Successful Enterprises as Means for Economic Growth
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Comparative Study of Polish Regions Podkarpacie and Dolnoslaskie
How can unsuccessful entrepreneurship of a region affect the economic growth of two Polish regions, Podkarpackie and Dolnoslaskie?
State of the Art
The aim of this research project is to find out how unsuccessful entrepreneurship of a region affects the economic growth of Polish provinces. In Polish language the word province is used interchangeably with the word region. In this proposal the word region refers to administrative unit, an entity of governance within a state (Van Langenhove, 2013). Poland is divided to 16 regions, some of which, for example the regions forming the Eastern wall are not as well of as the central region Mazowieckie, in which Warsaw, the capital is situated, or the other regions at the western border of Poland, such as Dolnoslaskie.
According to analysis of Statistical Center in Rzeszow (2009), the synthetic measure defining the level of economic development of territorial governance units (regions) is gross domestic product per capita. The Raport Poland 2011 published by the Ministry of Regional Development (MRD) in Poland (2011) presents results gathered by Central Statistical Office (Glowny Urzad Statystyczny, GUS) which show that the real growth of Polish economy between years 2000 and 2010 was as large as 46 percent, making it one of the fastest growing economies in the European Union (MRD, 2011). However, the inequalities between the wealthiest and the poorest region have deepened as well. The Gross Domestic Product (GDP) in the most active region was at the beginning of year 2000 more than 9 times higher than in the weakest region. After ten years this disparity grew up until almost 11 times higher (MRD, 2011). The disparities in GDP per capita, on the other hand were in year 2000, two times higher in the wealthiest region than in the poorest region and grew up to two and a half times higher by the year 2010 (MRD, 2011). Shares of individual provinces in GDP in 2012 varied significantly - from 2.1% in Opole region to 22.7% in the region Mazowieckie (in 2011, from 2.1% to 22.4% in the same regions)(GUS, 2014). Studies of Statistical Centre in Rzeszow (2009) show that regional GDP and the amount of income attributable to the disposal of per capita situatePodkarpackie region on one of the last positions in the European Union, except for Bulgarian and Romanian regions. The regional GDP per capita in 2012 was at the level of 27 719 zÅ‚ in the province of Podkarpackie (67.0% of the average country) to 68299 zÅ‚ in Mazowieckie (165.0% of the national average) (GUS, 2014). These studies provide quantitative evidence on disparities in economic growth between Polish regions, however they are missing the reasons for these gaps in regional economic growth.
According to measures by GUS (2014) Mazowieckie is clearly the wealthiest and most attractive region in terms of living, working or investing, thus the disparities in economic growth between this region and the regions in the East of Poland are much higher. Witold Czudec (2013) from Portal for Innovative Trasfre of Knowledge in Science (PITWIN) has conducted a comparative study of competiveness of regions of Eastern Poland and the central region Mazowieckie. However, Mazowickie is the region pulling most of the investors as well as wealthy residents which may be a cause of research bias. In order to avoid the bias in this study Mazowieckie is left out. Instead, the two regions that will be compared in this research are the region Podkarpackie, situated at the south-eastern border of the country and the region Dolnoslaskie, at the western border of Poland (see map). The GDP per capita of region Podkarpackie in years 2008-2010 amounted in approximately 24070PLN, which is equivalent to 5775 euros and GDP per capita, in the same period of time of region Dolnoslaskie was approximately 38708PLN, which is equivalent to 9318 euros (GUS, 2012).
