.
(2015)claimedthatthehigherqualityofformalinstitutions(whichuseregulationa n d a differentv a r i e t y o f instrumentsadaptedt o institutionalenvironmenta n d conditionsofenterprises)createdapo sitiveinfluenceonthedevelopmentof
entrepreneurship.However,differentfactorscouldhaveanimpactonthequalityofformalinstitutio ns.Oneoftheimportantfactorscouldbethedevelopmentinstrumentsusedbyformallocalinstitutio nsrepresentedbydistrictsa n d municipalitiesi n o r d e r t o influencethedevelopmento f M F ' s . Fo rmallocalinstitutionsrepresentedbydistrictsandmunicipalities(Table4)supporteddevelopmento f l o c a l microenterprisesm o s t l y byusing informational,promotional,o r investmentinstruments.I n theopiniono f districtsa n d municipalities,themostadequateinstrumentf o r thedevelopmento f entrepreneurialenvironmentswereinvestments,legal,administrative,economic,a n d financialinstr umentso rinstrumentso f informationa n d publicity.Organizational,institutionalandinformalinst rumentssuchasthecreationofappropriateethicsa n d valuesamongt h e localM F ' s w e r e h a r d l y u s e d byanytypeo f thesurveyedformallocalinstitutions.Inspiteoftheinterviewswiththefir mowners,theotherperceptionofdevelopmentinstrumentscouldbeobserved.IntheMFs’opinion,the investmentinstrumentsthatwerepreferredbythemunicipalitiesanddistrictsweretheonesthatenc ouragedlargeinvestors,nottocreatebusinessenvironmentsadaptedtotheMFs’needs.Thedevelopment instrumentsusedbymunicipalitiesanddistrictswerenotwelladaptedtothelocalinstitutionalenvironm entbecausethelevelofenterpriseinvestmentsandinnovationwasverylowastheinterviewswiththeR CsCshowed.
Table4.Development instrumentsused bylocalauthorities
Whatkindof instrumentswere used
bydistricts/municipalitiest o infl uencethedevelopmentofM F ' s ?
Administrativeunit
Answers Rural
districts Urbanmu nicipalities
Urban–
ruralmunicipa lities
Ruralmun icipalities
Legal and administrative
instruments,eg. Localstatutes - 40% - -
Economic and financial
instrumentss u c h a s d e d u c t i o n s a n d exemptionsf r o m l o c a l t a x e s a n d fees
Investmentinstrumentse.g.
- - 21.74% 20.34%
- 40% 30.43% 30.51%
thecreationo f b u s i n e s s environ ments
Informalinstrumentse . g . o f t h e cr e a ti on ofappropriateethicsand va l ue s amongt h e l o c a l
- - 4.35% 5.08%
- - 8.70% 3.39%
entrepreneurship Source:Authors’owncalculation.
investmentinlocal infrastructure Instrumentso f informationa n d pu
blicity,e.g,thepromotionof 100% 20% 17.39% 22.03%
businessesoperatinglocally Organizationala n d institutionalin strumentse.g.participationin
3.2. Informal institutionalenvironment
Successfulentrepreneursareseeninapositivewayaccordingto71%ofthepopulationi n WEC
’sonaverage.IntheCEECs,60%in2004,and63%in2015(average)ofthepopulationagreedthats u c c e s s f u l entrepreneursa r e s e e n positively.I n P o l a n d , 5 6 % o f thepopulationagreedthatsuccessfu lentrepreneurshadapositiveperception(GlobalEntrepreneurshipMonitor,2017).Thisattitudeisal soreflectedintheresultspresentedbelow.
Table5.Attitudestowardsentrepreneurshipinthelocalsocietyaccordingtolocalauthorities
Administrativeunit
Is running abusinessseenina positiveway?
Answers
Yes No Do not know
Ruraldistricts 100% 0% 0%
Urbanmunicipalities 100% 0% 0%
Urban-
ruralmunicipa 100% 0% 0%
Ruralmunicipalities 88% 0% 12%
Administrativeunit
Arepeoplewhoachievedsuccesswhilerunningabusinessadmired by
the local community?
A n s w e r s
Yes No Do not know
Ruraldistricts 100% 0% 0%
Urbanmunicipalities 100% 0% 0%
Urban-
ruralmunicipa 63% 0% 38%
Ruralmunicipalities 74% 6% 21%
Administrativeunit Arebusinessownersseenasrolemodelsbythelocal community?
A n s w e r s
Yes No Do not know
Ruraldistricts 100% 0% 0%
Urbanmunicipalities 100% 0% 0%
Urban-
ruralmunicipa 88% 0% 13%
Ruralmunicipalities 62% 6% 32%
Source:Authors’owncalculation.
