Add Thesis

Entrepreneurship in times of an economic crisis

An explanatory research on the impact of the economic crisis on entrepreneurial activity

Written by N. Pavlova, R. Sagov

Paper category

Master Thesis

Subject

Business Administration>Entrepreneurship

Year

2020

Abstract

Master Thesis: Credit availability and liquidity in the post-crisis era. The most important determinant of entrepreneurial activity in the post-crisis period is credit availability, because most entrepreneurs do not have sufficient financial resources in the early stages of entrepreneurship. A characteristic of any economic crisis is the general financial contraction, which leads to more companies suffering devastating losses among start-ups, and lower investment levels. In addition, due to the integration of global financial markets and financial liberalization, this problem is spreading rapidly (T. Gries, W. Naude 2011, p. 4). In this case, the entrepreneur’s equity and sufficient internal company Funds have been given a special role. This background leads to fewer capable entrepreneurs having the opportunity to establish their own companies, which means that financial inequality in the economy is increasing (T. Gries, W. Naude 2011, Ze. 6-7). It is an innovative small and medium-sized enterprise. The economic significance of companies providing favorable credit conditions has been mentioned earlier in this article, and is particularly important because they often lack the internal financial resources to successfully commercialize innovations (Beck, Demirguc-Kunt 2006; Schneider, Veugelers 2010 from Lee et al. 2015, p. 370. However, it is difficult for these companies to obtain bank loans in order to develop products. This is due to a variety of factors. First of all, the business model of innovative SMEs is more risky, which is absolutely important for breaking through and opening up new markets. However, in the final analysis, most innovative companies rely more on intangible assets that banks are not particularly interested in as collateral. In addition, the innovation process cannot guarantee certain successful results, so investing in such companies is inherently risky (Hall 2002; Coad, Rao 2008; Mazzucato 2013 from Lee et al. 2015, p. 371). In addition, because these small companies do not have sufficient financial resources, the activities of these SMEs have a high risk of diversifying their investment portfolios. Therefore, specific innovations The collapse of the process may lead to the complete bankruptcy of the company, which is not an additional attraction for the bank (Freel 2007 from Lee et al. 2015, p. 371). Last but not least, the intangible assets produced within the company May have a high level of background and may not be able to provide the bank with any value as collateral (Mina et al., 2013, Lee et al., 2015, p. 372). 2.4 Innovation and creativity related to the economic crisis. Regarding the correlation between innovation and creativity and decline, existing research does not have a clear scientific view. A large number of researchers believe that the economic crisis contributes to the development of creativity (Bartlett 2008 from AO Iacobuta, OR Socoliuc 2014, p. 85), while the opposite scientific camp advocates that entrepreneurs use market opportunities during economic downturns. At the same time, "Creativity, expressed through thoughts, attitudes and behaviors, is an important factor in improving productivity, maximizing profits and company development" (GL Şipoş, A. Ionescu2015, p. 164). In the scientific literature, it is determined that creativity and innovation are not interchangeable concepts, because creativity involves the generation of new ideas, and innovation is the successful process of putting these ideas into practice in order to create value for individuals, companies and society A whole (GL Şipoş, A. Ionescu 2 015, p. 165). Otherwise, creativity can be determined as "the ability to overcome information and knowledge characteristics in this way to ensure new and urgent human needs, or to fully satisfy existing needs in an innovative way" (S. Mihai-Yiannaki, S. Savvides 2012, p. 4). The consequences of the economic crisis constitute the main challenge that society must face in the future. The crisis shows what gaps exist in the professional market, determines the emergence of new opportunities, and stimulates the development of creativity at the educational level (S. Mihai-Yiannaki, S. Savvides 2012, p. 6). At present, given the sensitivity of the global economy to major issues and periodic crises, the company is trying to increase R&D investment because these expenditures help ensure the creation of new products, ensure the effective marketing of the company’s products in the market, and improve the company’s competitiveness (N.Bogavac-Cvetkovic, M. Milickovic2016, p. 159). Generally speaking, companies tend to show their resilience to economic recession in three different ways: survival, adaptation, and most importantly innovation (Scott, Laws 2006 from Dahles, Susilowati 2015, p. 38 ). In the scientific literature, there are some classic concepts about the methods for small and medium-sized entrepreneurs to overcome economic crises. Hofer (1980) su believes that financially restricted companies should follow the following strategies: reduce assets, reduce costs, and create revenue. In their further research, Hambrick and Schlecter (1983) proved that the first two strategies are most commonly used in difficult times. Read Less