Private Service Firms in a Transitional Economy

Studies of Economies in Transformation Paper 11. The service industry is the largest and most dynamic sector of the newly emerging private sector in St. Petersburg. Little is known, however, about the entrepreneurs and firms in this sector or about the problems they may encounter. This study describes the origin and characteristics of 86 small- and medium- size firms, identifies the main difficulties they face, and recommends policies to facilitate their stronger growth in Russia and...
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Studies of Economies in Transformation Paper 11. The service industry is the largest and most dynamic sector of the newly emerging private sector in St. Petersburg. Little is known, however, about the entrepreneurs and firms in this sector or about the problems they may encounter. This study describes the origin and characteristics of 86 small- and medium- size firms, identifies the main difficulties they face, and recommends policies to facilitate their stronger growth in Russia and other transition economies. Although the survey found that most firms were performing reasonably well given the difficult business environment, there are still numerous obstacles to growth, many of which could be alleviated by the policy reforms generally required for a successful transition. These include improving the business environment by offering special assistance to small businesses, simplifying the tax structure, opening the real estate market, and reducing government intervention. The report also examines in detail the characteristics of the entrepreneurs--highly educated, energetic, and resourceful--and their firms--small, self-financed, growing, and diversifying. An appendix provides an analysis on firm performance.