The article aims to examine a highly debatable issue of ensuring economic security from a new standpoint as the most significant factor determining specific investment objects' attractiveness. Therefore, the authors pay special attention to their original technique's methodology and methods to diagnose an enterprise's economic security. The technique includes identifying determinants that characterize the situation to ensure economic security, assess them as substances of specific factors that characterize an enterprise's investment attractiveness, and assess the factors as an unsystematical component of investment risk. The authors propose a specific matrix-based method to solve some interdependent problems: to diagnose investment object attractiveness, evaluate investment risks specified by enterprise economic security, and make an informed management decision on investment. More importantly, the diagnostic data derived with the method make it possible to identify, develop, and implement specific measures to eliminate various barriers, restrictions, challenges, and threats that arise on the enterprise level as well as on the sectoral, regional, and country levels, and thereby create a favourable environment for the promotion of investment processes.
Today, one of the urgent problems of the Russian economy's advanced development, both in theoretical and practical terms, is the problem of creating a climate that is favourable for doing business and creating conditions that promote investment processes. At the same time, there is growing awareness that it is impossible to solve the problem without considering such an important factor as enterprises' economic security, which largely determines their investment attractiveness and perception by a particular appraiser. In this regard, the authors consider it necessary to examine the logical relationship between enterprises' investment attractiveness and economic security. The following circumstances can explain the relevance of the approach:
Firstly, it is the need to implement strategic national priorities defining the goals, directions and objectives of the Russian Federation policy in the field of innovation and investment activities aimed primarily at creating the favourable environment for investment resource concentration and competition development conditions, as well as attracting investment to the Russian Federation economy. Another major strategic goal of the state policy up to 2030 is formulated in the Russian Federation National Security Strategy and aims to counteract challenges and threats to its economic security.
Secondly, it is the need for practice since the expectations that the market, competition, and self-interest alone will motivate investment and innovation have not been satisfied. As a result, we are faced with the fact that the economic environment in which business operates is changing too slowly towards the conditions favourable for economic entities' activities. The evidence is the fact that enterprises, as the primary links of the national economic system, are often unable to respond adequately to various types of challenges and to resist external barrier and restrictive factors and threats caused by the negative events both in the enterprise organization and management and in the market economy itself. All this shows up in the imperfection of the economic mechanism which is still poorly contributing to eliminating the objective market economy contradiction between the planned work organization at individual enterprises and the production anarchy in the entire socialized economy.
Thirdly, the first and second circumstances point to the need for further development of the theory. First of all, this refers to very debatable questions about the essence of economic security, its determinants, their diagnostics, and, especially, methodological approaches to assessing the level of economic security and the degree of its impact on the enterprise investment attractiveness. This predetermines the content of the research, which is devoted to the development of an adequate methodological approach and a specific method to diagnose and determine the level of economic security as an essential component of the enterprise investment attractiveness as well as to assess the factor of economic security as investment risk, more specifically, in its unsystematical part. Thereupon, the article considers the possibility of using the authors’ original matrix approach to develop a practical tool for diagnosing the economic security of enterprises in its impact on their investment attractiveness, as well as for evaluating various internal and external threats and challenges in the form of an unsystematical component of investment risk.
Thus, the main problem solved in the article is the presentation of the methodology to study economic security as an essential factor of investment attractiveness. At the same time, it is crucial to determine the content of this phenomenon to reveal the causal relationship between the elements of specific determinants and conditions characterizing threats, challenges, and ultimately investment risks. In addition, we consider it necessary to focus on the crucial fact that any enterprise is an element of the social-economic system. In this regard, its economic security and its investment attractiveness significantly depend on the situation on each system level, i.e. on the industry, regional and country ones. Therefore, it is important to define the determinants characterizing enterprise economic security, which are formed on each of the hierarchical levels of management. In addition, the study of the problem should take into account the fact that economic security is a subjective-objective reality perceived by the entrepreneur in terms of the ability to set up a new business, the level of risk and failure (Beynon et al., 2018). However, the nature of perception depends mainly on the fact who exactly is the appraiser. In particular, an active entrepreneur engaged in investment activities faces certain entry barriers and restrictions, including challenges and threats, at entrepreneurial choice. The entrepreneur is sure to appraise them first and make a management decision, appropriate to their interests and relevant to their attitude to risk, to invest in the business being set up (Stroe et al., 2018). Naturally, the same kind of appraisal is typical for a potential partner, an external investor, having more alternatives and a wider choice of business objects, taking into account the type of attractive activity (industry), favourable location (region) and country affiliation.
