A Look at Small Business in Austria

Article excerpt

In recent years numerous academic articles have addressed small business in Europe (Goffee and Scase 1987). However, the major focus has been on members of the European Economic Community (EEC), and relatively little research has been done on the seven nations of the European Free Trade Association (EFTA). EFTA member nations include Finland, Iceland, Liechtenstein, Norway, Sweden, Switzerland, and Austria. Austria, a country of small businesses, is the subject of this article.

Strinati (1982) demonstrated that many governments have encouraged mergers of existing firms into larger units; in contrast, Austrian business did not go through a "bigger is better" stage. A strong labor movement helped strengthen corporatism and weaken the small business sector in another EFTA nation, Sweden (Stephens 1979, Storey 1982), but the same did not occur in Austria.

Small Business Need Not Be Entrepreneurial

Schumpeter (1912) described the entrepreneur as doing thins in innovative ways by finding: (1) new products/services, (2) new methods of production, (3) new markets, (4) new sources of supply, or (5) new forms of organization. The Schumpeter-type entrepreneur is also the creator of jobs and a highly innovative harnesser of technology who generates economic growth and social change (Schumpeter 1934; Barth 1963, 1967). Carland et al. (1984) and Blatt (1988) made a distinction between entrepreneurs and small business owners. As explained by Blatt (1988, 29):

Not every small business is entrepreneurial and not every entrepreneur runs a small business. Some small businesses are run by entrepreneurs and some entrepreneurs run small businesses; they are not mutually exclusive nor mutually inclusive categories.

Some of the innovative entrepreneurship has occurred in Austria. Skis, for instance, were invented in Austria. However, for the most part, one cannot describe modern Austrian society as entrepreneurial.(1) Most firms are instead traditional small businesses, and these businesses employ a substantial portion of the population (97 percent of Austrian businesses have fewer than 50 employees, and 46 percent of the working population works for such firms). Most small firms are unincorporated sole proprietorships.

Methodology

Considerable entrepreneurship research is based on mail surveys of entrepreneurs--an approach that facilitates obtaining a sample size large enough to allow for statistical tests. However, depending on the pattern of responses and the sample selection methodology, the resulting sample may include a selection bias that can affect reliability and validity. For this research, an ethnographic methodology was utilized instead; data were collected via open-ended interviews conducted in Austria. Some interviews took place in German, others in English. Both private and public sector persons (owner-managers, business consultants, and government officials) were asked to participate in an effort to capture a complete picture of small business in Austria.

Historic Background

The Austro-Hungarian Empire's strong industrial base was in the area that was Czechoslovakia, the economic center of which was Vienna. However, after World War I, Vienna found itself without its vast empire. Economically, the industrial families (such as the Laudas), lost their financial power as the large factories were no longer located within the state of Austria (of which Vienna remained the capital). Between the First and Second World Wars, Germany's influence on impoverished Austria grew phenomenally; and by the 1930s, commercial law in Austria and Germany had become almost identical. This commonality remains today and facilitates business transactions between Austria and Germany. In fact, the Austrian corporation's organization is almost identical to that of its German counterpart.

During World War II, the Nazis took over all industry of significant size in Austria. The German-owned industry of the Eastern parts of the country were taken over by the Austrian government in 1946 to avoid a transfer of assets to the Soviet Union. …