CHALLENGES OF LOCAL DEVELOPMENT: ENTREPRENEURSHIP

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1 CHALLENGES OF LOCAL DEVELOPMENT: ENTREPRENEURSHIP Lucica Matei Abstract At the end of the second millennium, accepting the features of development: economy internationalisation, change of the ratio cause -- effect within the dynamic social -- economic environment, globalisation and flexibility of markets, concept of long-lasting development, increasing the level of public ethics, institutionalisation of socialeconomic partnerships, as well as the European features of development: UE "development" and thorough study", market economy with functional competition, open borders, rigorous observing the subsidiaries and balance between European integration and national autonomy, we express our opinion that a multicultural, open, adjustable market economy provides adequate conditions for entrepreneurship. In this context, the role of local authorities in local-economic development will increase in Romania. The reform represents the most important accelerating factor for development. The reform enables the local communities to elaborate and adopt some own economic development models, to promote directly their own interests, to stimulate and support the local initiative. Thus, the entrepreneurship, supporter of the dynamic change and development will assert itself both within the public and private sector, both in production and services. 1. Introduction The local development, approached as a component of the process concerning structural economic changes, requires the creation of local partnership, aimed to ensure the positive economic growth, based on the consensus at local level. The local development assumes correlation with the policies for all sectors of activity, through economic development of enterprises (SMEs), as well as encouraging the innovative spirit, rural development, health, education etc. The changes and actions carried out also on local level take into account the objectives for regional development in Romania, such as: diminishing the existent regional unbalances, focusing on an equitable development and reviving the less favored zones; preventing new unbalances; accomplishing the criteria for EU integration and access to financial instruments for assistance (structural funds, the fund for cohesion) etc. In this dimensional context, the entrepreneurship, supporter of the dynamic change will assert itself and it will represent the accelerating factor for local development.

2 2. Local development partnership The challenges, encountered at the end of the second millennium outline the future dimensions of social -- economic development. Mention should be made on the following: economy internationalisation in the context of the challenges brought by regional, inter-regional development policies, the national and regional dignity being acknowledged; globalisation and flexibility of the markets; long-lasting development, enhancing the role of new technologies, increasing the entrepreneurial spirit, developing the competition and entrepreneurial culture, self-development in society, changing the public opinion's attitude versus industry; institutionalisation of social-economic partnerships, aimed to strengthen the social dimension and the longlasting development of the environment. The experience of Western European countries emphasises the existent stimulati factors and models for local development initiatives, based on: decisional autonomy of local development; local performance depending on the management of local partnership; promoting innovative industries and entrepreneurship within civil services. In Romania more and more local authorities, and recently regional authorities will play a key role in localeconomic development. The reform represents the most important factor, accentuating the existent economic and social unbalances, or generating new ones: increasing the unemployment rate over the average in some counties. This situation will enable the local and regional communities to adopt a new model for social-economic development, which should promote directly their interests and support the local initiative. In Romania, the local development is also imposed by the restructuring process, aimed to create local development models, specific for various areas, culture and traditions. At the same time, the local development is determined by the level of material, human, financial, informational resources. The success of local development actions, performed by the local authorities depends on the modality to elaborate their own strategy, policies, programmes, plans etc. The local authorities' actions should not be "subordinated" to other decisions. Taking into account the principle of subsidiary, that restricts the government implication in local authorities' activity, we underline the following issues: the local authorities have decisional autonomy in the development processes; the central authorities involve themselves, taking corrective measures, whenever disfunctionalities occur a partnership between central public administration authorities and local public administration authorities will develop, being subordinated to the citizens' interests; the local development programs require the increase of responsibility and the involvement of decisionmakers, identification and turning into account of own and attracted resources in order to meet the local community requirements. The objectives for local development are reached by local and regional actors, interested in solving the problems specific for their field of activity, who are organised in local development partnerships. The relation of association between the actors involved in local development, based on establishment of their own contributions, participation in solving the problems specific for the local community represents a main feature of the local partnership. The relation of association between partners is representatively and operationally. The partners accept to have dialogues on matters of mutual interest. The "open" feature of the partnership is provided both by its

