Socio-Economic Determinants Of Changes In The Regional Entrepreneurship Environment Development


The article summarizes the theoretical and methodological aspects and the work-out of recommendations for the formation of the organizational and economic foundations for regional entrepreneurship development. The conceptual approaches and the economic content of entrepreneurship are concretized; the formation tendencies of the organizational and economic foundations for the development of entrepreneurship in the context of general economic transformations have been systematized; the institutional and infrastructural business support was investigated; the features and mechanisms of support and regulation of regional entrepreneurship’s sphere were revealed. Based on the generalization of the existing scientific provisions regarding the interpretation of the essence of regional entrepreneurship, a new approach to its identification is proposed. Entrepreneurship, as a complex socio-economic phenomenon is considered from the standpoint of the implementation of its basic principles of multifunctionality for the regional economy, which considers not only the totality of economic determinants of ensuring balanced growth of the regional economy, but also provides for the possibility of capitalizing business ideas of entrepreneurs to achieve commercial success in strategic perspective. It is theoretically substantiated that motivation, as an important tool for enhancing the activities of business entities to achieve personal goals, should be consistent with both obtaining an economic and social effect, and performing social and environmental functions. A set of criteria for identifying entrepreneurship at the regional level is determined, and a systematic approach to the formation of organizational and economic entrepreneurship foundations is justified. The main socio-economic determinants of changing the environment of entrepreneurship development are established.

Keywords: Entrepreneurship, organizational and socio-economic determinants, business, mechanism, regional economy


In recent years in Russia as a whole, and in Crimea in particular, significant steps have been taken to create conditions for the development of entrepreneurship as a locomotive for the strategic growth of the state. This contributed to the activation and growth of quantitative and qualitative parameters of entrepreneurial activity. However, the adopted production and economic mechanisms for the functioning of structures of this type do not always consider the peculiarities of doing business in local (regional) areas, despite its importance in the development of the business sectors of the economy. The instability of the socio-economic situation in the regions largely inhibits the spread of antecedent structures, limits the possibilities for the formation and implementation of their economic potential. Under such circumstances, entrepreneurial activity acts only as a way of survival or a source of additional income for the local population, does not allow to fully perform the main business functions in the region, to achieve the desired strategic guidelines of economic, environmental and social content. The multifaceted form of the problems raised determines the objective need to substantiate fundamentally new approaches to the study of the peculiarities of the foundation, diagnostics of the development and conditions for the implementation of predecessor activities in the regions.

Problem Statement

The theoretical and methodological paradigm of entrepreneurship as an economic phenomenon is revealed in the fundamental works of Malyshev and Solomonov (2010), Staniewski et al. (2015), Swanson (2017) and other economists. The problem of the extraordinary importance of entrepreneurship to ensure the regional viability has attracted considerable attention from domestic scientists to study the organizational and economic foundations of its development.

Modern trends in the local entrepreneurial activity are reflected in the works of Boiko (2018a), Lugova and Ermolenko (2017), Issa and Tesfaye  (2020), Jones and Wadhwani (2006), Sudak (2017) and other economists who during a long-time of period studied the concept of regional development and economic effectiveness (Ergin et al., 2020).

Despite the existing scientific achievements in the study of this problem, there is a need to deepen the conceptual provisions for the formation of organizational and economic foundations of region entrepreneurship from the standpoint of modeling the impact of key socio-economic determinants, improving mechanisms for providing infrastructure support for business transformations in the interaction of business entities and state institutions, substantiation of scientific and methodological approach to programming the development of regional business agents (Ergin et al., 2019). This set of unsolved and insufficiently studied problems led to the choice of the dissertation topic, its structure and content.

Research Questions

To develop and substantiate the strategic directions and priorities of the post-reform development of the regional business sector; Development of small business in the region; Innovation and investment imperatives in the region. Within the framework of these topics, the author substantiated theoretical and methodological provisions and developed practical recommendations for improving the organizational and economic foundations of the development of local business infrastructure.

