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Small businesses are the break-out possibility of the North-Hungarian region

Gergely, Sándor

Keywords: small businesses, competitiveness, cluster, network economy.

Summary findings, conclusions, recommendations

The area of the North-Hungarian Region is 13,429 km2, which is 14.4% of the country’s territory. In terms of area and population the region lies in fourth place in . The region is remarkable for the beauty of its landscapes, which are rich in untouched natural values with its significant ecological potential. Among its natural treasures we can find medicinal, thermal and mineral water springs. The wine pro- ducing regions of and Gyöngyös are well known in Europe, while is world famous. Significant problems in the North-Hungarian Region are unemployment ex- ceeding the national average, caused by adaptation and modernisation crises, low- level employment, and the concentrated appearance of underdeveloped settlements and population groups. As small businesses represent an outstanding employment ratio in the region - about 70% - socio-economic development is not possible without increasing the num- ber and competitiveness of small businesses. In our research we looked for an ans- wer to what the necessary conditions are for this. Recommendations for increasing the competitiveness of small businesses in the North-Hungarian Region: • Small businesses need to improve in the area of supplier activity, quality, infor- mation and confidence. • Small businesses must improve precision, supplier discipline and quality. • When establishing co-operation and partnership relations the greatest preven- tative factor is lack of confidence. Most of the businesses are afraid of transferring their own knowledge and information; they are ready to accept every benefit of co- operation but without its risks. • Higher-level co-operation will be necessary among small businesses, supporting organisations, chambers and municipalities. • Efficient support must be given to the participation of small businesses in the network economy and to the establishment of small businesses’ common efforts. • Common large-scale purchasing and selling by small businesses must be effici- ently supported. • The changing of small business/managerial mentality needs to be supported in the following areas: - problem solving ability - business sense - high-level professional knowledge - organising ability - practise-focusing - high-level communication skills gazdálkodás • Vol. 52. • Special edition No. 22 51

- managerial knowledge - co-operation ability - risk taking ability - analysing ability - idea representing ability - computer skills • Efficient, target-oriented training and extension training, needs to be organised for managers and employees of small businesses. • Transparent, clear legal frameworks must be established. • Tax burdens should be reduced, especially those exerted on labour. • Efficient capital search and credit programmes are needed for small businesses. • An efficient small business relations system needs to be created with research sites and higher-education institutes using the latest R&D results. • Efficient support must be given to small businesses to access new markets. • The establishment and efficient operation of the Regional Small Businesses Sup- port System (REKTÁR), planned and worked out by ourselves, would basically help with small business competitiveness. REKTÁR, overseen by small businesses, would provide help at each stage of small business activity in the field of business establish- ment, strategy development, business development, solving technical tasks, training and extension training, crisis management and winding up.

1. Introduction of North- ches of industry were collapsed and in- Hungarian Region dustrial production was declined. Howe- ver, suffering large losses, it could preser- The North-Hungarian Region is situa- ve its consolidated large company-nature ted in the north-eastern part of Hungary by help of foreign investments; its machi- and covers the counties of Borsod-Abaúj- ne- and chemical industry characteristics. Zemplén, and Nógrád. Area of the Penetration of foreign capital transfor- region is 13,429 km2, which is 14.4% of ming the economic structure has not re- the territory of the country. Considering ached the critical mass yet, however since the area and population the region has 2002, along the motorway being const- the fourth position in Hungary. Based on ructed, in the region of , Eger and geographic and natural endowments of in the western regions situated nearest to North Hungary this is one of the most vari- Middle-Hungary the economic develop- ous regions of the country, which appears ment has commenced. with prodigy of beauty of its landscapes to Share of the agriculture in the gross be rich in untouched natural values. The region is rich in minerals for buil- added value is average. ding industry purpose and in lignite sites; In this region the forest coverage is hig- has significant ecological potential and hest and also ratio of grass is high. Agri- among its natural treasures we can find cultural land endowements – mainly de- medicinal water-, thermal water- and mi- pending on the terrain – are very various. neral water springs. Wine producion and fruit growing of the Economy of the region was primarily de- region are considerable. Wine production termined by heavy industry and mining. region of Tokaj is world famous and ones of After social transformation these bran- Eger and Gyöngyös are known in Europe. 52

