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Book review

by Stephen Fortescue

Open for business: the persistent entrepreneurial class in Poland
Elizabeth Osborn, Kazimierz M. Slomczynski

Published by IFiS Publishers, 2005-01-02
ISBN 9788373880634

It is generally accepted, including by the authors of this volume, that to have a genuine market economy one must have a well-developed entrepreneurial class. They define entrepreneurs as ‘those who own small and medium enterprises in the non-agricultural sector, who employ people, and who are actively involved in the operation of their businesses’ (p. 19). The book, therefore, is explicitly not about those running big businesses, including owner-managers of the oligarch type. The authors claim to demonstrate that in transition economies entrepreneurs have a particularly important role, filling a gap created by the relative lack of capitalists, i.e. individuals or groups with sufficient financial resources to run big firms. They also claim to disprove the claims of Akos Rona-Tas that an excessive number of small-scale entrepreneurs can be detrimental to economic development, since they cannot possibly achieve the economies of scale needed in the contemporary global economy.

In fact the book does not contain the economic analysis needed to prove those points one way or another. They argue their points plausibly enough, but to prove them would require detailed comparative economic analysis of economies with capitalists and relatively lacking in small-scale entrepreneurs. There are some obvious transition candidates for such comparison, but they are not part of the analysis in this book. What the book does contain, given the assumption that small and medium scale entrepreneurs are an important component of a transition market economy, is a sociological analysis of such entrepreneurs in Poland.

The authors engage briefly in the inevitable debate on whether entrepreneurs make up a class, claiming against the arguments of Jan Pakulski that they do. Considerable attention is then devoted to the nexus between the communist and post-communist periods. The book is valuable for the amount of detail on communist-era entrepreneurs, something made possible by the national sociological surveys of the late communist period. Although the authors identify differences between the characteristics of entrepreneurs before and after 1989, they claim that entrepreneurs of the communist period were already starting to change before the system collapsed. Generally, therefore, they are supporters of evolutionary and path dependence views, rather than that today’s entrepreneurs are an entirely new breed.

As another aspect of the continuity issue, they find no correlation between party membership and entrepreneurship, but they do find one between mid-managerial positions in the communist bureaucracy and subsequent involvement in entrepreneurial activity. Although the focus on small and medium business limits the application of the finding, there is nothing here to support a nomenklatura capitalism conclusion.

After a brief look at what they call ‘simple demographics’ (age and gender), they then concentrate on the motivational and psychological characteristics of Polish entrepreneurs. Their regressions do not come up with strong positives for the expected variables: risk taking, profit orientation and valuing independence. Less grand variables such as travel abroad, business experience, anti-unionism, accessible financial resources (often from relatives or friends) and owning a car, turn out to be more significant.

Their main conclusion is that while there certainly are character traits that play a role, of greater importance are the circumstances in which individuals find themselves, including the lack of other employment opportunities. They suggest that individuals are more likely to become entrepreneurs as a result of rational calculation of the benefits to be obtained by doing so, than as a result of an inherent urge to run one’s own business. It is at this stage that one wishes the authors had paid more attention to whether their entrepreneurs were successful or not. Is becoming an entrepreneur because the alternative is unemployment enough to lead to success, particularly success which, to return to Rona-Tas’s point, goes further than providing an individual a subsistence income but which contributes significantly to national economic growth? The treatment of success on pp. 190–94 is brief and inconclusive.

The authors use data from a series of national survey data sets from 1978 through to 1998, backed up by two waves of interviews done especially for the volume (34 in 1996, and 28 in 1999–2001). At times they have to be creative in the use they make of questions in the national surveys that were not designed with their purposes in mind. Much of the analysis is quantitative, but even those untrained in quantitative methods can readily follow the arguments. The interviews give some life and colour to what is otherwise pretty dry. This is not to suggest that it is a hard read. The book is generally clear and straightforward and the content consistently interesting.

The willingness of large numbers of people to take on, in addition to the general stresses and uncertainties of life in transition, the special strains of entrepreneurship is an important and, to this non-entrepreneurial reviewer, impressive phenomenon. The book makes a significant contribution to our understanding of it.