Purpose of the Study

The study aims are to substantiate theoretical and methodological provisions and develop practical recommendations for improving the organizational and economic foundations for the development of local (regional) entrepreneurship. Achievement of this goal made it necessary to solve the following tasks:

  • to generalize the theoretical approaches of the economic content of regional entrepreneurship;
  • to systematize the scope of organizational and economic foundations in the modern concept of the regional entrepreneurship development;
  • to identify the problems that hinder the entrepreneurship development and assess the level of business activity;
  • deepen the scientific and practical foundations and develop an algorithm for the formation and implementation of economic policy for the development of business entities.

The research object is the process and state of the organizational and economic foundations for the development of regional entrepreneurship. And the research subject is a set of theoretical, methodological and applied aspects of the formation of the organizational and economic foundations for the development of entrepreneurship in the context of transformational shifts.

Research Methods

The theoretical and methodological basis of the study is a systematic approach to the study of the fundamental provisions of economics about the development of entrepreneurship in the region in the conditions of transformational changes.

The process of scientific research was based on general scientific and special economic methods. The abstract-logical method is used to formulate the basic principles, theoretical generalization of conclusions and analysis of research results of other researchers, clarification of the conceptual and categorical apparatus. A retrospective analysis of business development was carried out based on the historical and economic method, in particular the reception of historical detail. The use of sociological methods allowed to monitor the business environment in the region.

Characterization of entrepreneurial formations and assessment of entrepreneurial activity was carried out using the economic-statistical method. In order to substantiate the business environment and determine the strategic orientations of business activity, the method of SWOT-analysis was used.

Within the economic-mathematical method, the methods of correlation-regression analysis and graphic modeling were used. The monographic method was used for detailed study and generalization of the experience of regional business entities. Graphic and tabular techniques are used to visualize the results.


Activation of entrepreneurship as the most mobile part of the labour market, which attracts the bulk of regional labour resources, is now considered as one of the main determinants of comprehensive solutions to key organizational and local (regional) economic problems, primarily by diversifying the economic component and leveling negative employment trends in regional economic areas. etc.

The gradual transformation of organizational and legal forms, business functions, scales and scope of entrepreneurship has significantly influenced the terminological essence inherent in its interpretation. It must be said that the study of the essence of entrepreneurship as a complex socio-economic phenomenon was laid back in the 18th century, which is reflected in the works of such world famous scientists as (Keogh-Brown et al., 2010).

Somewhat later, the scientific principles of entrepreneurship were studied by Issa and Tesfaye (2020) and other researchers. According to some scientists, the process of developing the theory of entrepreneurship took place based on the understanding the relevant practice in four stages (Gartner et al., 1994). Nigam and his other like-minded scientists, based on the results of scientific communication of this position, came to these milestone positions (Nigam et al., 2020)

At the first stage, as it turned out, the attention was focused exclusively on substantiating the entrepreneur's risk. In general, it was argued that an entrepreneur is an individual who has a strategic forecasting methodology and is willing to take on future risks, and whose actions are characterized not only by a desire to make a profit, but also by an absolute willingness to incur losses (Jones & Wadhwani, 2006). It is believed that the term "entrepreneur" was first introduced into scientific glossary by Gartner (1988).

In continuation of the discussion on the identification of entrepreneurship, from the standpoint of justifying the stages of its formation, we support the opinion of Shaver K. and other economists (Shaver & Scott, 1992), which argues that extremely important for the development of business theory are the results of a study of the classics of political economy (Keogh-Brown et al., 2010). These researchers considered business activity only in the context of the market mechanism of self-regulation.

At the second stage of formation of the scientific vision of the definition of "entrepreneurship" researchers focus on the personality of the entrepreneur and his functions, which were considered from a historical perspective, emphasizing the benefits of societies where people with entrepreneurial abilities (Greco & De Jong, 2017). Such a wave of scientific achievements in the scientific world is often associated with the name of J. Schumpeter, who believed that economic development is based on the specific function of the entrepreneur, which is manifested in the desire to use "a new combination" of factors of production, resulting in innovation, innovation (Stam, 2008).

Many economists come to say about the multifunctional model of entrepreneurship emerged at the third stage. From the standpoint of these scientists of this period, entrepreneurship as an economic category was first considered as a process of development of a certain idea, the practical implementation of which allowed profitability. His follower Lafuente E. team developed Kirzner’s concept formed the theory of entrepreneurship as a process of transition from one equilibrium state of "arbitration" agreements to another (Lafuente et al., 2021).