Tourism attractions of the region are nesses employing less than 50 persons are given by varying natural endowments, considered small businesses.) cultural values, ethnographic traditions, Because the small businesses represent medicinal waters, famous grapes and wine a dominant role, about 70% in employe- traditions, culture. ment of the region as well, therefore the Significant problems of the region are social-economic rising cannot be possib- unemployement exceeding national ave- le without improvement of competitive- rage, low-level employement, concentra- ness of small businesses. On our research ted appearance of the falling behind sett- we looked for an answer wether what con- ditions are for it. lements and population groups. To help their raise – similar like nationwide – no 2. Economy of North-Hungarian long-term efficient and sustainable mea- sures and strategies have been made. Region The role of higher education is determi- In the North-Hungarian Region 1,493 ning in the region. There are significant billion HUF Gross Domestic Product was research-development capacities availab- produced in 2003, it is 8.1% of the natio- le, however their density also stays below nal average. Share of the region was lower the average of the six rural regions. In our than five years before, it means it fell back research we were wonder too, wether this again from 2001 in the order of the regions capacity is used by small-and medium size to seventh, last position. Measured in 2003 businesses. (In the followings the busi- at GDP purchase power parity per person

Table 1 Area distribution of Gross Domestic Product (GDP), North-Hungarian counties, seven regions and Hungary, 2002

GDP per person in Area distribution Order of counties GDP per person in percent of national Description of GDP and regions based on thousand HUF average % GDP per person %

Borsod-Abaúj- 4.6 1,025 62 17. Zemplén County

Heves County 2.4 1,209 73 12.

Nógrád County 1.2 897 54 19.

North-Hungary 8.1 1,050 64 7.

North-Plain 9.9 1,062 64 6.

South-Plain 9.3 1,136 69 5.

Middle-Hungary 45.6 2,701 164 1.

Middle-Transdanubia 9.7 1,462 89 3.

West-Transdanubia 10.2 1,703 103 2.

South-Transdanubia 7.1 1,204 73 4.

Nationwide 100.0 1,648 100 - gazdálkodás • Vol. 52. • Special edition No. 22 53

(PPS) it was 8,198 PPS in Northern-Hun- and permanently connected to each other. gary, 38.3% of average of 25 member sta- Since the last third of the 20th century the tes of EU. information has fulfilled more and more Unfavourite condition of the North- role in the economies, it is more and more Hungarian Region is indicated by the fact becoming a resource, therefore the role of that it is last in the figure of operating bu- those institutes is increasing, which make sinesses per 1000 inhabitants among the possible fast accessibility of useful infor- regions, it means in the business density. mation. During our resarches we conclu- ded that the greatest spare of the regional 3. Small businesses and network economic development is establishment economy and efficient running of basic elements of the network economy at the beginning of The network economy is such a comp- the 21st century (Gergely – Nagy, 2006). lex structure, in which the players of bu- In the following figure the elements of siness, public- and civil sphere are closely network economy are shown. Figure 1 Elements of network economy

Networking, co-operation in clusters is One key element of organising networks much more important to small busines- is multinational companies operating on ses than to large companies. Competiti- international market and domestic large veness of small business is determined by companies, which can attract and enforce the fact that how way and how fast these ones can react to challenges set by market- the local small businesses. place and large companies. How these can meet requirements of suppliers and sub- 3.1. Industrial parks contractors. Appearance of competitors of The industrial parks are important or- huge capital capacity forces the small busi- nesses to stay in the competition and to get ganising scenes of capital attraction, mo- competition benefits through establishing dern industry, logisztics and services and strategic alliances and networks. therefore their establishment and filling 54 up have basic importance in term of mo- rial parks operated in the region in 2006 dernisation of a given region. from 179 ones of the country (of which 14 Considering characteristics of the in- in Borsod-Abaúj-Zemplén, 7 in Heves, 4 dustrial parks the situation of North-Hun- in Nógrád), it is the fifth position, but in gary is medium in comparison with other term of number of the employees it is third regions of the country, because 25 indust- among the regions with the figure 23,705.

