Investment process is the most complex moment in the organization of enterprise development. The effective investment management of one or another enterprise group determines the market size, fields, nature of their activity, the role and influence in economics.  Consequently, it is possible to control the process of formation of any business structures, the process of formation of relations between large, middle and small businesses efficiently only based on the investment management. As a result, there appears a necessity to develop the investment policy.

 

Considering that enterprises make decisions on investment financing in the market conditions on their own, it is possible to affect the process of their development efficiently from outside. In the first place, it may be done by means of creation of prerequisites for the overcoming of internal contradictions and limitations, and in the second place, by means of assistance to the formation of such environment for enterprise, which could help to eliminate the above mentioned limitations and expand the opportunities for the development. Such impact may be called an internal stimulation of investments. Therefore, direct financial support of enterprise investments by the state should appear as an addition to the economic policy, which is aimed at the internal stimulation of investments. Direct, or otherwise, external stimulation of enterprise investments is reasonable only inasmuch as it is destined to compensate the incompleteness, immaturity of internal self-development of enterprises, which is expressed in the failure to solve the problems of current functioning efficiently. 

There is a traditional belief that the main obstacle of the investment growth in Russia refers to institutional barriers[1]. It manifests itself in the negative influence of certain institutions, including informal ones (for example, corruption), as well as in poor development or a total absence of others. From our point of view, a primary consideration is that the native investment infrastructure is still in the stage of formation.

 

For larger dynamism and flexibility of micro-entrepreneurship investment processes it is necessary to create and develop the infrastructure, focused on its needs. It must include the system of specialized organizations, rendering assistance in the implementation of national policy in the sphere of micro-entrepreneurship and acting at the state participation or at the initiative of entrepreneurial cycles themselves (credit, insurance institutions, educational, consultative, informative, service business structures-incubators, industrial estates etc.).

 

Associations (public associations) of small business enterprises are a complex of legally independent small organizations. These associations usually take an active part in the elaboration and implementation of government programs, supporting a small business. At the same time, they independent exercise the functions of infrastructure institutions of micro-entrepreneurship: give assistance in search of business ideas and business projects, render various types of advisory services, personnel development, informational assistance, assistance cooperation to small enterprises among themselves and with middle and large enterprises, including international ones[2]. The situation is possible, when the association of entrepreneurs establish close contacts with a certain bank, which realizes the priority and concessional lending to companies, which are the members of the association. Government authorities assist to small business, appropriating the resources for crediting through the selected bank.

 

Public associations of small business entrepreneurs are an inseparable element of civilized system of the market economy. The associations of employers have fully occupied their niche in the general structure of market market relations and balance, providing the elaboration of common interests, consolidation of forces and protection of micro-entrepreneurship rights.

 

These associations of small business employers are more active, than anybody else, and uncover the most actual problems in this sphere and offer the most efficient ways for their solving. Their proposed supportive measure exceed the proposal of governmental authorities by one order greater[3]. What is more important, the associations of small business employers is the institution of collective protection of small business interests in the state government bodies. Organizations of small business employers perform the functions of infrastructure support of micro-entrepreneurship: perform legal and technical counseling, assistance in the search of business ideas and projects, personnel development, informational assistance etc. We can see various directions of work of American entrepreneurs associations in Table 1.

 

Table 1. Directions of Association Activity of Enterpreneurs in the USA[4].

 

Type of Activity % from a General Numberof Associations
Publishing periodicals 95%
Development of Personal Educational Programs 95%
The pursuance of the research and collection of statistical data 71%
Books publishing 39%

 

At the present day the significance of small enterprise associations is generally recognized as organizations, which are able to significantly contribute in support of micro-entrepreneurship and protection of their interests. For example, supporting of cooperatives is a priority area of state policy in respect of micro-entrepreneurship in Japan, as a result of which the cooperativization has cover the most part small enterprises. The forms of such cooperativization are rather diverse: from the joint organization of parking lots to the exploration of new technologies, defense of personal interests in front of government authorities and mutual assistance on bankruptcy prevention.

 

There are three basic types of such associations:

— continental (European) model, wherein the admission to the association is often conditioned by the existence of a corresponding diploma on academic education in the potential association member, but the process of admission is rather formalized;

— American model, which is focused on supporting of activity of association members, and differs with more «open» management style and more flexible response on crisis situations and potential offered, as well as more pragmatic approach to problem solving;

— Asiatic model, which differs by a firmer control of hierarchy and the rotation absence of administrative officials (as opposed to American model)[5].

