Promoting entrepreneurship in Eastern Europe

The past decade has seen a revival of entrepreneurship in the modern industrial economies, characterized by a wave of enterprise restructuring and of new developments in business and technology. In this paper, we argue that market transitions of the post-socialist economies of Eastern Europe cannot be successful without similar entrepreneurial restructuring. To address the massive structural distortions that still plague the post-reform economies, the governments of the region must promote entrepreneurship through policies that: (1) make use of all possible sources of entrepreneurship, including in particular the former state and social sectors; and (2) establish a macroeconomic environment and property-rights framework conducive to entrepreneurship. A successful promotion strategy will need to operate on several fronts, by: (1) redirecting entrepreneurial activities into legal, productive activities, (2) increasing the supply and effectiveness of entrepreneurs, (3) developing markets for complementary inputs, and (4) increasing the demand for entrepreneurship. An unsuccessful approach, we argue, will be one that regards the pre-reform small private sector as the only source of entrepreneurship, and as the only arena for its productive use.Chair of the President's Council of Economic Advisers Professor of Economics and Business Administration University of California at Berkeley (on leave)Visiting Professor University of California at Berkeley Professor of Economics and Entrepreneurship Faculty of Economics, University of Ljubljana (on leave) Advisor to the Government of Slovenia on real sector restructuring, 1992–93