Figure 2 Industrial parks in the North-Hungarian Region

Industrial parks in the North-Hungarian Region

Borsod-Abaúj-Zemplén Nógrád County County • Abasár Industrial • Borsodchem Industrial Park (Abasár) Park () • Bélapátfalva • Salgótarján Industrial Park (Salgótarján) • Diósgyőr (DIGÉP) Industrial Industrial Park Park (Miskolc) (Bélapátfalva) • Bátonyterenye Industrial Park (Bátonyterenye) • Industrial Park (Encs) • Eger Industrial Park (Eger) • Rétság Industrial Park • Kazincbarcika Industrial (Rétság) Park (Kazincbarcika) • Gyöngyös Industrial Park (Gyöngyös) • Balassagyarmat Industrial • Mezőkövesd Industrial Park Park (Balassagyarmat) (Mezőkövesd) • Industrial Park (Hatvan) • Miskolc-Alsózsolca Industrial Park (Alsózsolca) • Heves Industrial Park (Heves) • Ózd Industrial Park (Ózd) • Petőfibánya • Sajóbábony Chemical Industrial Park Industry Park (Sajóbábony) (Petőfibánya) • Sátoraljaújhely Industrial Park (Sátoraljaújhely) • Industrial Park (Szerencs) • Szikszó Industrial Park (Szikszó) • Tiszaújváros Industrial Park (Tiszaújváros) • Felsőzsolca Industrial Zone (Felsőzsolca) • Miskolc Industrial Park (Miskolc) gazdálkodás • Vol. 52. • Special edition No. 22 55

In the North-Hungarian Region 533 bu- incubator houses are operating, which are sinesses operate in industrial parks, which members of Federation of Enterprising is the second position among the regions. Incubators From 28 sub-regions of the region there • Service Incubator House of Regional are industrial parks in 18 ones. Their num- Enterprise Development Foundation of ber is outstandingly high in the sub-reg- Nógrád County, Salgótarján City; ion of Miskolc (5), but in the sub-regions of • Enterprising House of Sátoraljaújhely, Kazincbarcika, Hatvan and Gyöngyös 2-2 industrial parks were established as well. Sátoraljaújhely City; The number of businesses operating in in- • Enterprising Centre and Incubator Fo- dustrial parks of the region indicates quite undation of Ózd, Ózd City; large difference, since there is place where • Inntek Co. Centre of Innovation and only 9 companies works, while the maxi- Technology, Eger City. mum reaches 47. Based on our researches Incubator houses were established only it was concluded: an industrial park can in a few locations of the region, but their only fulfil its economy development role services are unvaluable to small busines- when it helps activity of the small busines- ses and beginners, both in reduction of ses through its services and helps them to their costs, getting information, networ- be concentrated in the same location and to make co-operations. king and obtaining information to their in- novation activity. 3.2. Enterprising Incubator Houses 3.3. Logistic Service Centres Based on the term of Federation of Incu- bators „ an enterprising incubator (house) A Logistic Service Centre (LSZK) is a is such a combination of industrial and ser- totality of such businesses, organisations vice facilities established in a plant, which belonging to service sector and settled in is primarily able to provide the beginners a closed plant, which are built on a com- in business with necessary provisions for mon infrastructure system, information production of modern goods and applica- network. In their activity these ones are tion of latest technologies at highest level”. connected to purchasing, selling, goods The incubator houses do not give financi- al support to small businesses and rather – and information transfer – besides ser- provide them with beneficial services at vices of goods traffic centres- via producti- much lower costs than ones of marketpla- on-technological elements, processes in a ce. In the North-Hungarian Region four manner of value increasing.