 

At present Russia has about 2000 associations of entrepreneurs, including the small business representatives[6], but the degree self-organization of small and medium-sized enterprises is insufficient at present. In this respect the small enterprises have no such forth, which should be considered by the governmental authorities.  Besides, there is no enough developed mechanism, which would allow such associations to have an have impact on the development of national policy in the field of micro-entrepreneurship. On the whole, it is fair to say that associations of entrepreneurs are not very popular in Russia at present(see table 2).

 

Table 2. Public Associations of Entrepreneurs in Russia and the USA[7]

 

Country Number of public associations of entrepreneurs
Units Per 1,000 of small enterprises Per 1,000 of population
The USA 147 7.62 48.68
Russia 2,000 1.76 1.41

 

In our opinion, Russia has two types of small business associations at present. The first type organizations are created on the sectoral characteristic, the second type organizations are intended to support small businesses irrelevant to their sectoral belonging (currently, in connection with the adoption of law «On the Development of Small and Medium Entrepreneurship in the Russian Federation», more and more associations comprise of both small and medium enterprises). Sectoral organizations may also combine enterprises of various scale, but in the majority of cases small enterprises get a sizable proportion there, and, basically, these associations are also primarily intended for small enterprises. For example, AssoNeft is a nonprofit association, uniting independent middle and small gas and oil producing organizations on a voluntary basis, is indisputably an organization, acting in the interest of small enterprises in the first place. At the same time, the Union of hairdressers and beauticians in Russia formally unites enterprises irrespectively of their size, but actually represents interests of small business entities simply by virtue of the organizational specificity of enterprises in this industry sector.

 

Thus, we may see, the following common features are specific for the associations, supporting micro-entrepreneurship, created on sectoral characteristics. Firstly, it is a tendency of business support not only by means of provision of general conditions of their activity (protection of collective interests, resistance to the monopoly, collaboration with government authorities, informational support etc.), but also by means of solving of certain tasks, which appear in the course of current activity. Let us admit, that the level, volume and conditions, on which the associations solve the given problems do not always correspond to the needs of small enterprises, and the set of provided services varies greatly: from rendering of producer services on a commercial basis, to the production promotion of enterprises-association member at the market and organization of teams for the participation in international contests on the corresponding type of professional activity.

 

The admission to such associations often requires the provision of a great number of various documents and consent of the general member meeting, or a special commission on membership. Besides, in the majority of cases the entry in the association may be complicated, as it may require the accomplishment of rather tough conditions: presence of the minimum required duration of the company, references of association members, presence of prizes in professional contests etc.

The organizational structure of similar associations is simple enough and is built basically on the functional principle. The net of regional representative offices of such organizations is usually not too developed, that in some degree is explained by tough conditions of entry.

 

Thus, we may see, that small business associations, created on the sectoral ground, render a relatively broad range of services to their members, but at the same time participation in such associations is not always available for small enterprises.

 

Organizations of the second type are focused on the rendering of help to small business regardless to their sectoral belonging. The most famous of these associations is Allrussian noncommercial association «Support to Russia», created for the purpose of supporting and upholding of interests of small and medium businesses. This type of organizations, as well as the previous one, have the shift of support focus directly from small enterprises to small and medium ones, which is, as in first case, caused by changes in legislation.

 

As we may see it, the organizations focused on small business support, generally have a more complex and multidivisional structure. Such associations have a divisional organizational structure combined with the more extensive network of regional representative offices.

 

Generally such association re focused on supporting business activity in general in their activity in a greater or lesser degree, interaction with the environmental authorities by adopting their decisions, which affect the interests of micro-entrepreneurship, rights protection of entrepreneurs, international co-operation. Regulations for joining such associations is simple enough, in some cases it has a declarative nature.

 

You may see a comparative analysis of two association types of small enterprises in table 10.