The research problem under consideration has to be solved as the following specific issues: firstly, the identification of the determinants having a considerable impact on providing economic security, the diagnostics of the most important factors determining the investment attractiveness of investment objects; secondly, the improvement of the judgement method of economic security determinants and investment attractiveness factors to reduce the subjective impact on these judgements, including the appraisal of an unsystematical component of investment risk; thirdly, the possibility of the method practical application providing, on the one hand, the diagnostics of economic security as an important factor of enterprise investment attractiveness and, on the other hand, its assessment as investment risk, specifically, in its unsystematical part.
Purpose of the Study
As follows from the problem under consideration, the research aims to identify causal relationships between enterprise economic security and investment attractiveness and, therefore, define an adequate approach to developing a comprehensive method. The method has to combine the diagnostics and assessment of economic security level, supposed to be an essential factor of enterprise investment attractiveness, which can be estimated in the form of investment risk, instead, in its unsystematical part. Following this idea, we suppose that it makes sense to quantify the level of economic security to apply this assessment in practice. Since the strategic goal of ensuring economic security is a sustainable advanced development of the economy, which combines its economic, administrative and legal, resource and technical, social and environmental aspects, it is advisable to propose an appropriate classification of factor groups. They include various threats and challenges, barriers and restrictions that hinder enterprise activities and negatively affect its economic security. Theoretically, a particular method of production is characterized, on the one hand, by productive forces (material resources, labour resources and their technical and technological level, labour force and organizational, social and environmental conditions of production) and, on the other hand, by economic relations, which, in turn, are implemented in certain organizational and economic forms and are regulated by administrative and legal methods and mechanisms through various types of institutions.
The study rests on methods of theoretical, systems, logical, and comparative analysis of academic literature, general scientific methods, like analysis, synthesis, induction, deduction, comparison, generalization, the analog approach, and simulation..
Considering the theory of economic security, we do not aim to elaborate on the discussion of the phenomenon definitions. The only thing to be noted here to clarify the subject of research is a rather wide range within which this category is discussed: from focusing on different characteristic conditions, for example, those stipulating the economy development and efficiency, its protection from external and internal threats (Tatarkin & Kuklin, 2012), to upholding ideas about the existence of the phenomenon only on the national level, regarding it as a government policy to resist threats to the country’s defense and to protect people’s lives (Kevin & Topel, 2013), to improving the quality and standards of people’s lives (Courtney & Levine, 2011). In addition, attention should be drawn to ensuring the security of socio-economic systems as they are thought to protect the systems against the risk of well-being loss in conditions of limited resources (Lee, 2015). A number of publications do not only claim that this concept can be used on the national level, but also point to its illegal absolutization, since the problems of enterprises and regions can be solved with ready-made tools without introducing any terms that are absolutely superfluous in terms of argumentation. There is certainly some truth in this. Indeed, it hardly makes sense to present clear and generally accepted concepts with a new phrase or term and even develop a special conceptual apparatus and special
Along with the conclusions made above, we want to emphasize that the use of our research results following the goal set will help significantly advance both in theoretical and practical terms and solve the main problem of ensuring enterprise economic security and, accordingly, their investment attractiveness. Besides, the research findings can solve several tasks in improving the following: firstly, diagnosing the situation with ensuring enterprise economic security and investment attractiveness, assessing an unsystematical component of investment risk; secondly, identifying barrier and limiting factors, challenge and threat determinants affecting economic security negatively; thirdly, identifying the reasons for their origin and differentiating them by groups of factors and the importance of their impact on economic security and investment attractiveness; finally, determining an unsystematical component of investment risk and, accordingly, a discount rate for evaluating project effectiveness.
The reported study was funded by RFBR, project number 20-010-00124.
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16 April 2021
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Sustainable Development, Socio-Economic Systems, Competitiveness, Economy of Region, Human Development
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Alexandrov, G., Vyakina, I., & Skvortsova, G. (2021). Interdependence Logic Of Economic Security And Investment Attractiveness Of The Enterprise. In E. Popov, V. Barkhatov, V. D. Pham, & D. Pletnev (Eds.), Competitiveness and the Development of Socio-Economic Systems, vol 105. European Proceedings of Social and Behavioural Sciences (pp. 407-415). European Publisher. https://doi.org/10.15405/epsbs.2021.04.45