3 representativeness, namely its structure, the promotion activities of the strategies incorporating targets for local development, and the positive, constructive, collaborative atmosphere for the partnership interest. In order to achieve the local partnership, the following barriers have been identified: modalities for organisation and management; understanding and adopting the mechanisms of operation; establishing the hierarchical levels and the modality for decision-making; how and who achieves the function of control; how are represented the personal interests, which is their intensity; how will response the partnership actors versus change. A good operation for the local partnership assumes the following aspects: exchange of information and cooperation, wish to have open dialogues, to negotiate, flexibility in dialogues, creating an intense interaction climate, understanding properly the advantages of an optimum operation. 3. Decision and development The organisation of local partnership system requires the following issues: establishing clearly the roles played by the actors involved in local development (assignments, tasks, and competence) defining the modern work procedures; achieving a balance within the partnership system. At the level of local partnership, the decision-making process assumes joint consulting and debating, as well as individual contribution aimed to implement decisions. The decision is based on a very large volume of information, with economic, technical, social components. The European Union experience demonstrates the fact that whenever the local actors are involved in the decisionmaking process for local development, they have the feeling of responsibility for their own actions. The local development partnership stipulates the actors' elements of responsibility and empowerment, the structure and fundamental criteria for its operation, objectives, assignments, criteria for performances in local development. The local partnership comprises important actors involved in developing and applying policies, who face serious obstacles, depending on the circumstances of local community, legislation, finance, taxes or lack of professionalism in this field. hrough the local partnership, all actors are mobilised, they are getting confidence in their own activities, their efforts are credible and they co-operate permanently in local development problems solving. The actors involved in local development hold various functions in the hierarchy of administration, on middle or microeconomic level, depending on: local management functional and decisional autonomy the role played in economic-social development as partner and/or participant strategic involvement consultative role

4 The actors' involvement in the local development process, who are situated on the middle level is characterised through the following aspects: the actors on this level (chambers of commerce, local development agencies, trade unions, professional associations, financing institutions, institutions of education, entrepreneurs' associations, consulting and training centres in the field of small and medium sized enterprises etc.) hold great independence, total autonomy, respectively partially autonomy versus the government; high capability to undertake partially some public and special assignments; counseling between the government interests and the individual ones (trade unions, professional associations); orientation towards certain groups of citizens (professional associations, trade unions, entrepreneurs' associations); less bureaucracy; orientation towards certain objectives (local development agencies, institutions of education, financing institutions etc.) The actors' action, understood as a strategic involvement may be approached, on one hand as an option of the local leaders and decision makers in identifying the priorities for local development, based on local analyses, and on the other hand as a factor for turning efficiently into account the local resources. Therefore, a diagnostic analysis on the local community should be carried out, as a main component of the studies and analyses for local development, aiming to respond to the following issues: 1. attentive interpretation of the relevant social indicators for the quality of the economic growth; 2. the impact of structural changes in operation on national, regional level, with consequences on local level; 3. defining the position of local community on regional level; 4. adopting the structural adjustment policy, aimed to improve the capacity of transformation and adjustment, as well as the capability of innovation and creativity. 4. Entrepreneurship and innovation An entrepreneur may be any person or group of persons, men or women, young or old, having ideas how to do something in the best way, trained to work, ready to take risks and to compare his/her ideas with the demand on market. The best idea may be a product, service, process or event for the new market segment. Thus, the entrepreneur represents that person who transforms the chances into opportunities. He/she undertakes risks and uncertainties from any activity. The entrepreneur may develop his/her idea through various forms: self-employment; partnership; corporation; non-governmental organisation; enterprise; employee in an enterprise or institution.

5 "The innovation represents an action which endows the means with a new capacity to create wealth". Innovation represents an instrument specific for the persons wishing the change. Innovation may be found both in the economic and social field. Being a process with a target, defined by changes, the innovation assumes: "systematic analysis of opportunities, revealed by the changes that might support the economic or social innovation". It is based on seven sources of opportunities for innovations, four sources being revealed by matrix A (omitted), corresponding to the endogenous environment of civil services, the other three being shown by matrix B (omitted), corresponding to the exogenous environment. A successful innovation in the field of civil services should be simple. The innovation may exist at the level of civil services sector, even if the following threats have to be faced: the institution supplying civil services is based on a budget allocated from the state budget, not on its results; the institution supplying civil services is not allowed to select the market segment for its services, it offers services for the entire local community; the institution supplying civil services does not carry out the analysis of its activity on the basis of the cost/profit relation. Thus, it results its mission to maximise, not to optimize. If the civil services may be transformed into profitable enterprises, it should be accepted the development of a partnership between the public and private sector. The partnership between the public -- private sector is based on common concerns, specific objectives, aiming to achieve the consensus. The local partnership is preoccupied to increase the quality of services, aimed to social welfare, to decrease the unemployment rate and to diversify the economic activities. The start-up of such a partnership in Central and Eastern European countries enables us to submit some recommendations concerning the entrepreneurial management in the civil services sector. The entrepreneurial management assumes the existence of the strong wish to make changes in the institutions supplying civil services, the assessment of the entrepreneurs and innovators' outcomes, policies specific for entrepreneurial management in the field of leadership, organisation, motivation, incentives for personnel. The circumstances for achieving the changes may represent barriers for the local community or individuals, having double action: a positive one in order to stimulate and a negative one in terms of stress. At the local community level, four inter-dependent elements are influencing the local partnership: 1. major changes in the future entrepreneur's life or major economic disorganisation at the local community level; 2. the new entrepreneur's training in order to participate as partner; 3. examples offered by other entrepreneurial behavior models, inspiring credibility, with a strong cultural and psychological influence; 4. possibility to obtain resources and markets, suitable for the entrepreneur's activity. We have to underline the fact that "the end of the XIX century and the beginning of the XX century represented a period of creativity and innovation in the field of civil services". 5. Regional aspects of entrepreneurship development in Romania Regional development in Romania, according to the regions conceived not as administrative territorial units (Table 1) will encourage, differentially the development of entrepreneurship and local initiative, depending on the own specific elements of the counties.