 

Table 10. Comparative Analysis of Small Enterprise Associations

 

Characteristics Small Enterprise Associations,Created on the SectoralCharacteristic Support Associations of Small Enterprises
Structureof organization — is built on the functional characteristic— undeveloped network of regional subdivisions — is built on the divisional characteristic— developed network of regional subdivisions
Basicdirections of work — services for problem solving, which appear during the operating performance of enterprises— protection of collective interests, — resistance to monopolies, — informational support,— collaboration with government authorities etc. — support of business activity, — cooperation with bodies of government,— protection of entrepreneurs rights,— international co-operation etc.
Entryinto the association — is complicated, requires fulfillment of a set of conditions. — rather simple regulations for joining often have a declarative nature

 

Thus, we may see that sectoral associations are attracted to the continental model, whereas the American working model is specific for the supporting association. In our opinion, such substantial differences between two types of associations of small enterprises are explained by the range of factors. Primarily, it is connected with the fact that industry associations, practicing rendering of organizational and economic assistance, even in small volumes, require reliability of every association member. This explains the presence of considerably high requirements to the initiated members. But such situation does not only hamper the development of these associations (as we can see, looking at the structure of each of them, these organizations have a relatively small size, with a small number of regional subdivisions). The problem is that such approach hinders the entry of beginning small enterprises in the association. Thus, they (enterprises) appear to be incapable receive that support which is needed at the early stage of their development.

 

At the same time, associations of the second type, services which appear available to small enterprises in the early stages of their activity, are oriented rather on the consultative supporting, than on the solving of certain problems, which appear in the course of current work of micro-entrepreneurship.

 

So, we see, that a current system of associations of small enterprises does not satisfy existing needs of small business and require the carrying out of measures on the further development. There is a necessity in creation of such organizations of small enterprises, which would combine the simplicity of participation, specific to the organization of support of micro-entrepreneurship and a broad range of services rendered, specific to the organizations, created on the sectoral characteristic.

 

Associations of small enterprises are necessary only inasmuch as they encourage the overcoming of internal contradictions, drawbacks of small enterprises and encourage the strengthening of their organizational potential and activation of investment processes. The existence of small business associations is reasonable only if they centralized solve the problems which cause more difficulties in small enterprises. This should be the primary objective of functioning for such associations.

If small enterprise associations are created for dispatch of current business, after the problem has been settled, the necessity in this organization eliminated. Therefore, the structure of the association should be rather flexible in order to respond quickly to the modification of conditions of small enterprise activity. There appears a necessity of methodological support of small business associations, especially concerning the development of typical association models, able to execute the above mentioned functions. One of the possible variants of the organization of such public association is shown in figure 1.

 

The highest legislative organ of such association is a general meeting of members. The highest highest governing body is the association council, headed by the president. The Council performs interaction functions with state environmental authorities and the coordinations, performed by the project union. Also the council develops a strategy of development in the midterm (for example, for three years), in which the priority tasks for the association is stated. The strategy is approved on the general meeting of members, thereafter the association structure and size of membership fee is described.

 

 

Figure 1. Recommended Structure of Small Enterprise Associations

 

 Also under the association of small employers it is supposed to create three types of lower level structures:

— regional representative offices;

— industrial groups;

— committees and boards on individual questions, created in accordance with development strategies of associations.

 

Regional representative offices are associations of basic, primitive level , they accomplish the following functions:

— protection of rights and interests of small enterprises at the regional level;

— rendering of help in the search for partners: suppliers, contractors, customers, as well as organization infrastructures (technology parks, business incubator zones, venture capital funds etc.);

— assistance in the realization of joint projects in a part of creation of local infrastructure objects (road, element water- gas-, energy supply etc.).

 

The elaboration of regional development programs on present level is also possible. They should be also focused on the solution of problems, which are the most topical for the specific region.

Sectoral associations designed for the generalization of experience and rendering of methodical support to small businesses, working in a single sector. The functions referred to these subdivisions are as follows:

— assistance to the development of markets of corresponding goods (works, services);

— informational support and exchange of experience (personnel development, publication of professional literature, spread of advanced experience, revelation etc.);

— assistance in promotion of production at the market:

— organization of exhibitions, festivals, fairs and contests;

 

Committees and boards are destined to solve the most acute problems, facing small enterprises, irrespective of their location and business sector, wherein they work. The formation of such committees takes place in accord with the accepted development strategy of small enterprise associations. Problem, solved by these committees, can be quite various:

— development of cooperative relations;

— strengthening of micro-entrepreneurship positions in opposition to monopolies;

— conduction of marketing researches;

— scientific and technological counseling;

— legal protection of interest of small enterprises

— international co-operation etc.

 

One of most important directions of work of small business associations is the support of its investment process.

 

The unity of the owner, entrepreneur and manager within a small enterprise creates conditions, which are best suited for of the creation of innovation and profit gaining from them. The opposition to large-scale enterprises make small business develop and use their advantages to the maximum. The associations of employers should promote such development and support the tendency of small enterprises to implement the innovations.

