Increasing small- and medium-enterprise contribution to local and regional economic growth by assessing the institutional environment

Abstract

PurposeA neo-institutional methodology defines the entrepreneurial environment for SMEs as a multidimensional set of interacting formal/informal institutions influencing regional economic growth. Acknowledging the multidimensional nature of SME growth, this study tests an approach to measure SME institutional environment quality through the identification of regional-level determinants.Design/methodology/approachThe method used in this paper is based on Brunset al.’s (2017) model and is tested on 81 Russian Federation regions. The approach seeks to determine variation in entrepreneurial ecosystems based on quality and estimated marginal effects of difference across geographical regions.FindingsThe most severe obstacle to SME development in Russia is its shadow economy and corruption. Access to finance, high transportation fees, and instability in the political and economic field ranks second and third, respectively. Results suggest governments should eliminate main obstacles at country-level, which hampers the SME sector's development. While this is noted for this case looking at Russia, this is a common argument found in SME research.Practical implicationsFindings from this study are useful in managerial practice, aimed at increasing innovative development and increasing the competitiveness of Russian SMEs. A neo-institutional approach is one of the theoretical strands with the emphasis on enhanced understanding of organizational behavior and social capital, including cultural norms and beliefs.Originality/valueUtilizing an extended empirical approach to assess the institutional environment for SMEs addresses a research gap – offering novel insight on SME growth useful for policy makers. The results can inform managerial practices to increase SME contribution to economic growth.