Small business in Russia: institutions, market potential, taxes and digitalization

Abstract

In this paper we use an institutional approach and apply a regional perspective to explore how market potential, formal institutions, taxes, access to finance, regional policy instruments and digitization have affected small business activity in 83 Russian regions during 2008-2018. We use various regional data sources and official statistics to study the effects of the business environment in the regions and how it may affect entrepreneurship. Our results suggest, that Russia's business environment is important in explaining small business activity, however digitization and the role of market potential can be better controlled by entrepreneurs in terms of what skills to learn and where to locate their businesses. In addition, we discuss the effect of exogenous shocks and changes in the business environment , along with dynamics, challenges and perspectives of entrepreneurship in Russia.