Accordingtothesurveyeddistrictsandmunicipalities(Table5),runningabusinessiss e e n inapositiveway.Peoplewhoachievedsuccessrunningabusinessareadmiredbylocalcommunitie sandcanbeseenasrolemodels.Someruralmunicipalitieshad
anegativeattitudetowardsentrepreneursa n d mentionedt h a t peoplebecomejealouso f otherswh obecomesuccessful.Itisworthmentioningthatbetween1/5to2/5ofurban-
ruralandruralmunicipalitiesa r e notknowledgeableinthisfield.
Thetwowaysofseeingentrepreneursobservedinthecommunitiescanbedistinguishedf r o m t heinterviewswithf i r m o w n e r s . A p a r t o f Polishs o c i e t y stillj u d g e s entrepreneurialactivity in
anegativewayPeoplebecomeenviouswhensomeoneiswealthy;theyassumethatallt h e m o n e y w i t h w h i c h theypayf o r productso r serviceso n l y helplinethepocketso f businessmen.Somepeopl estillthinkthattorunabusiness,heorsheneedstoknowtheright
people,makedealswithlocalauthorities,andrunsabusinessinanunfairway.Incontrast,ap a r t of societyunderstandsthatrunningabusinessishardwork.Theyunderstandthatsuccessi s ther e s u l t o f g r e a t effort,knowledge,a n d a n enormousinvestmento f timea n d energy.Interviewswiththe R C s C confirmedthisd u a l i t y i n theattitudetowardse n t r e p r e n e u r s i n society.Additio nally,itwasmentionedthatlocalauthoritieshavestartedbuildingapositivepictureofentrepren eursinthelastyears.
ThenegativeattitudetowardentrepreneursmighthaveitsrootsinthePolisheconomy’stransitio nfromsocialismtocapitalism.Duringthesocialistera,earningmoneywasperceiveda s p u r e gree da n d t h e exploitationo f o t h e r s . Polishs o c i e t y d o e s n o t t r u s t entrepreneurs(Cierp niak-
Szóstak,2 0 0 8 ) . Sztompka( 2 0 0 8 , p . 1 3 8 ) pointedo u t t h a t thequickeconomictransformat ioni n t h e beginningo f the1 9 9 0 ’ s
w a s introducedintoa n u n p r e p a r e d s o c i a l environmentlacking‘modernlabourculture,b usinessculture,entrepreneurialandmanagerialethos’.Sinceinformalnormsdevelopmoreslowlytha nformalones,(Williamson, 2000)moretimeisneededtochangethisattitudeinPolishsociety.
Accordingtothesurveyedmunicipalities,itiscustomarytohelpfamily membersindifficu ltsituations.H a l f o f ther u r a l districtsa n d a l l o f t h e u r b a n municipalitiesa r e n o t kno wledgeableinthisfield.Abouthalfofurban-
ruralandruralmunicipalitiesalsoconfirmedthatentrepreneurscan countonthesupport of familymembersinrunninga business.
Theinterviewedfirmownersconfirmedtheexistenceofageneraltendencytosupportf a m i l y members.Entrepreneursstronglypointedoutthatthementalsupportofafamilyplaysa crucialr oleinthebeginningofabusiness.Itenhancesself-
confidenceandthemotivationtot o beproactive.Thefirmownersalsovaluetheabilitytotalkwithfa milymembersaboutthechallengesofrunningabusiness,tosharedoubts,andtoreceivesupport inproblem-
solving.Someofthemmentionedinstrumentalsupportthroughbuildingreconstruction,sometimesi nab u s i n e s s environmentservicesperforming.Familialsupportisveryimportantforentrepren eursi n general,sometimes theyfeeltreatedinaspecialwaybyfamily.Itwas saidthatwithoutthiss u p p o r t , itwould behardtosucceed.
AccordingtotheWorldValuesSurvey(2010-2014),onlybetween1.1%
(forpoliticalparty)t o 1 5 . 2 %
( f o r churcho r religiousorganization)o f r e s p o n d e n t s confirmeda n activemembershipindiff erenttypesofassociations.InGermany,itwasbetween2.4%forenvironmentalorganizationsto26 .4%(forsportorrecreationalorganizations.ThislowsocialengagementinPolish
societyisalsoreflectedinthepresentedresultsbelow.
Thelocalauthoritiesdonothaveextensiveknowledgeabouttheinformalnetworksofentrep reneursandthecustomo f knowledge-
sharingamongthem.Someofdistrictsandmunicipalitiesmentionedfollowingformalgroupsoflocalen trepreneursoperatingintheirarea:LocalA c t i o n Groups(LAG),ChambersofCommerce,Associa tionsofEmployers,AssociationsofEntrepreneurs,LocalEconomicForum,Guilds of VariousCrafts.
