Academic journal article Journal of Small Business Management

Comparative Entrepreneurial Cognitions and Lagging Russian New Venture Formation: A Tale of Two Countries

Academic journal article Journal of Small Business Management

Comparative Entrepreneurial Cognitions and Lagging Russian New Venture Formation: A Tale of Two Countries

Article excerpt

Changes in Russian government and economic systems over the last 15 years led to expectations of increased entrepreneurial activity. Yet potential entrepreneurs are deciding to venture at a much lower rate than anticipated. New venture creation in Russia is occurring at a rate that is considerably lower than that of the United States and Western Europe.

This research examines cognitive similarities and differences among Russian and U.S. entrepreneurs and nonentrepreneurs to find a possible explanation. Multivariate analysis of variance and multiple discriminant analysis results found similarities between U.S. and Russian experts and U.S. and Russian novices with respect to arrangements, willingness, and ability scripts, but differences in these scripts were found between experts and novices, particularly in Russia. Implications for entrepreneurship cognition research and public policy are discussed.

Introduction

Many experts expected Russia's movement from a planned to a market economy to make a positive economic difference. Instead, economic progress in Russia has lagged, and people are wondering why Western-style entrepreneurship is not helping more. Until recently, per capita and real gross domestic product (GDP) (World Bank 2002, 1999), along with manufacturing capacity (Chazen 2005), has steadily declined (McCarthy et al. 2005). Currently observed economic growth is taking place primarily in the natural resource sector, contributing to skepticism concerning Russia's long-term development potential (Ahrend and Tompson 2005). Aging production technology and minimal capital to invest in new technologies have limited productivity improvements (Gurkov 2005; Mugler 2000). These factors combine to slow Russia's economic growth to lower levels than were previously expected, leaving Russians less able to compete in the global marketplace. Policymakers ask, what happened?

During the early 1990s, hope was high for Russian economic progress, built upon the anticipated foundation of privatization and new venture formation. Development of a small to medium-size enterprise (SME) sector was expected to raise the Russian standard of living, create wealth, and increase employment (Dickinson 2004). Yet this sector, which provides an average of 70 percent of GDP in European economies, currently accounts for only 12 percent of Russian GDP (van Stel, Carree, and Thurik 2005; Wennekers et al. 2005; Belton 2000). New-venture creation was expected to take the lead in developing the SME sector, yet Russian entreprencurial activity rates among the lowest in the world, with 2.5 percent of the workforce establishing new ventures, as compared to 10.5 percent in the United States and 12.0 percent globally (Reynolds et al. 2002).

The lag in Russian new venture development, as compared to similar development in the United States, highlights the need to understand the factors underlying entreprencurial capability (Stewart et al. 2003; Puffer, McCarthy, and Peterson 2001). Is it the market, the money, or the mind?

Some think that Russian entrepreneurs do not understand the workings of free markets and are less able to compete than entrepreneurs having more extensive experience in a market economy (McCarthy et al. 2005; Snavely, Miassoedov, and McNeilly 1998; Gibb 1996; Ponomarev and Gribankova 1996; Brenner 1992). According to this point of view, potential entrepreneurs are perceived to be hampered by lack of experience with market-based business, resulting in insufficient maturity in risk-taking and demand-identification skills. Others suggest that the decision to venture is most negatively influenced by the lack of capital and other needed connections (Kuznetsov, McDonald, and Kuznetsova 2000; Organization for Economic Co-operation and Development 2000; Wallace 1996). In this article we explore the third possibility: that of "mind," or entrepreneurial cognitions.

Cognition-based explanations of entrepreneurial activity have recently gained the interest of business and entrepreneurship scholars (e. …

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