Table 2 Certified regional logistic centres of the North-Hungarian Region, 2007

Company name Facility under the below address Certified title

Regional Logistic Service ÁTI Depo Closed Inc. 6. Repülőtér str. Miskolc 3526 Centre Trans-Sped Logistic Service Regional Logistic Service TVK-Plant,Tiszaújváros, 3581 Centre Co.Ltd. Centre

Source: www.mlszksz.hu 56

3.4. Regional innovation transfer • Bioenergetic Innovation Cluster centres (Gyöngyös) These clusters were initiated by orga- Economic competitiveness can signifi- nisations dealing with economy develop- cantly be increased by establishment, ef- ment, education, not by the businesses ficient operation of regional innovation themselves, however it is true no any clus- transfer centres, because these ones can ter can be made without businesses con- organise connection of industrial parks, sisted of its core. Of course, the non-pro- professional organisations and research fit institutions of area-and economic de- workshops of the region to innovation pro- velopment can have a catalyst role in this cess at region level. Within the frame of field. it an information system of technical de- velopment can be created and a databank 4. Large companies in can be operated on research-development the North-Hungarian Region activity of the region. Also, a network based establishment and later operation of regional business-and innovation centres 4.1. Research hypothesis can be supported in this way. In Hunga- ry the establishment of innovation trans- According to our research hypothesis by fer centres is planned in a few large uni- studying structure, strategy and motiva- versity cities. tion of the large companies settled in the In the North-Hungarian Region a con- North-Hungarian Region the small com- sortiun deals with establishing innovati- panies will be able to adapt to requirements on system, which is led by the North-Hun- of the large companies and join more easily garian Regional Innovation Agency. The the system of corporate networks and their members are chance of becoming a permanent supplier • North-Hungarian Regional Innovati- will be improved. on Agency; • Innovation and Technology Transfer 4.2. Purpose, method Centre of Miskolc University (Miskolc); and results of the research • Public Foundation of Applied Research A questionaire aided evaluation was of Zoltán Bay (Miskolc); prepared in 2006 on the situation of large • Innocenter Innovation Transfer Cent- companies operating in the North-Hun- re Co. (Miskolc); garian Region, with help of which the si- • INNTEK Co. (Eger). tuation, management and operating cha- 3.5. Clusters racteristics of the large companies of the region were exploited, and also co-opera- Based on our studies it was concluded tion and competition attitudes, mentality that the level of networking in the North- of the top managers and finally their look Hungarian Region is behind the other forward. Also, industrial branch relati- regions of the country, because the clus- ons, ownership structure, network relati- ters were recently made. ons of the large companies working in the • Carpaths Supplier Cluster (KBK concerned areas were evaluated. The local – Sátoraljaújhely) roots of a given large company were invest- • North-Hungarian Automotive Cluster igated and also the areas, in which co-ope- (NOHAC – Miskolc) ration can be found with other organisa- gazdálkodás • Vol. 52. • Special edition No. 22 57 tions, with special consideration to small gure of the registered large companies in businesses. Hungary. When selecting large companies we Of the 88 large companies 83 ones were contacted via questionnaire sent by post started from the fact that 88 profit-ori- and also the managers of the large com- ented companies operated in the North- panies in person in order to make verbal Hungarian Region in accordance with questionnaire evaluation. data of the Central Office of Statistics Summary of the most important re- (KSH) (2005), which is 9.3% of total fi- sults of the research can be seen below.