Almosteveryrespondentsharestheknowledgeandexperienceinrunningabusine sswithothers,mostoftenwithfriendsorpeopleintheirsocialcircle.The
firmownerswhohaveemployeesshareexpertisewiththem.Mostoftherespondentsalsoasked moreexperiencedfriends,whoalready ownedafirm,foradvice andinformationwhenthey w antedtostarta b u s i n e s s . Theyconsideritassupportive--
itwaseasiertoestablishabusinesshavingalreadysomeknowledgeandinformation.
Only1respondentattendedinformalmeetingsingroupof5friends(runningasimilartypeo f b u s i n e s s ) . Hes e e s thesemeetingsa s u s e f u l a n d h e l p f u l –
t h e y s h a r e d knowledge,experience,andinformation.Hestressedthatinformalmeetingswithacq
uaintancesaremoreeffectiveingaininginformation,“Whensomeonedoesn’tknowyou,hewillno ttellyouthetruth”(Interview2).
TheinterviewedRCsCconfirmedthatthereisaproblemwithknowledge-
sharingandcooperationamongentrepreneurs,andalackof“educationforcooperation”waspointedo utas
oneofthepossiblereasons.ItisseenbyoneoftheRCsCthatthePolisheducationsystemeducates peopleinodertocompeteinstead of tocooperatewitheachother.
2respondentsmentionedLAGasaformofformalmeetings.Onerespondentmentionedpaidentre preneurs’associations,butmembershipfeeswereseento
betoohigh.2respondentsmentionedthattheestablishmentofaformalgroupoflocalentrepreneurswou ldbehelpfulandmeaningfulingainingcontactswiththelocalgovernmentand voicingtheirneeds asentrepreneurs.“ O n e microf i r m i s unnoticeable,b u t a s a g r o u p t h e y c o u l d g e t a v oice”(Interview1).TheinterviewedRCsCseethemselvesontheonehandasorganisationssupportin gnetworking,cooperation,a n d k n o w l e d g e s h a r i n g amongentrepreneurs,a n d a s represe ntativesofentrepreneursandpartnersforlocalauthorities on theother.
Finally,somelimitationsofthestudyshouldbementioned.Unfortunately,accordingtolowr e s p o n s e rateo f localg o v e r n mentunitsf r o m theMasoviana n d Świetokrzyskievoivodeshipsasw ellasthelittleknowledgeregardingtheexistenceofinformalinstitutions,furtherresearchissuggest edtogetabetterunderstandingofinformalinstitutionsintheareaofinfluencesonMFdevelopmentandp ossiblewaysofcooperationwithformal institutions
Conclusion
Inthisstudy,local,formalandinformalinstitutionsandtheirroleinMFdevelopmentw e r e investigated.AccordingtoPolishlaw,municipalitiesanddistrictsare
responsibleforthedevelopmentoflocalentrepreneurshipandforcreatingfavourableconditionsth atwillencourageM F economicactivity.A l t h o u g h therew e r e publictasksthatmunicipalitiesa n d districtshadtoperformasthefirstpriorityandincreasingofbudgetrevenuesasthesecondp riority.
Accordingt o P h e l p s ( 2 0 1 3 ) , informalinstitutionsstimulatet h e b o t t o m -
u p energyo fentrepreneurship,creativitya n d innovationthrougha c u l t u r a l systemo f r i s k - b a s e d norms,individualism,collaborationa n d s e l f -
r e a l i s a t i o n . T h e e x i s t e n c e o f a d u a l attitudetowardsentrepreneurswasnoticed,one partofasocietyjudgesthempositively,theother,negatively.M F o w n e r s highlightedthec r u c i a l r o l e o f familials u p p o r t i n r u n n i n g a b u s i n e s s , a n d theimportanceo f k n o w l e d g e - s h a r i n g a m o n g entrepreneurs.Nevertheless,t h e weaknesso f networksandcooperationbetween entrepreneurswasidentified.