 

Associations of enterprises are able to have an effect on the organization of environment, in which the innovations of small enterprises will be in demand On the one hand, the associations provide access to information: simplify the search of necessary data, scientific information, data on modern technology, methods of implementation etc. On the other side, structures for the implementation of innovations can be created within these associations. The creation of the patent sale system is also possible, if sufficient volumes of production cannot be reached within the associations.

 

Technological ideas of specific as there is no corresponding amount of financing, efficient risk management, and it is impossible to get benefits from such projects, as small business is inefficient and cannot secure the corresponding production volumes. The resolving of these problems is possible, within the association of entrepreneurs. Functions of reinforcement of innovative potential of small enterprises can be implemented by means of creation of special structures: venture capital funds, structures, monitoring the process of development of innovations and providing assistance at the implementation etc. Financing of innovative development and its further use can bring benefit of whole association.

 

Centralization at a higher level of management of various production and economic functions is important for the creation of favorable conditions of small business development and the increase of the rate of their investment activity, which also can be reached by means of development of small enterprise associations.

 

Outsourcing is a necessary condition of professional accomplishment of a set of functions on small enterprises: accounting and financial management, technical supervision and quality management, marketing and marketing research etc. The use of services by third-party specialists for every small business is connected with additional expenditures, the search of a specialist, and remuneration of his work. Mediation of associations of small business would allow not only to cut down on expenses for the search of specialist with the necessary qualification, but also to draw higher-level professionals. Also it is necessary to point out that continuous cooperation usually cost cheaper, rather than a simultaneous attraction of a specialist. Besides, collaboration with associations of small enterprises on a permanent basis allows a specialist to receive experience and extra qualification namely in the sphere of work with small businesses. In this way, all other conditions being equal, the mediation of the association at the attraction of specialists and centralization of the abovementioned functions allows small businesses to get services of a higher quality at the lower costs.

 

As an example, we can review the management function of temporary free cash. It is usually complex to organize such management efficiently within the specific small business. Firstly, by virtue of the fact that the head of an enterprise usually does not possess sufficient qualification in the field of financial management, secondly, it is because the sum of free cash flow within a single enterprise can be inadequate for the implementation of certain types of investments. Mediation of associations will allow not only to attract a qualified specialist, but to accumulate free cash flow of all association member, as a result of which the received big enough sums of money can be invested the most efficient. Furthermore, such management can form considerable additional financial resources for small business lending on a reciprocal basis (creation of consumer cooperatives), or for the functioning of the above-mentioned venture capital fund.

 

Thanks to centralization of management function, it is possible to create a special fund for the investment financing and innovations. This capital source can be treated as proper, as it belongs to one association. In this case, it can be received on preferential terms in case of capital leveraging necessity (for example, a banking credit). Consequently we can see that small enterprise associations, in addition to public relations, which prevail at the present time, can perform administrative, consulting and research functions, which will eventually enhance the organizational potential of every association member.

 

 

 



 

[1] Savelyeva Z.A. The problems of Theory and Practice of Micro-Entrepreneurship// Савельева З.А. Проблемы теории и практики малого предпринимательства / З.А. Савельева — СПб. : Инфо-да, 2003

 

[2] Rube, V.A. Institutional Aspect of Small Business Organization in the Developed Countries and in Russia: Educational Book // Рубе, В. А. Институциональные аспекты организации малого бизнеса в развитых странах и в России : учеб. пособие / В.А. Рубе — М. : НФПК 2101c ИНФРА-М, 2004

 

[3] Vilensky A.V. «Russian Associations of Small Business Employers as a Civil Society Institution // Виленский А.В. «Российские объединения малых предпринимателей как институт гражданского общества» / Общественные науки и современность, 2005 — №1.

 

[4] Chichmeli I.V., Rutkovskaya I.B. From the History of Development of International Business-Associations // И. В. Чичмели, И.Б. Рутковская. Из истории развития зарубежных бизнес-ассоциаций  http://www.smbsupport.ru/rop/2796

 

[5] At the same place

 

[6] At the same place

 

[7] Chichmeli I.V., Rutkovskaya I.B. From the History of Development of International Business-Associations // И. В. Чичмели, И.Б. Рутковская. Из истории развития зарубежных бизнес-ассоциаций  http://www.smbsupport.ru/rop/2796