The Business Challenges Of Entrepreneurship In Transition Economies

Abstract

Increase in globalization and internationalization in markets has created a complex business environment for all size firms in open market and also in transition economies. We see that there are more obstacles for entrepreneurs in transition. The purpose of this research is to examine the leading business constraints of entrepreneurship such as institutional environment and market (taxation andregulations, financing, policy instability, inflation, corruption, infrastructure, anticompetitive practice, marketing and managerial practices and bureaucracy) intransition economies. This study aims to integrate theoretical field with the empiricalstatistical data. The theoretical and empirical data were collected from literature andinstitutions based on statistical data, indexes and indicators to examine the business challenges. Therefore we use the global competitiveness index which is measuring nine pillars of competitiveness (institutions, infrastructure, macroeconomy, health and primary education, higher education and training, market efficiency, technological readiness, business sophistication and innovation). We also use governance indicator.We define governance broadly as the traditions and institutions by which authority ina country is exercised. This includes the process by which governments are selected,monitored and replaced; the capacity of the government to effectively formulate andimplement sound policies; and the respect of citizens and the state for the institutions that govern economic and social interactions among them. The six dimensions of governance corresponding to this definition that we measure are: 1. Voice and Accountability (VA) - measuring perceptions of the extent to which a country's citizensare able to participate in selecting their government, as well as freedom of expression,freedom of association, and a free media. 2. Political Stability and Absence of Violence (PV) - easuring perceptions of the likelihood that the government will be destabilized or overthrown by unconstitutional or violent means, including politically motivated violence and terrorism. 3. Government Effectiveness (GE) - easuring perceptions of the quality of public services, the quality of the civil service and the degree of its independence from political pressures, the quality of policy formulation and implementation, and the credibility of the government's commitment to suchpolicies. 4. Regulatory Quality (RQ) - easuring perceptions of the ability of thegovernment to formulate and implement sound policies and regulations that permitand promote private sector development. 5. Rule of Law (RL) - measuring perceptionsof the extent to which agents have confidence in and abide by the rules of society, andin particular the quality of contract enforcement, property rights, the police, and thecourts, as well as the likelihood of crime and violence. 6. Control of Corruption (CC) - measuring perceptions of the extent to which public power is exercised for private gain, including both petty and grand forms of corruption, as well as "capture" of the state by elites and private interests. BEEPS (Business Environment and EnterpricePerformance Survey), CPI (Corruption Perception Index) and WBES (World Business Environmental Survey) will be used to examine challenges. The WBES team sought toaccomplish the following objectives: To provide feed back from enterprises on the state of the private sector; To measure the quality of governance and public services including the extent of corruption; To provide better information on constraints toprivate sector growth, from the enterprise perspective; To sensitize client governments to the importance of listening to firms and using this information tocritically assess policies; To establish the basis for internationally comparable indicators which can track changes in the business environment over time, thus allowing an assessment of the impact of market oriented reforms on private enterprises; To stimulate systematic public-private dialogue on business perceptions and the agenda for reform. By the help of those data we will determine the institutional environment, markets and organizational strategies for entrepreneurs intransition economies. As a conclusion we will make proposals for the entrepreneurs inthe process of European integration.