The development of entrepreneurial activity is impossible without a proper legal basis. In the Russian law "On business" this concept is declared as direct, independent, systematic, at own risk on production activity, the performance of works, rendering of services to receive profit which is carried out by the physical persons and legal entities registered as business activity subjects in order to the regulation.

We agree with the opinion of Issa and Tesfaye (2020) that representatives of the domestic scientific school of economics consider entrepreneurship as an economic category, method of management, type of economic thinking. That is, as an economic category, entrepreneurship reflects the relationship between its subjects regarding the production, distribution and appropriation of goods and services; as a type of economic thinking, the essence of entrepreneurship is reduced to the initiative, innovation, independent activity; as a method of management entrepreneurship involves the most complete and effective use of factors of production and the desire to realize their creative abilities (Issa & Tesfaye, 2020).

The content of entrepreneurship, according to Licht and Seigel (2006) can be considered in several aspects, in particular:

  • the form of economic activity - freedom of choice of directions and methods of activity, self-decision-making, profit, responsibility for decisions, their consequences and associated risk;
  • the appropriate style and type of behavior of the entrepreneur - is the initiative, the search for non-traditional solutions, scale and risk, business acumen;
  • special economic function - improvement of the state mechanism, constant updating of economy, creation of innovative sphere.

Entrepreneurship as a special type of economic behavior realizes its properties (initiative, risk, combination and innovation) in the conditions of competitive interaction of economic entities. Under such conditions, the content of the entrepreneurial activity is manifested not only in obtaining benefits, but also in creating better business conditions, which is the main specific feature of entrepreneurship as a type of economic behavior (Shaver & Scott, 1992). At the same time, all economic activity cannot be innovation, because innovation is a form of manifestation of accumulated results in the process of activity that generates the idea (Stam, 2008). Thus, the generalization of scientific approaches of domestic and foreign scientists to identify the essence of entrepreneurship indicates the need to consider this definition from several positions (Sudak, 2017).

According to the accepted structure of the reproduction process, it is generally accepted to distinguish four areas of entrepreneurship, namely: production, commercial, financial and consumption. Other types of entrepreneurial activity, for example, innovation, marketing, are individually included in the four designated zones. In turn, the essence of pre-acceptance and the limits of its implementation are closely related to the forms and types of entrepreneurial activity.

In general, the majority of scientific studies on the definition of entrepreneurship in local (regional) areas practically do not differ from its traditional interpretations. So, Hoy (1989) considers it as a sector of the regional economy, in which business entities of various organizational and legal forms and forms of ownership of small-scale production operate, carrying out independent, innovative, systematic, at their own risk, economic activity in order to obtain economic and social effect (Stefko et al., 2020). We believe that such a definitive content is somewhat limited since entrepreneurship is the personification of a process or activity, therefore it can in no way be considered as an economic sector.

Shapero and Sokol (1982) consider local entrepreneurship as a socio-economic phenomenon of repetitive commercially oriented interaction of people, the parameters of which are determined by the endogenous capabilities of local areas, the personal potential of entrepreneurs and the needs of consumers, formed under the influence of the local lifestyle.

Figure 1: The economic content of entrepreneurship (Shapero & Sokol, 1982)
The economic content of entrepreneurship (Shapero & Sokol, 1982)
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Territorial entrepreneurship is also interpreted as an activity initiated by active representatives of the local community, based on the application of modern scientific and commercial approaches in managing the economy in regional areas and functioning in accordance with the requirements of the elements of the institutional system (Lafuente et al., 2021). Such activities are traditionally focused on the production of diverse products and goods, their direct sale and provision of services, with the aim of material and moral encouragement of local entrepreneurs-owners (Shaver & Scott, 1992).

