Factors influencing success of
small rural Polish enterprises
Wadim Strielkowski,
National University of Ireland, Galway
Research supervisor: Prof. Michael Cuddy
A presentation at Raymond Pierre Bodin Conference Centre, The European Foundation of the
improvement of living and working conditions, Dublin
2nd of June 2006
Research question and research objectives
Research question: What factors influence success of small Polish
rural enterprises?
The aim of this research is:
to identify factors influencing Polish rural small enterprise success
(measured by profits per employee and rate of revenues).
Two sets of hypotheses are tested:


Factors internal to the firm influence success of Polish rural small
enterprises;
Factors external to the firm influence success of Polish rural small
enterprises.
The role of small enterprises in Poland

SMEs (< 249 employees) constitute 99.8% of all Polish
enterprises;

Micro-enterprises (<9 employees) constitute 95.2% of all
enterprises on the Polish market (Ministry of Economy of the
Republic of Poland, 2004).

The role of small enterprise is improvement of
quality of life:

Creation of employment in rural areas;
Provision of opportunities for rural population;
Economic stabilization in rural Poland.


Importance of small enterprises (1)

In most EU countries micro-enterprise constitute 93%
of all economic subjects accounting for 34% of total
employment (Observatory of European SMEs, 2003).

Special place in the national economy:
 Contribute
to the stability of the economy and
labor market;
 Capable of reducing exposure to asymmetric
shock;
 General adaptability and flexibility;
 Key driver of economic growth
Importance of small enterprises (2)

Stimulating competition and market efficiency;

Job creation (creation of employment and reduction of
unemployment);

Welfare enhancing due to the previous two;

Product diversity and innovation.
The focus of this work: types of enterprises

Rural micro-enterprises (<9 employees);

Food-processing sector (bakery, meetprocessing, beverages, etc.);

Two selected regions: Mazowieckie & WarmiaMazury
The focus of this work: location
Results from the data analysis (1): types of enterprises in
sample
Other
2%
State-owned enterprise
0%
Cooperative
5%
Civil law partnership
22%
Professional partnership
46%
Unlimited partnership
5%
Limited liability company
13%
Joint stock company
7%
Results from the data analysis (2): size of enterprises in
sample
>9
Ranges: number of employees
9
8
7
6
5
4
3
2
1
0
20
40
60
80
Number of firms
100
120
140
Results from the data analysis (3): activities of enterprises
in sample
other
cons um er goods
healthy alim antation
s pices
products/goods
production of flour
production of honey
vegetable proces s ing
m ineral water
m ilk production
ice-cream production
m eat proces s ing
pas try
gas tronom y
baking goods
0
10
20
30
40
50
60
Number of firms in main specialization
70
80
Results from the data analysis (4): enterprise innovation
200
number of positive answers
180
160
140
120
100
80
60
40
20
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Results from the data analysis (5): enterprises sales
Geographic spread of sales
Abroad
Rest of the country
2002
2003
Region
2004
Local markets
0%
10%
20%
30%
40%
50%
60%
share in % by year
70%
80%
90%
100%
Statistical tests: distribution of sales

Significant negative relationship between the size of the enterprise
and the fact whether the enterprise has been distributing its
production on the local markets only or attempted to expand to other
markets – [U (N= 300) = -5.206, p< 0.01];

Significant negative relationship between the enterprise legal form
(physical entity) and the fact whether the enterprise has been
distributing its production on the local markets only or attempted to
expand to other markets [ρ( N=300) = -0.1198, p<0.05];

Significant relationship between the enterprise legal form
(company limited) and the fact whether the enterprise has been
distributing its production on the local markets only or attempted to
expand to other markets [ρ( N=300) = 0.2344, p<0.01].
Results from the data analysis (6): getting bank credit
business credit for small
business in the last 3
years
yes
no
preferential credit for
small business in the
last 3 years
0
50
100
150
200
number of answers
250
300
Statistical tests: obtaining the credit

Significant relationship between the enterprise legal form (family firm)
and the fact whether the firm has obtained any credit in the last three
years [ρ( N=299) = 0.1375, p<0.05];

Negatively significant relationship between the enterprise legal form
(company limited) and the fact whether the firm has obtained any
credit in the last three years [ρ( N=299) = -0.1018, p<0.01];

Significant relationship between the enterprise legal form
(cooperative) and the fact whether the firm has obtained any credit in
the last three years [ρ( N=299) = 0.1340, p<0.05].
Results from the data analysis (7): receiving government &
public support
Other
Forms of public assistance
General economic consulting
Consulting in the sphere of governance
Export guarantees
Space for the enterprise (housing)
Regional sources
Governmental sources
Assistance in schooling of the personnel
EU (SAPARD)
Funds for the promotion of local production groups
Funds for research and development
Grants or investments loans
0%
10%
20%
30%
40%
50%
60%
Share in %
70%
80%
90% 100%
Statistical tests: Payments from EU SAPARD