The regional economic development, can be defined as quantitative and structural development entities engaged in the economic activity of the region, which should be identified by the improvement and introduction of new products and services, expanding markets, upgrading of technology, investing , increasing employment and production efficiency , and the "strengthening" of the company’s financial actions (Sztando, 2000). According to Andrzej Sztando’s thoughts the area of economic growth is therefore based on individual entities and manifests itself in achieving a high level of efficiency and its constant increasing over time. While each company is an entity extracted from the environment in terms of legal, organizational and economic activities. However, isolation of an entity does not mean gaining independence from its surroundings. The survival and development of the individual entity depends on existing external conditions and those that will occur in the future. In turn, by increasing the efficiency of individual companies, sectors, cities and regions, increase their efficiency and consequently the efficiency of the whole country (Sztando, 2000). Basing on the thoughts of Sztando, it has been concluded that at least one of the reasons for fast economic growth within a region is successful entrepreneurship. However, Sztando does not present concrete examples, for example by involving regional data in his study. Therefore this research will be concentrated on impact of entrepreneurship on regions, by focusing on two Polish regions as concrete examples.
In the era of globalization, regionalization and departing from classical approach of degrading the role of industrial policy in favor of regional policy, the importance of research on entrepreneurship in regions and cities increases. Increasing number of research institutes and academic centers dealing with regional development is a proof of interest in this field. Studies conducted by them focus primarily on those aspects of the development of entrepreneurship (competitiveness, accumulation of wealth which is seen as indicator of economic development), which are stimulated by appropriate regulation of regional policy and socio-economic policy of the country, for example, tax policy, regulation of labour code, etc. (Platonoff et al., 2001).
A research project conducted at University of Szczecin (Platonoff et al., 2001) analyzes and evaluates the economy of the city Szczecin and looks at the condition of entrepreneurial entities in the city and their impact on city’s economy. The study and its results are attention-grabbing and give a great insight to the economy of Szczecin and impact of entrepreneurship, however it is focused only on one city in the West of Poland. Thus basing on this research, it is interesting to conduct a similar kind of study in regions with one of the slowest growing economies in Poland, Podkarpackie region, and in one with fastest growing economy (right after Mazowieckie), which is Dolnoslaskie, in order to find out how unsuccessful entrepreneurship of a region affects the economic growth of Polish provinces.
The current situation of Poland is quite difficult. On the one hand, the businesses are not liquid enough, they do not expand and go bankrupt more often. On the other hand, the Polish government does not have sufficient financial resources to cover basic needs for health, education, construction roads, etc. and many others. Businesses pay attention to too high taxes, and officials are looking for ways to enlarge their meet increasing social needs (Platanoff et al, 2001).
Moreover, it has been observed that in bad times weak regions become worse. Weak regions do not have any mechanisms for immunizing: they are not competitive, they are not productive, they do not operate on a global market , they have diversified economy that would facilitate a soft landing (Maciejewicz, 2013). This perpetuates the division between the less prosperous Poland B, covering the eastern regions of the country and better developed Poland A, with the western and central regions. The latest GUS findings show that the gap between Poland A and Poland B deepened , even though the weaker regions received a remarkable sum of EU funds worth millions of Euros in order to help them to mobilize the regional operational programs . The per capita payments to the eastern provinces in 2007-2012 were significantly higher than those of Western . In addition, five provinces of the eastern wall had to use an additional pool of 2.4 billion euro allocated for the equal opportunities of development (Tomaszkiewicz & Kowalski, 2014).
Regions of Eastern Wall of Poland are in the circle of slow economic development and one of the main reasons for that is inhibiting the development of entrepreneurship. For example, low income and high costs result in no or a low gross profit, and this in turn, lead to lack or low amount of money obtainable from taxes. Low budget revenues from taxes impede the development of infrastructure which would support entrepreneurship within the regions (for example: highways, health, education , promotion of the region in the world and other procedures established by the local and national authorities ). This leads to decreasing profits of individual companies which in turn restrain their development (lack of sufficient funds for investment, training staff, finding new customers, research and marketing , etc.), resulting in lower quality of the offered products or services and a decrease in their domestic and international competitiveness. In addition, low salaries of employees reduce their purchasing power by limiting the demand. Consequently, the reduction in the number of transactions has a negative effect on the revenues of companies causing depletion of other actors in the economic chain. This results in low competitiveness, thus slow economic growth of a region (Platonoff et al, 2001).