Greco A. considers regional entrepreneurship as the main element of the local economy, arguing that the latter should be considered not only as the basis for improving the quality of life of the local population, but also of the whole society. Such a modification, on the one hand, will be a definite manifestation of positive shifts in the economic, social and ecological planes, that is, there will be a convergence to balanced regional development, on the other hand, the expediency of determining the possibilities for the implementation of modern organizational and economic foundations for the identification and use of unique features and potentials will be actualized regional areas, position them as potentially attractive objects of attracting investment, including foreign (Greco & De Jong, 2017).

The study of the essence of entrepreneurship, the characteristics of entrepreneurial activity and the specifics of economic activity in local areas allows us to highlight a number of its inherent functions, namely: economic, environmental, social, innovative, strategic, personal, organizational, psychological, integrating, resource, competitive. Each of the designated functions is an integral part of the entrepreneurial environment in regional areas (Shaver & Scott, 1992).

When researching the peculiarities of entrepreneurship, it is necessary to consider that the countryside is characterized by the presence of many types of resources that allow the development of various activities. This is also facilitated by the diversity of natural and climatic conditions, socio-economic and historical features of the development of individual territories. According to Sudak (2017) such an organization of the population in regional areas has specific features:

  • in the regional territory is the highest share of activities that are not entrepreneurial in content, ie, not aimed at making a profit. This is due to the use of natural resources, cultivation of land around the house and growing products for their consumption;
  • in the regional territory, most activities are associated with one of the most important resources of local areas. At the same time, local business is a basic type of activity, as it forms the basis for the development of many other types related to the provision of conditions for local business activities, promotion of products to consumers (Bird, 1992).

Considering the peculiarities of the formation and development of entrepreneurial activity in regional areas, the socio-economic determinants of changes in the environment of its operation are substantiated (Figure 2).

Figure 2: Socio-economic indicators of regional entrepreneurship development (Carree & Thurik, 2010)
Socio-economic indicators of regional entrepreneurship development (Carree & Thurik, 2010)
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Consequently, the economic and social orientation of entrepreneurial activity should be considered as a prerequisite for the sustainable development of the region's economy. The economic component, at the same time, is based on a change in the structure of economic sectors, freedom of economic choice, and the expansion of the delights of regional areas.

Entrepreneurship interacts closely with the external environment and directly affects it. The latter is an activator of business formation and increases the level of entrepreneurial activity. In particular, the environment affects the formation of the business climate, labour potential, quality of life in regional areas. In turn, entrepreneurship determines the economic, social and environmental development of regional areas. Against this background, it can be argued that the need for the formation of a proper organizational and economic platform for entrepreneurship in regional areas is caused by industry specifics and the specifics of its implementation, changing conditions of internal and external environments.

At the next stage, it is advisable to identify and systematize the signs of entrepreneurship in the regional areas, which allows its identification among the established list of signs of entrepreneurship as a socio-economic phenomenon that spreads in various sectors of the national economy (Boiko, 2018b).

The entrepreneurial abilities of a business entity are not limited to entrepreneurial activity and must be supplemented by the education, experience, knowledge and skills of the entrepreneur. Also, self-organization seems to be a key condition for the implementation of the basic business function. At the same time, it is also worth noting that regional entrepreneurial activity is formed under the influence of a set of informal institutions, in particular, such as experience, the traditions, the culture of management, which are inherent in the relevant territory of the region. Entrepreneurship is the basis of the economic and social development of the region, focused on solving key problems of regional residents, overcoming poverty and ensuring a high level and quality of life of citizens. The issue of creating appropriate conditions for response to the state, socially-oriented, aimed at solving both current and strategic tasks, the business has always been a priority (Shaver & Scott, 1992).

Entrepreneurial formations are the main driver of the regional economic development, create a basis for social stability, the formation of civil society in the country as a whole. Such structures have a significant impact on the development of the region. This is confirmed by the following provisions:

  • business brings additional income for the people themselves, which contributes to improving the living standards of the local population and increasing its welfare;
  • Entrepreneurship is a direct source of funds for local (regional) budgets;
  • Entrepreneurship solves the problems of food security of the local population and thus contributes to food security in general;
  • the regional business contributes to the formation of chains of processing of local products, as well as the provision of various types of services.

It is important to note that the transition of the world economy to a qualitatively new stage of development, which is determined by the growing interconnectedness and interdependence of economic systems, is primarily determined by the development of economic component based on entrepreneurial initiative, extensive use of innovative information systems and technologies (Ergin et al., 2020).