Negatively significant relationship between the enterprise size
and the fact whether the enterprise received any payments from
EU SAPARD program – [U (N= 277) = -1.797, p< 0.1];

Significant relationship between the enterprise legal form (family
firm) and the fact whether the enterprise received any payments
from EU SAPARD program – [ρ( N=300) = 0.1592, p<0.01];
Empirical approach
Data: survey questionnaires of 300 rural microenterprises in food-processing sector in
Mazowieckie and Warmia-Mazury provinces,
Poland
Empirical model: single-equation Tobit, OLS
Tobit estimates for small rural enterprise success
Dependent variable:
Profit per employee (in PLN)
Owner/manager risk
23877.12***
Owner/manager need of cash
-6788.393***
Owner/manager organization of work
-4297.242**
Owner/manager age
1521.34**
Owner/manager age squared
-15.75961**
Enterprise age
-231.9323**
Enterprise regional location
3880.727*
Enterprise size
-840.5918**
Enterprise certificates
14084.08***
Limited liability company
-5181.882*
Y-hat
12880.35**
Const
-28038.5
Pseudo R2
Observations
* significant at 10%; ** significant at 5%; *** significant at 1%
0.0162
249
OLS estimates for small rural enterprise success
Dependent variable:
Average revenues (in PLN)
Owner/manager family tradition
61732.2**
Owner/manager knowledge of marketing and selling
-59185.56***
Owner/manager age
9436.304*
Owner/manager age squared
-101.8933*
Owner/manager previous sector experience
58727.69***
Physical entity
-55314.06***
Ownership of the enterprise
70231.76**
Internet in the enterprise
60588.36***
Trademark share of the enterprise
32266.12**
Enterprise area of advantage in innovativeness of its product
-105051.2***
Some form of innovation in the enterprise
85978.56***
Certificates obtained by the enterprise
76972.95**
Licenses obtained by the enterprise
-61894.16**
Financial help of local governments to the enterprise
-105301.5**
EU SAPARD funds in the enterprise
134229.5***
Const
-113529.7
R2
0.269
Observations
* significant at 10%; ** significant at 5%; *** significant at 1%
300
Profit per employee (N=300)
Owner/manager org. work**
Owner/manager need of cash***
Owner/manager org. work**
Enterprise age**
Enterprise regional location*
Enterprise size**
Limited liability company*
Y-hat*
Average revenues (N=300)
Owner/manager age**
Owner/manager age squared**
Certificates obtained by the enterprise***
Owner/manager family tradition**
Owner/manager knl.mtkg&sales***
Owner/manager prevsecexp***
Physical entity***
Ownership of the enterprise**
Internet in the enterprise***
Trademark share of enterprise**
Area of adv.: product innovativeness***
Innovation in enterprise***
Licenses obtained by enterprise**
Financial help local governments**
EU SAPARD funds***
Results:

The effect of factors internal to the firm and external to the firm on
Polish small rural enterprise success is significant:

Positively significant for: Owner/manager risk,
owner/manager age, previous experience, enterprise regional
location, enterprise innovation, Internet in the enterprise,
certificates;

Negatively significant for: enterprise age, enterprise size,
financial help of local governments, organizational forms of
enterprise.
The result shows that support of innovation, education and new
technologies in Polish rural enterprises can increase their success. The
results are also robust.
Policy implications (1): rural enterprise
owner/manager

Development of supports for older owners/managers;

Simplifying the constraints (concessions, etc.) for enterprises
established by the owners/managers with previous sector
experience;

Promotion of entrepreneurial tradition & increasing
business ethics in the country.
Policy implications (2): rural enterprise






Adopting different strategies for enterprise of different
size;
Adopting different policy for enterprises of different
age;
Using different criteria for enterprises from different
locations (bank loans, credits, assistance, etc.);
Promoting innovation in enterprise rather than
increasing financial streams;
Supporting new technologies in enterprises;
Directing EU funds to the enterprises effectively.
Some conclusions




Small Polish enterprises in food-processing sector are
the key player in Polish economy;
The evidence suggests that there are: (i) areas in which
those enterprises can achieve more success and (ii)
means to enhance this success;
Research needs to be undertaken in order to identify
the factors and means how to increase this success;
Crucial for economic development in Poland &
increasing rural and environmental sustainability in
Poland.