About Belarus

4 weeks ago, I went to Minsk to interview ICT companies and their entrepreneurs in this country. It is very interesting to note that the Belarusian IT industry is internationally focus. Almost 80% of companies there are acting on the international market with a very high proportion of them having almost all income from foreign clients.

I was positively surprise by the country. I was expected a worse situation (especially since the Orange revolution in Ukraine) and the recent negative international media coverage did not help.

However, I found a thriving international entrepreneurship spirit in the IT sector. Saying this, it is important to notice that for any entrepreneurial activity in Minsk really needs a local presence. To be Belarussian or foreigner is no matter. It is important to have a local presence because the legal framework is changing way too fast and what was legal one day, might not be the day after. This requires not only a great flexibility but advance warnings that you can only get by having a local partner, representative, lawyer, etc.


I am planning to return there and then publish later this year a short article about my findings there. I will keep you posted!

2 international conferences related precisely to this blog

I have participated yesterday in 2 very good conferences in Kaunas (Lithuania) which had several interesting presentations on innovation in Eastern Baltic, SME situation in Lithuania and Eastern Europe, intercultural issues, etc.

If you have missed them, you should visit the 2 following links:
- International Scientific Conference (European Management Association and VDU university)
- RIS-Lithuania (EU FP6 supported project, English site not updated!)

and perhaps get some useful information for you…

Topping Google!!!

Wow! Using the brand new google service specialised in Blog search (http://google.com/blogsearch), my blog topped it for the key words "international entrepreneurship"!

Funny surprise! :)
(The related blog section: Top of the page)

One model of business “innovative” entrepreneurship during economic transition of Eastern Europe.

Anyone who spent sometime in Eastern Europe would have noticed that many of the successful company created at the beginning of the 90s (just after the fall of the soviet block) where the brain children of middle age academic men. This is somewhat surprising and do not fit so much current description of opportunistic entrepreneurship profiles (stigmatised by the Californian young innovative undergraduate in his parent’s garage or the 50+ European executive creating his company using his life time savings and personal network).

Puzzling for some is also that the successful model of middle age academic entrepreneur did not survive the end of the transition period.

Of course one can argue that no opportunistic entrepreneurship existed at that time and place, and that those university professor where forced to become entrepreneurs with the fall of the communist system. This is quite true but there is more to this. As argue previously most people would grade (objectively or not) their entrepreneur profile in between the 2 “pure” types (forced and opportunistic). This is true for these academic-entrepreneurs.

At the beginning of the transition, professors have still a significant innovative power. More importantly due to the old system, they still have important access to the few resource available (often state owned or managed). Also they have easy access to the new generation of student and can select from them the most suited for “modern” management (which is during this stage a significant improvement in compare with the communist pool of expertise but still far off to real management skills). Altogether they can expertly use the 3 components and connecte them adequately to create successful companies.

During the transition economy, general conditions evolve (more or less rapidly). Growing number of resources are available. Management skills are improving. In the same time, the power of innovation is decreasing with private sector research stuck at zero level and the public sector crumbling fast (and consequently with the university staff moving abroad or to the private sector). However the innovation component is still the dominant one and more importantly the one having access to the 2 other components (via public or international funding for example).

At the end of the transition economy period, resources available are now significant and the management skills have increased too. The innovation component keeps decreasing in importance (comperatively to the 2 other companents and also absolute "quantity") but more importantly it loses the controlling position its used to enjoy and has little access to most resources and management. This is why that at this stage professors are not any longer the leading entrepreneurs type in Eastern Europe.

However main issues during and just after the transition economic period are:
- Lack of opportunistic entrepreneurship culture (see previous blog)
- Lack of opportunistic relays which ensure a smooth network between each components (see another previous blog)

If you are interested...

If you are interested in international entrepreneurship research, I recommend reading this document from Patricia Mc Dougall and Benjamin Oviatt.

" Some Fundamental Issues in International Entrepreneurship " is an excellent place to get many research references and also get acquainted in current issues on the subject. You probably know some of the authors mentioned and referenced works but nevertheless this is a great document to most scholars in the field.

One view on opportunistic entrepreneurship…

I remember my training in the French army and in particular the one about on fire fighting. It was said if the 3 components of the triangle of fire (Air, Combustible, Heat) were in the same vicinity, then the risk of fire was high to say the least.

Opportunistic entrepreneurship triangle

For entrepreneurship, it is pretty much the same. There are 3 essential components on the triangle of the opportunistic entrepreneurship; resources, innovation and management skills.

Resource (R) means all kind resources needed to succeed in an entrepreneurial operation such as (of course) financial means, but also personal network, entourage support, etc.

Management skills (M) are the business skills necessary not only to launch an enterprise (in the general sense of the term) but also to run it in the early years.

Innovation (I) in the case of entrepreneurship is the capability to identify opportunity (business or not), to articulate a vision in a coherent manner. This does not describe truly innovative solution on a global scale (product or process), but also include a truly innovative step on a local level.

An opportunistic entrepreneurship model

In the most advance economies, the less common of the 3 components is the one linked to innovation (as seen in the figure beside). Indeed there are ample resources to be accessed. This is also the case of management skills. More importantly, they are actively interconnected by various means (technological, governmental, private initiative, etc.). The key of all this is the entrepreneurship culture (existing or promoted) which make the whole system efficiently.

This can be seen has the original life soup in early earth life (4 billions years ago). Life key elements became more and more abundant (the 3 key components), floating in some kind of “soup” (our entrepreneurship culture, the blue square) where interconnection where made (the circle). Each time, our 3 components are connected, a enterprise can launch (life can appear).

This is, however, not the case in emerging economies (look at a coming soon blog).

Entrepreneurship culture in Eastern Europe during and after transition economy.