Figure 3 Aspects of selecting suppliers

In opinion of managers of the large liable delivery (7 companies), already companies the most important crite- existing relations (3) and vicinity (2). ria set against the suppliers are con- Consequently, small businesses can formity with quality requirements (12 primarily get supplier’ position with companies), price (11 companies), re- improving quality. Figure 4 Success factors of long-term supplier’s relations

Mutural problem solving

Flexible adaptation of supplier

Average deviation

Quality of communication

Average Spread

Efficlent co-ordination

Confidence 58

In accordance with the investigated xibility of the supplier, while efficient large companies the success of long- co-ordination and quality of communi- term supplier’s relations is mainly inf- cation only in smaller extent. luenced by confidence, accuracy and fle- Figure 5 Internal corporate factors mainly determining competitiveness

Product quality and technical backgro- was such opinion that majority of them is und, also market knowledge and marke- against the multinational companies. ting are considered by the large companies According to 29% of the replies only as three most important internal corpora- one organisation could support the small te factors, while connection to market or- businesses in most efficient way, furt- ganisations is not seen important, which is her 45% supposes to do it with only a few allowed by size of the company. organisations. In opinion of the managers of the large companies the mostly missing factors for 5. Competitiveness more efficient supplier activity of the small of small businesses in companies are conformity with quali- the North-Hungarian Region ty requirements (22 companies), accura- cy and discipline (14), co-operation abili- 5.1. Secondary research ty (11), and development of machinery (8). These factors shall be changed by the small During our researches aimed at exploi- companies in order to be capable to meet tation of competitiveness of small busines- supplier’s requirements of the large com- ses of the North-Hungarian Region the gre- panies long-term as well. Opinions about atest difficulty of secondary research was co-operation ability of the Hungarian bu- lack of data and impenetrability between sinesses show very mixed picture. In their data. Today KSH and APEH can provide opinions the businesses are only able to co- data in Hungary about small businesses. operate if their interests are same, get in But at both authorities the employement emergency or enjoy benefits from it. There data are considered among small busines- gazdálkodás • Vol. 52. • Special edition No. 22 59 ses limiting criteria. This causes distors- if it is not possible then how their operati- ion of data. Both KSH and APEH can pro- on can be adjusted? Then, how can it be to cess data, maximum at sub-regional level work out programs to them? and only from 2000. We note that it is una- The following table contains most im- voidable to arrange records of small busi- portant data of the small businesses in the nesses because without it any authentic in- North-Hungarian Region for 2004 and formation cannot be received about them, 2005.

Table 3 More important data of small businesses of the North-Hungarian Region by corporate size, 2004-2005 (million HUF)

Profit Number Number Net Profit Own Registe- under Regio total of Export of emp- turnover befor taxes capital red capital balance- business loyees sheet

Small businesses

Year 2004. 21,917 987,540 73,059 39,268 74,575 280,723 102,540 130,637

Year 2005. 22,580 1,093,284 71,155 47,660 77,317 337,624 136,942 22,757

Of which: Micro-businesses

Year 2004. 20,198 500,700 30,223 21,999 36,211 137,342 60,686 67,456

Year 2005. 21,013 552,289 30,953 24,202 36,754 187,223 91,963 10,842

Medium size businesses

Year 2004. 401 514,877 139,264 20,133 47,296 230,852 107,214 57,680

Year 2005. 393 580,494 177,523 30,856 40,332 224,990 108,637 6,209

Total

Year 2004. 22,318 1,502,417 212,323 59,401 121,871 511,575 209,754 188,317

Year 2005. 22,973 1,673,778 248,678 78,516 117,649 562,614 245,579 28,966

Source: APEH, calculated from tax reports

Comparing the two years the most figu- then the value of 2005 was only 10.7% of res show increasing tendency. But, there one of 2004. are significant exceptions as well. Among We can state based on data of the above table that – in case of lower size categories these, one most important fact that pro- – increase of number of the employed pe- fit margin has reduced in each size cate- ople is necessary to higher efficiency, while gory, its greatest extent was in case of the the medium size businesses can increase medium size businesses, but when consi- their turnover without it and perhaps their dering total figure of the small businesses export as well. 60

Figure 6 Ratio of small businesses in the North-Hungarian Region, 2005 (%)

