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Markin Maxim,
the 4 year student of the SU-HSE
Nazarbaeva Elena,
rd
the 3 year student of the SU-HSE
th
What Is More Important for Early Stage Entrepreneurs
in Russia and Belgium: Human Capital vs. Social Capital
INTRODUCTION: types of entrepreneurs and forms of capital
Who is an entrepreneur according to our common sense? We suppose that it is somebody
who owns and manages business. But when studying entrepreneurship one should remember that
entrepreneurs are not only people who already have their businesses, but also anybody who has
just started his or her business or who is just planning to start (the entrepreneurial potential of the
society).
So entrepreneurship is too general term. Our research focuses on early stage
entrepreneurs who are nascent entrepreneurs (they are looking for sources of financing,
business-partners, equipment, etc. and still not have a stable income from the venture they are
stating-up) and new business owners (they are earning income from the venture but the
perspective of their further development is unpredictable) [Chepurenko].
The term of capital can be described as stored economic resources which include in the
processes of value reproduction and growth by the conversion of their different forms [Radaev].
The classical forms of capital are economic capital, human capital, social capital and cultural
capital.
Economic capital is the set of financial assets (money capital), means of production
(production capital) and products (goods capital) [Radaev]. It is institutionalized in property
rights [Bourdieu].
Human capital is stored knowledge and skills obtained by education which can
subsequently bring in return in the form of wage, interest or profit [Becker]. It is institutionalized
in credentials (certificates of degree, patents and licences) [Radaev].
Social capital is social liability (ties) [Bourdieu] which exists only in human interactions
[Coleman]. It is institutionalized in titles [Bourdieu] or in membership of social groups [Radaev].
Cultural capital is the knowledge that gives people an opportunity to understand other
people’s behavior. It is institutionalized in status groups [Radaev].
Our study is based on the assumption that all forms of capital are important for
entrepreneurs.
We focus on two forms (human capital and social capital) as they are commonly
considered to be the most important forms with the exception of economic capital which is
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traditionally the object of economic analysis.
METHODOLOGY: the aim of the study and main hypotheses
The aim of our research is to compare the importance of two special forms of capital
(human capital and social capital) for early stage entrepreneurs in such different countries as
Russia and Belgium. In other words we want to analyze what forms of capital are more
frequently used by early stage entrepreneurs.
So the object of the study is early stage entrepreneurs in Russia and Belgium. The subject
is the forms of capital that they more frequently used.
As we have defined the aim, the object and the subject of the study and have described
the main terms which are the most important for our research, now the tasks can be presented:
1. to compare frequencies of using human capital and social capital by early stage
entrepreneurs in Russia and Belgium;
2. to analyze the influence of social-demographic characteristics of early stage
entrepreneurs on the capital they use;
3. to compare the typical means used for starting business in Russia and Belgium.
The hypotheses of the study are:
H1. the share of entrepreneurs using social capital is higher in Russia than in Belgium as
in Russia it is sometimes the only accessible source of financial support [Chepurenko] (for task
1);
H2: in Belgium human capital is used by more entrepreneurs than in Russia as the return
on human capital in Russia is lower than in European countries [Maltseva] (for task 1);
H3: there are no differences between Russia and Belgium in the influence of socialdemographic characteristics of entrepreneurs on the prevailing forms of capital they use as there
are no reasons to suppose them (for task 2);
H4: both in Belgium and Russia older entrepreneurs are more likely to use social capital
than younger entrepreneurs as older entrepreneurs have gained many contacts during their lives
(for task 2);
H5: both in Belgium and Russia women are more likely to use their social capital than
men as women have closer social ties than men have (for task 2);
H6: getting money through social networks is more important to start-up a business in
Russia than in Belgium as in Russia it is sometimes the only one accessible source of financial
support [Chepurenko] (for task 3);
H7: getting money from institutional investors is more important to start-up a business in
Belgium than in Russia as in Belgium there are a lot of ways of financial support receiving and
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entrepreneurs can choose the most effective one (for task 3);
H8: entrepreneurs more often use solely their own savings to start business in Russia than
in Belgium as in conditions of financial uncertainty it is quite difficult to find investors [Kuzina]
and there is a stable financial sector and well embedded start-up support programmes in Belgium
which makes it accessible to find outer financing (for task 3);
DATA ANALYSIS: the description of the empiric base
For testing the hypotheses of our research we are going to use the data which were
collected for the international study “The Global Entrepreneurship Monitor” in 2006. The sample
represents the population of the countries by gender and age. There were 1894 people questioned
in Russia and 2003 people questioned in Belgium.
Now we will describe the whole situations connected with entrepreneurship in Russia and
Belgium. Our aim is not to analyze different aspects of business environment or to establish
some connections between them. We are just pretending for giving the most common picture of
each country and to build something like a frame for further analysis. We suppose that there are
three aspects that can influence the form of capital involved in business:

the level of the development of entrepreneurship in the country because it shows further
perspectives of started business itself and the capital involved in this business;

the motivation of starting business because people with opportunity motivation have
higher possibility to have there own resources to start business;

the existence of social ties with other entrepreneurs and “business angels” that makes
using different types of capital more possible.
So now we are going to find out what is the share of people who own and manage
businesses in the population of the countries under consideration. Even here we can see that the
share of such people in Belgium is significantly (sig. < .01) higher (8%) than in Russia (4,5%).
But one should also take into account that the average share of such people from all the
countries1 is 12% and the share of those who refused to answer is less than 1%. What is also
important – the fact that the share of people who refused to answer, whether they have their
business is significantly higher in Russia (2,3%).
The share of people who are doing their autonomous start-ups is higher in Russia (6,2%)
and it doesn’t differ from the world one. And there are no differences in frequencies of refusal to
answer. The question is: will this situation change in the near future? It depends on the plans of
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We mean only countries where Global Entrepreneurship Monitor research was conducted: United Arab
Emirates, Argentina, Australia, Belgium, Brazil, Canada, Chile, China, Columbia, Czech Republic, Germany,
Denmark, Spain, Finland, France, Greece, Croatia, Hungary, Indonesia, Ireland, India, Iceland, Italy, Jamaica,
Japan, Latvia, Mexico, Malaysia, Netherlands, Norway, Peru, Philippines, Russia, Sweden, Singapore, Slovenia,
Thailand, Turkey, United Kingdom, United States of America, Uruguay, South Africa
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entrepreneurs to do or not to do start-ups. What is interesting – the number of people who are
going to do start-ups doesn’t differ (about 7%) and is lower than all over the world (11%), but
the quantity of people who don’t know in Russia is higher (7,8%) than in Belgium (1,6%) – the
share of such answers among all the people from all countries is 2,5%. We suppose that such
distinctions are conditioned by the high level of uncertainty, which is typical for Russia in the
sphere of financial behavior [Kuzina]. This statement can be also proved by the following data:
people were also asked if they see the good opportunities for starting business in the next six
months. The share of people who answered “I do not know” in Russia achieved 50,7%, the same
showing in Belgium is only 19,4%. The important fact is that the share of “Don’t know”-answers
is even lower – 18,4%. We have just described the situation with autonomous start-ups, but startup can be also included in business. But in this sphere there are no significant differences
between Russia and Belgium. The share of business jobs involving start-ups is about 2%.
Speaking about the conditions for business we should also pay attention to the number of
businesses that shut down. What is interesting – there are also no differences between the
numbers of shutting down business in Russia and in Belgium – about 1%. And the average share
of people who shut down business in the last 12 month for all the countries is 2,6%.
Now we are going to move on to the motivation for starting business. According to the
approach used in the GEM motivation is classified into three types: opportunity motivation that
means that entrepreneur wants to achieve something new, to get higher income, get higher social
status etc., necessity motives mean that people have to do business because they do not have any
other ways of getting money. And the motives that can’t be included in these types are
mentioned as other motives. First of all we should note that there is significant difference
between the motives for starting business. In both countries the opportunity motive is the leading
one (69% in Russia and 86,3% in Belgium). But we should also take into account that the share
of people with necessity motives in Russia is much higher (29,9%).
We will discuss the last but not the least factor – the presence of social ties. We are going
to compare the share of people who personally knew an entrepreneur in the past two years. As
we remember the number of entrepreneurs in Belgium is higher, but if we speak about knowing
entrepreneurs the situation is quite opposite: in Russia 37,6% of people personally knew an
entrepreneur in the past two years and almost 12% don’t know.
Finally we will analyze one more important factor that can also influence using types of
capital – “business angels”. Business angels are private investors that invest their money to
unusual start-ups on the conditions of getting their share of profit and capital [Wikipedia]. The
number of such people is very low both in Russia (1,3%) and in Belgium (2,4%).
So we have studied some aspects of conditions for entrepreneurial activities in Russia and
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Belgium. And now we can say that there are some common characteristics as well as some
differences. First of all the level of uncertainty is higher and the necessity motives are more
wide-spread in Russia, but in Russia the share of start-ups is higher. And if we speak about
Belgium we can say that situation is more stable and people are more confident about their future
and the opportunity motivation dominates. But in both countries we can see a very low number
of business-angels, the fact that a few of people who are able to start business are going to start it
and rather great share of people who do not make start-ups because of their fears.
Now we get some basic knowledge about characteristics of Russia and Belgium and we
can move on to the main part – the analysis of using different forms of capital in these countries.
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