The key structural element of the organizational and economic platform and, at the same time, the locomotive of entrepreneurship development in the region is its organizational and economic mechanism. Research has shown that in the scientific literature there are different approaches to determining the organizational and economic mechanism of entrepreneurship (Ulhøi, 2005).

Entrepreneurial formations of this type, due to small capacity and small production volumes, have almost no opportunity to become, for example, competitors in tender procedures conducted by government agencies (Jarchow & Rohm, 2020). A significant number of researchers focus on this statement to create a reliable and adequate organizational and economic mechanism for the development of entrepreneurship, according to Sexton and Smilor (1986) it is necessary to combine the synergistic and institutional approaches. The institutional-synergetic concept of management is a rod-cap economic structure as multidimensional formations that determine the internal structure of its components – from socio-economic systems to business entities (Short et al., 2009).

Thus, the theoretical generalization of trends in the formation and development of entrepreneurship in the region against the background of general economic transformation suggests that the formation of organizational and economic mechanisms for its activation should be based on a systematic approach. This will allow predicting the effectiveness of the relationship of business structures with the external business environment and on this basis to develop models of their strategic growth.

Supporting the views of Jarchow and Rohm (2020), Sudak (2017) emphasizes that the main principles of the systemic development of regional entrepreneurship are the principles of target orientation, structural balance, responsibility and resource provision for socio-economic development. The principle of targeting implies the need to develop entrepreneurship in clearly defined areas, due to which its strategic imperatives will be determined. The principle of structural balance provides for a clear delineation of powers to regulate and support business entities between central, regional government bodies and local government bodies.

Figure 3: The organizational and economic bases for the local entrepreneurship development (Sudak, 2017)
 The organizational and economic bases for the local entrepreneurship development (Sudak, 2017)
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The prospect of effective development of regional entrepreneurship is associated with the need to create an appropriate institutional environment, the introduction of effective financial and investment levers to stimulate economic activity, their systemic support at the local government level, and coordination of the activities of all branches of government. Using the terminology of institutional theory, it can be argued that entrepreneurial formations are also created in order to take advantage of profitable opportunities that depend on the existing set of constraints (Ergin et al., 2020).

The organizational and economic mechanism must be based on the tools of cyclical self-maintenance of the processes of its formation, implementation and adaptation in a rapidly changing and unpredictable business environment. This makes it necessary to study the features of the state regulatory policy to enhance entrepreneurship in the region.

The influence of state support on the development of regional entrepreneurship should be based on a comprehensive solution to existing problems related to the financial support of their functioning. It is the relevant state institutions and institutions of this kind that contribute to the creation and functioning of entrepreneurial formations in the region, form a specific organizational and economic environment for stimulating, as well as rapid adaptation of business entities to market conditions.

The fundamental principles that should be the basis for the formation of the organizational and economic mechanism of interaction between government bodies, local entrepreneurship entities and the territorial community should be considered: the principle of social partnership; the principle of effectiveness; subsidiarity; legitimacy (Ergina et al., 2020).

The mechanism of interaction of these subjects of local development presupposes the most efficient and rational use of the resources of a separate territory to stimulate entrepreneurial activity and ensure social and environmental responsibility of all subjects of interaction (Figure 4).

Figure 4: Mechanism of interaction between business agents and local community
Mechanism of interaction between business agents and local community
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In addition, the functioning of the modern organizational and economic mechanism of the mutual fashion of public authorities and business structures requires proper coordination of support. Such coordination should be carried out systematically and simultaneously at the state and local (regional) levels, which will allow coordinating the priorities and interests of all parties in interaction, considering the needs of a particular territorial community. To ensure the effectiveness of the mechanism of interaction between government and business structures, it is necessary to develop appropriate institutional support that will ensure compliance with certain principles of interaction. Accordingly, it is proposed to form specialized standing committees at the appropriate levels, the functional load of which will consist in the preparation of legal initiatives and documents, elimination of misunderstandings between the parties, justification of priority areas of their partnership, control and coordination of relevant programs and projects.