If you asked a French mother what she would like her child to become, you stand a good chance to get “(high level) civil servant”. “To be an entrepreneur” will be far down on her list of favoured job.

Of course in the US, with the more understanding attitude toward failure and the media circus around the rare self-made billionaires, entrepreneurs would be much higher in the US mother list.

As far as Easter Europe is concerned, entrepreneur will probably close to the bottom of the list (the top would be occupied by lawyer, marketing director and other IT job). The main reason would not be the “soviet” brain formatting as it could be easily thought. Although, the ex-communist framework has certainly an influence, I would argue that the main reason the entrepreneur “job” would bottom the list because of the transition economy effect.

At the beginning of the transition period in CEE countries, many lost their position and there was no option to get any regular income. Being entrepreneur was synonym of deep struggle with little hope of success (forced entrepreneurship). The rare case of success were often linked to ex-communist party connection (KGB, etc.), illegal trade (metal smuggling, etc.), or even worse (petty crime or even organised crime).

For all these facts, “entrepreneur” is most likely to bottom the list of CEE mothers.
And because of this the (opportunistic) entrepreneurship culture in the Eastern European countries has some way to go before to emerge as their economy are currently doing.

A view on entrepreneurship types

Before to write something in the situation in Eastern European Entrepreneurship, I think it is useful remind in a few coming blogs some common information.

There are mainly 2 kinds of entrepreneurs:
- Necessity Entrepreneur
- Opportunistic Entrepreneur

Necessity entrepreneurs are people who have no or little alternative of income. There is often a depressed job market in such situation or even a total failure of the institution and/or society mechanisms. To self-start some kind of activity is often the only choice to simply survive.

Opportunistic entrepreneurs are in totally different mind frame and often in a totally different environment. They are not forced to start an activity. They are convinced they have an innovative approach to solve a problem. They thus choose to become an entrepreneur (business entrepreneur, social entrepreneur, etc.)

Of course blend of entrepreneurs exist, mixing to some extent both categories of entrepreneurship. Also any entrepreneur breed can be found in any social/economic environment (although it is clear that different environments stimulate different entrepreneur types). At any rate, most people would grade their entrepreneur type between the two “pure” categories.

In today’s world with Schumpeter ideas dominating this arena, especially in the European Union (dixit the Lisbon Agenda), the focus of research is very much on the opportunistic entrepreneur type. It is also the more “sexy” type, which get the attention of media (not much of a journalistic story to write about a middle age man creating a poor-looking shop-booth selling second-hand metal part just to have some income to provide food to his family).

We always start somewhere...

So here is the first blog! Let’s hope it will be the start of an active blog where people will comment inputs publish here…

Through my doctoral studies and my professional experience, I have noticed that many papers, studies or consultancy works, just do not include the Eastern European situation while working on entrepreneurship (or on SME management for that matter), and a fortiori on international entrepreneurship!

The reason I got hooked is that I have been active in this area for many years seeing different situation in different countries (from “old Europe” to “new Europe”). Meeting, interviewing and working with many leaders and entrepreneurs of many companies in countries of the Eastern Baltic area gave me precious insights of this exciting place. The fact that I am not from Eastern Europe (I am French) offers me a unique perspective in this.

If most entrepreneurs from CEE countries suffer the same lacks than their "western" counter-parts, they usually get that in a higher factor. Typically, main issues are:

- Lack of management skills
- Lack of financing means
- Lack of innovation transfer capability
and to add to this often a lack of outward internationalisation experience!

Modern business course curriculums are rather young here. In Eastern Baltic, first business master degree graduates got their diploma only a few years back (around 2001). Not only courses offer are of unequal quality, they are also rare. This means that the management culture is not mature and still very influenced by old practices. These practices do not only relate to Soviet habits but also relate to the special circumstances and attitudes that have been developed in the height of transition period (such as for example, the lack of business focus so common in that economic stage).

To make matters worse, not only the management skills are missing (with often very sketchy business plan or strategy), but also the financing relays are not present. Banking sector is at best maturing and have not yet the habit of supporting entrepreneur, States are too poor to be able to sustain entrepreneurship schemes, VCs are rare (in the 3 Baltic States, less than 10 are really active) and they are focusing on second investment round. There is no – to my knowledge in the high-tech sector – any VC active on the seed stage and only one (recently established), which declared interest in first round size of investment.

Alternatives are in their inception phase such as a Business Angel Network initiative in Lithuania. Moreover, the lack of good stories and the plentiful of bad ones made BA to be called business devils in this region of the world.

Finally the innovation level is still very low because so far it was far cheaper and efficient to import it from abroad (there come from their inward internationalisation skills). Also the high-growth of local economy made local innovation not so relevant for local entrepreneurs. Copycat strategy was by far a more sensible strategy.
It is also worth to notice that despite the fact that R&D from universities is at a reasonable level, they are often not in tune with industry needs (and researchers average age is dangerously high and getting worse). This is not helped by the fact that R&D budget in private companies are almost non-existent or not focus in most cases.

So why to call this environment, an exciting place?

I am personally convinced that within 5 years, the world will see the first born global start-ups from Eastern Baltic area (Skype despite having its own development centre in Estonia, can not qualify, although in my opinion this is a truly European start-up spanning from Denmark for founders, Luxembourg as HQ, UK as a base for sales and Estonia as a production centre, a remarkably and truly EU start-up!).

The technical capabilities are here but more importantly the will to succeed is very high. Moreover, local companies management are feeling more and more that the survival and development pass by internationalising their operation (as I argued in an article in 2004).

Things are moving very fast here (with sometime GDP growth over 9% the last 5 years). I will keep you posted on progress in this arena and on the latest development of my research and professional experience in Eastern Europe.