Composition of Economy of Podkarpacie
The gross value added (GVA) in Podkarpacie is composed of following shares: trade (29.46 %), followed by industry (27.02 %) and services (25.8 %). Construction (8.28 %) is also of a great importance in the economy of the region , which is traditionally considered one of the major sectors of the economy of the region. Slightly more than 7 % of GVA generates financial and insurance activities . Agriculture, forestry , hunting and fishing occupy the last place among the sections that shapes the GVA of Podkarpacie (Marshal Office of Podkarpacie (MOP), 2011).
In the region of Podkarpacie at the end of 2012, there were just over 155 thousand registered entrepreneurial entities (including more than 148 thousand in the privte sector) , which accounted for 3.9 % of entities registered in the whole country. In spite of being close to reaching the national average of small and medium-sized enterprises ( SMEs) in the total number of enterprises , the companies of the Podkarpackie region absorb a much smaller share of labour force than any other Polish regions. While in Poland this percentage is 50 % it is only 40 % in Podkarpackie. In the case of micro-enterprises , this percentage is only 37 %. These proportions indicate the weakness of the SME sector in the region (MOP, 2011).
Composition of Economy in Dolnoslaskie
The GVA of Dolnoslaskie is generated mainly by the service sector (60%) , including 45.7% of market services, this is followed by industry (32%), and agriculture (2.2%) (GUS, 2014) .
In the region of Dolnoslaskie in 2008, the average employment in the enterprise sector amounted up to 418.8 thousand people, and was higher than in the corresponding period of the previous year by 6.4%. At the same time, in terms of national employment in the enterprise sector increased by 4.8 percent. According to the data from the Central Statistical Office in 2008, on average 89,7% of labour force involved in enterprise sector was employed by the private sector in Dolnoslaskie. Employment in the private sector increased by 7.4 percent compared to the previous year (amounting to 375.6 thousand . Persons), public sector employment fell by 1.4 percent (amounting to 43.2 thousand persons). Average number of employees compared to the previous year increased by 5 percent (GUS, 2008).
The Main Objectives of the Project
The cognitive goal of the project is to
- make the diagnosis of effectiveness of management processes in business entities in context of their entrepreneurial potential in Podkarpackie and Dolnoslaskie.
- develop proposals for rationalization of these processes and consequently, to stimulate the entrepreneurship in Podkarpackie.
The scientific goal of the project is to
- develop model assumptions in order rationalize the management process in business entities
Finally, the practical goals of the project are mainly to
- prepare reliable information on the economic condition of Podkarpackie and Dolnoslaskie on micro and macro scale
- shape effective policy instruments and strategies for the support of regional business entities (mainly in Polkarpackie)
Possibilities for the development of entrepreneurship, and thus sources of wealth of region’s economy, should not only be looked at in macroeconomic parameters (cost of labour, the level of interest rates, the value of the national currency, etc.), but also in regional settings (resourceful and effective use of different opportunities, predisposition for progress and collaboration between different actors) and microeconomic parameters (differences in management of companies) (Platonoff et al, 2001).
The starting point for establishment of a regional development program is to understand the economic potential rooted in economic operators and analyzing the main problems that hinder their functioning and growth. The potential of entrepreneurship lies in the individual business entities.
First, a researching team has to be recruited. The research team will be composed of academic staff and students from two major universities in studied regions, Rzeszow University in Podkarpackie and University of Wroclaw in Dolnoslaskie.
In the first phase of the research a representative sample of entrepreneurial entities in the region has to be collected, since studying the whole population entails high costs related to large amount of staff members and a long period of time in order to collect the data. Since the whole population is not studied, a proper sample size needs to be decided upon in order to assure a representative sample. 1550 enterprises from Podkarpackie region and 4188 enterprises from Dolnoslaskie region are to be selected, representing 1% of the entire population of each of the regions. By random selection of the sample it is meant that in the collection process each unit has the same probability of getting into the sample.
After conducting randomized sampling, the business entities must be divided into categories by sizes of enterprises, that is micro, small, medium and large sized enterprises, as well as, into and profile of activity (construction, trade, manufacturing, agriculture and services)
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