Considering the current trends in the development of business entities, an in-depth study of the theoretical aspects of the formation of the organizational and economic foundations of their development in the region is extremely relevant. In turn, this made it possible to obtain the following scientific theoretical generalizations:

Based on the theoretical generalization of existing approaches to understanding the essence of the concept of "regional entrepreneurship areas", a new approach to its understanding is proposed. Entrepreneurship in the region as a complex socio-economic phenomenon is proposed to be considered from the standpoint of the implementation of the basic principles of multifunctionality of the local economy, considering not only the totality of organizational and economic determinants of ensuring balanced growth of the local business economy, but also provides for the possibility of capitalizing business ideas of entrepreneurs in order to achieve commercial success.

It has been substantiated that the economic and social orientation of entrepreneurial activity is recognized as unconditional conditions for sustainable development of the region. At the same time, the economic component is based primarily on changes in the structure of the regional economy, freedom of economic choice, expansion of the delights of local areas; social – supposes the containment of migration processes, the development of social capital, the realization of the entrepreneur's potential. The weakening of the agrarian orientation of doing business in local (regional) areas, the spread of new forms of management and the creation of conditions for the development of alternative activities, in general, contributed to an increase in the quality of life of the population of the region.

The need to form an appropriate organizational and economic platform for the development of entrepreneurship in the region is caused by the sectoral characteristics and the specifics of its implementation, changing conditions of the internal and external environment, limited infrastructure support. Of particular importance is the agreement on the mutual modality of entrepreneurial formations with state authorities and the local community, the mechanism of cooperation of which provides for the most efficient and rational use of the resources of a particular territory to stimulate entrepreneurial activity.

Particular attention is paid to the formation of the institutional environment as one of the prevailing factors in the development of entrepreneurship. At the same time, regulatory activity with the involvement of modern market and government tools is becoming important. The features of state support of regional entrepreneurial formations with a description of the levers of financial support, legal protection, educational, innovative, infrastructural support and information support are investigated. Institutional determinants define the institutions of the market, state regulation, property, organization of production, territorial community.

It has been substantiated that the formation of the organizational and economic mechanism for the development of entrepreneurship should be carried out based on a systematic approach, which, considering the complementary interaction of its components, will make it possible to model and predict the effectiveness of multifunctional links between business structures and the external business environment.

The main instruments are:

  • organizational (projects of socio-economic development of region);
  • financial (concessional and targeted lending and financing) legal (legislative and regulatory acts, programs) innovative (formation of the institution of academic entrepreneurship);
  • social (professional development, education, culture).

Entrepreneurial activity in the region provides for the solution of a complex of complex, often contradictory problems, considering the general state and regional interests, as well as the motives of the activities of various social groups of the population. However, despite the leading countries of the world, regional entrepreneurship in Crimea suffers from regulatory problems.

This is explained by:

  • state regulation of entrepreneurship is sometimes burdensome for entrepreneurial formations;
  • the activities of business entities in the region have a rather low social responsibility and environmental awareness.

This requires the implementation of measures aimed at achieving the alignment of the interests of entrepreneurs and representatives of state institutions, to avoid manifestations of shadowing of business, the spread of corruption when obtaining permits, as well as the implementation of European norms and standards of doing business.

In the course of the study, the key tools for the development of entrepreneurial activity in the region were identified. The formation and development of entrepreneurial activity in Crimea do not have significant economic and social advantages in comparison with the existing principles of the development of entrepreneurial formations in other regions of Russia. Initially, this is because the fact that the implementation of an entrepreneurial initiative is associated not only with the employment of peasants, but also contributes to self-realization and the achievement of strategic goals.


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Economics, social trends, sustainability, modern society, behavioural sciences, education

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Ergin, S. M., Trusevich, E. V., Cherutova, M. I., & Kopaenko, I. V. (2021). Socio-Economic Determinants Of Changes In The Regional Entrepreneurship Environment Development. In I. V. Kovalev, A. A. Voroshilova, & A. S. Budagov (Eds.), Economic and Social Trends for Sustainability of Modern Society (ICEST-II 2021), vol 116. European Proceedings of Social and Behavioural Sciences (pp. 287-300). European Publisher.