BARRIERS TO ENTREPRENEURSHIP

Entrepreneurship can be described as action to run a business. But the actual situation is far too often in a way that the entrepreneur is actually working for customer under customer’s guidance and to customer’s price. This was actually the case when harvesting businesses start. The “profit” of the “business” was often the “right” to work longer than others so that the “entrepreneur” could pay the machine. Real entrepreneurship includes the risk for the loosing the invested capital, but also the

right to choose the ways what and how to operate, and also the demand to look all the time for new fields of activities. When starting the harvesting enterprise, the entrepreneur should check and calculate whether there is really the right time and place for running a profitable business and that the customers allow the entrepreneur to take independent decisions.

The society and especially the EU is interested to promote free competition, based on the optimistic idea that competition brings forth the most economical and effective solutions to solve different tasks. Each nation and even smaller areas have own rules, traditions and habits. They may prevent or hinder competition. The society is looking and trying to remove the barriers to entrepreneurship even in harvesting business.

The barriers to entrepreneurship can be barriers to enter (or go out of) the business, barriers to run the business or even barriers in entrepreneurial thinking.

Outstanding examples for barriers are the lack of capital to buy machines, lack of customer relationships or lack of enterprises´ recognition. Secondary is for example lack of mechanical or biological skills or lack of certificates. Thirdly there are traditional and outdated ways to operate, or the thinking that the customers know better how to work than entrepreneur.

To start a mechanised harvesting business one has to develop diverse know-how, purchase machines, hire skilful operators and build up a work organisation scheme. The need for capital and know-how is big compared to prospective profits.

The capital value of a company is small, so if one will back off from business, he gets only the second hand value of the machines. Therefore, the poor capital value is even a barrier to go out of the business. Usually one can not sell contracts forward, because the customer may demand experience, reliability, even certificates from new entrepreneurs. Entrepreneurs who are not making profit and those who are old can have difficulties to end the business, because they would loose all their investments.

Customers’ negotiating power is often overwhelming compared to entrepreneurs´.

This may create many kinds of barriers to come or stay in business. The common tendering systems to choose harvesting contractors contain no special barriers to come into business. Keeping up in competition may restrict enterprise’s resources to develop the business further, due to a lack of profit.

In the mutual agreement system which is common in Finland, customers can set compulsory requirements and thus affect the operating possibilities of the

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entrepreneur. In Finland the three biggest industry customers have each their own data processing and transfer systems, which have to be installed in machines. Customers can require certain types of machines or scaling systems. Thus working for another one of these three is impossible with the same machine. Earlier, customers preferred enterprises with one harvester-forwarder-system, but today larger enterprises are favoured. Customers sometimes arrange courses for enterprises and their operators, for instance on quality management systems and environmental protection. Lack of this knowledge may be a barrier to get an agreement, but on the other hand the courses can also be useful in servicing other customers.

Polish experiences differ as the State Forests are the main and practically the only one customer. So it is obvious that majority of barriers to entrepreneurship have their origin in relations between forestry contractors and forest officers. For many years, practically from the beginning of privatisation processes in Polish forestry, State Forests favoured small enterprises, benefiting from a dominating position. Now this attitude is starting to change. More and more forest district managers perceive them as business partners. It is clearly shown in that public procurement specifications prefer better equipped and knowledgeable enterprises.

The harvesting market in Romania is open. Problems to stay in business are bigger than to enter the market. Besides the low profits, poor credit systems do not encourage to invest in new technology. The labour force is old and poorly trained.

Many problems lie in the procedure, where the contractors buy the wood and sell wood assortments to mills. The price variation in market changes may plunder the profit. There is also risk to buy trees, which have hidden defects, which drop the value of wood assortments.

Inside the EU many tax and labour legislation regulations are or will be harmonised, so it should be easy to work in another country as an entrepreneur. The storm damages in Germany and in France in 1990s and recently in Sweden 2005 have shown the need to get fast extra capacity for harvesting over the borderlines.

There are however many difficulties, we may call them barriers, for working in another country. The forestry itself is quite a traditional business with old fashioned trade practises, contents of agreement, scaling and grading systems and other traditions.

When the round wood import and export volumes grow, it would be profitable to harmonise at least the most common scaling systems.

Table 7. Categories of barriers to entrepreneurship.

Barriers Characteristic

Structural barriers Lack of capital to buy machines.

Lack of customer relationships.

Low profitability.

Lack of enterprises´ recognition.

Rapid changes of market conditions.

Individual barriers Lack of mechanical or biological skills.

Lack of business skills.

Traditional and outdated ways to operate or the thinking that the customers’ know better on how to work than entrepreneur.

Formal regulations Lack of certificates.

Hard to get credits.

Laws and regulations in the different countries.