6 Table 1. Regions and subregions of development in Romania Number Name of the region Subregions 1. NORTH-EAST Botosani, Vaslui, Iasi, Suceava, Neamt, Bacau 2. SOUTH-EAST Braila, Galati, Constanta, Tulcea, Vrancea, Buzau 3. SOUTH Arges, Dambovita, Prahova, Teleorman, Giurgiu, Ialomita, Calarasi 4. SOUTH-WEST Dolj, Olt, Mehedinti, Gorj, Valcea 5. WEST Timis, Arad, Caras-Severin, Hunedoara 6. NORTH-WEST Cluj, Bihor, Satu-Mare, Maramures, Bistrita-Nasaud, Salaj 7. CENTRE Brasov, Sibiu, Covasna, Harghita, Mures, Alba 8. BUCHAREST This decade is marked of a period of fast economic, social, political changes, their effects being also reflected by the evolution of the entrepreneurial sector in Romania. The fluctuant evolution of this sector, determined by the crush of some economic sectors under the pressure of competition, demonstrates the fact that this sector registered a more accelerated dynamics until 1993 (Table 2 and Table 3). After that year, the number of the enterprises that were registered started to decrease. Table 2. Evolution of trading companies during Number of companies at the end of the year Number of companies registered during the year Number of companies radiated during the year Birth rate (%) Mortality rate (%) Rhythm of growth for the number of trading companies

7 Table 3 -- Evolution of private entrepreneurs during Family partnerships Individual persons Entrepreneurs The regional distribution of enterprises is unbalanced, being influenced by economic factors (economic power of the region), social factors (skilled employees), financial factors (own and/or attracted financial resources). We emphasise the same assertion for the distribution of employment on regional level. We notice a trend concerning the increase of the number of employees in agriculture (the agriculture registered the most accelerated dynamics), in: Bucharest, Western and Central regions and a slight trend of growth in the services sector. Table 4. Dynamics of SME sector in Romania Group/Zone employees Total Bucharest North-West Central South South-East North-West West South-West employees Total Bucharest North-West Central South South-East

8 North-West West South-West employees Total Bucharest North-West Central South South-East North-West West South-West Against the expectations, the services have not created new jobs in regions with a higher development level. Within the Carpathians areas and South-Eastern region a significant decrease of employment was recorded in the services sector. Slight increases were registered in Bucharest, South region and South-Western region. In the North-Eastern region, 9% represents the growth of employment. Conclusions The local development consists in: developing the local economic capacity, creating jobs, increasing the capability to face the threats, as result of changes and the economic, social reform. It involves the following actions: identifying, modeling, developing the local economic, human, financial resources, achieving a local partnership, that comprises persons, institutions, organisations from the public and private sector. The policy adopted by local partnership encourages the entrepreneurship. A successful partnership will strengthen its actors' credibility. The entrepreneurship, accepted as accelerating factor for local development asserts itself in a dynamic environment, for which the change means: developing and applying an improved management system in order to enable to the local authorities the achievement of objectives; determining the mission of the local partnership actors involved in local development.

9 References Matei, L. (1998) "Local development management. Decentralisation. Innovation. Risk", Economic Publishing House, Bucharest. Matei, L. (1995) "Local consortium and decision", Phare program, Bucharest. Matei, A., Matei, L. (1998) "Risk of decision-making and entrepreneurial environment", 28 th European Small Business Seminar, Vienna.Law 151 / 1998 concerning regional development in Romania. Green Book. Regional development policy in Romania, (1997), Bucharest. About the Authors Lucica Matei, Professor doctor in management, Training Centre for Public Administration National School of Political Studies and Public Administration 6-8, Povernei str, sector 1, code 71124, Bucharest, Romania Telephone/Fax: lmatei@snspa.ro