Theresultssuggestthatthedevelopmentplan(zoningplan)ofeconomicactivityandlocalta xeswascruciallyimportantforthedevelopmentoflocalentrepreneurship.TheInstitutionale n v i r o n m e n t favoredlargei n v e s t o r s . M F ' s couldn o t a p p l y f o r deductionsa n d exemptionsof localtaxesandfeesthatwereavailableforlargeinvestors,because
theydidnotfulfilltherequirementofcreatingahigh en ou gh amountofjobs.Furthermore,formall ocalinstitutionscouldstrengthenthedevelopmentoflocalentrepreneurshipbypromotingapositiveattit udetowardsentrepreneurship,knowledge-
sharingandsupportingthegrowthofentrepreneurnetworks.Theformallocalinstitutionsmayco operatewithinformallocalinstitutionsi n areao f creatingg o o d b u s i n e s s practicesadaptedt o thel ocalg e o g r a p h i c a n d socio-
economicpotentiala s w e l l a s t o organizeregulareventsdevotedt o n e t w o r k i n g andknowledg e-sharingwhich wouldbenefitMFleaders.
However,asitwasshown,localauthoritiesdonothaveanextensiveknowledgeabouttheinfor maln e t w o r k s o f entrepreneurs,knowledge-
sharing,a n d theimportanceo f familialsupport.Thisissueshouldbeexploredatadeeperlevelinfurt herresearch.Localauthorities,whilebuildingentrepreneurialenvironments,shouldtakebothformal andinformalinstitutionssupportinglocalfirm’sdevelopmentintoconsideration .Therefore,th eyshouldbeprimarily a w a r e ofexistinginformal institutions.
Thisfindinghastheimplicationforfutureempiricalinvestigationsinthatitputsintoquestio npreviousassumptionsthateitherformalinstitutionsmayencouragethedevelopment
ofMF'sorthatformalinstitutionsmaycooperatewithinformalinstitutionsdueto MFdevelopment.
MethodologicalAnnex
TableA1.Samplestructure Voivodeships Districts
(NUTS 2) (NUTS 4)
Municipalities(NUTS 5) SUM
Rural Urban Urban-rural
Ruraldistricts municipalities municipalities Mazovian,Swi
etokrzyskie
2 2 8 34 46
Largeweight 25 20 9.63 8.79
Maximumerror 2.81% 2.54% 3.37% 4.35%
Source:Author’sowncalculation.
TableA2.ProfilesofinterviewedMF'sfrom theMasovianandŚwiętokrzyskievoivodeships
No. Typeofadmi
nistrativeunit
Businessprofile Year of
founding Numberof employees 1 Urban-rural Computerpartssales,ITs
ervices
1992 2
2 Urban-rural Clothingsales 2007 7
3 Urban-rural Agriculturalservices 2014 Self-
employment
4 Urban-rural Motor andbikeservices 2016 Self-
employment 5 Citywithdistrictrig
hts MedicalResearch,consultation
a n d development
2016 Self-
employment
6 Urban-rural Publicrelationsandadvertising 2003 4
7 Citywithdistrictrig hts
Legalconsulting 2002 Self-
employment
8 Ruraldistrict Trade/Construction 2003 Self-
employment 9 Citywithdistrictrig
hts
Telecommunicationsservices 2008 Self-
employment
10 Urban-rural Agriculturalchemical sales 2014 Self-
employment Source:Author’sowncompilation.
TableA3.IDI questionslist No. Question
1 Doformal local institutionssupportthedevelopmentof localentrepreneurship?
2 Howdoformallocalinstitutionssupport thedevelopmentoflocal entrepreneurship?
3 Whatinstrumentsoflocaldevelopmentarebeingtakenintoconsiderationbytheformallocalin stitutions?
4 Howoftendoformallocalinstitutionschangelocaltaxesandfees?
5 Howdoformallocalinstitutionsinfluenceyourbusinessactivities?
6 What kindsof localactshavethemostimpactonyourbusinessactivities?
7 Howi s ru nn in ga bu si ne ss perceivedbythelocalcommunity?Pleaseexplainwhy.
(positively/negatively?)
8 Arepeoplew h o h a v e achievedsuccessi n r u n n i n g a b u s i n e s s admiredbyth e localco mmunity?Arebusinessowners seenasrolemodels?Pleaseexplainwhyyes/no?
9 Whatdoyouthink?Isit normaltohelpclose familymembersindifficultsituations?
10 Haveyoureceivedsupportfromyourfamily(financial,psychological,physical,other)whiler unningabusiness?Ifyes,pleasedescribethekindofsupportyoureceivedandw h e n ? 11 Doyous h a r e yourk n o w l e d g e a n d experienceo n r u n n i n g a b u s i n e s s wit
hotherentrepreneursorpeoplewhowantto start abusiness?
Ifyes,whatkindofinformationd o youshareandwithwhom?
12 Doyouknowifthereareanyformalorinformalgroupsormeetingsofentrepreneursw h e r e knowledgeandexperiencesaboutrunningabusinessareshared?Ifyes,please
describe what your experiences are in that regard?
Source:Author’sownelaboration References
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