Mikro Small Medium

Source: own plotting based on APEH data

5.2. Primary research 5.4. Content and method of research Negative experience of primary resear- ch made among small-and medium busi- During researches our goal was to exp- nesses is low-level responding ability. Ma- loit qualification, inventory of knowledge, jority of small businesses did not see im- getting sources of information, their ac- portant to take part in such a research cessability, efficiency factors of informa- program, which aims at providing prac- tion process-usage, characteristics of ope- tical recommendations. In personal con- ration, tendencies of changes, co-operati- tact a responding ratio of 30% was achi- on and competition attitudes of the small eved, which could be seen good because businesses, mentality and looking forward our questionnaire was detailed and deep. of the small businesses of the North-Hun- garian Region. During research the primary research of Similar methods were used to study small businesses consisted of two parts. In characteristics of environment created the first part the financial and employment by local, sub-regional and regional play- data were estimated via the sent question- ers and also their influence on operation naire, while in the second part the questi- of small businesses; emphasizing possi- onnairing was done in person. bilities and conditions of reinforcing the supporting elements. Special considerati- 5.3. Sampling on was put on finding out wether what re- sources were used to capital and operation Number of small businesses to be in- of the small busineses. vestigated was determined proportionally During primary research the following to those operating in the counties. Numer aspects were focused on: of small businesses operated in the North- • Innovation Hungarian Region in 2004 was 29.262, of • Supply in, working in which in Heves County 7.733, in Borsod- • Network economy Abaúj-Zemplén County 17.189 and in Nóg- • Strategy rád County 4.340. 1% of small businesses • Mentality of managers found in the region, 300 businesses were As mentioned earlier the employment selected to study in details. and financial data were asked in the writ- gazdálkodás • Vol. 52. • Special edition No. 22 61 ten questionnair, while the structure 40% of the small businesses have deve- of questionnair filled in person was the loped their business in the past 3 years, following: which is not a good ratio at all. • Basic data It was found out in the research that only • Financial data 7% is the ration of the small businesses ta- • Investments, developments, innovation king part in E-commerce. However, this • Network economy, supplier-, Business opportunity would one of the most seri- relations ous purchasing-selling benefits for small • Human resources management, businesses. trainings The asked small businesses indicated • Mentality of manager mainly own sources as investment resour- • Business environment ces, while credit provided by financial ins- • Strategy titutes in smaller extent. Spread of state • European Union subsidies is proved by the fact that domes- • Environment protection tic state subsidies are followed at third po- • Energy awareness sition and finally the European Union re- sources. However, the risk capital pro- 5.5. Results of research viders said to be as one basic resources provider for the small businesses are only Distribution of small businesses invest- ranked at the end. 32% of the businesses igated in the North-Hungarian Region do not plan any investment in the coming by foundation year shows that 58% of the 3 years, main reason of which is lack of businesses was found between 1987 and capital. 1996. Between 1997 and 2006 the 34% of More than half of the small businesses the small businesses was established. mean innovation important, but 74% do Most of the investigated small busines- not perform innovation activity at all. ses have been existing for and more than Concerning network economy 35 questi- 10 years. ons were included in the questionnaire.

Table 4 Distribution of opinions on network economy at small businesses of the North-Hungarian Region

Taking part Means important Does not mean Does not know Description (%) (%) important (%) (%)

Cluster 0 13 24 51

Co-operation 23 33 18 11

Co-operative 2 23 51 10

Industrial Park 9 40 29 6

Incubator house 1 20 41 26

Supplies 23 49 12 4

Sorting out 10 18 44 13 62

The much we have learned that the The 59% of the asked small business small businesses think small importan- managers voted for optimising approach. ce of various possibilities of common ef- It was concluded based on the answers forts. However, without these ones it can- given by the questionnaire for question not be hoped to be principal improvement group of the business environment that the in competitiveness. small businesses hardly deal with analy- Majority of businesses do not seem the sing their environment and possibilities. cluster important and do not know it at all. This fact was connected with the situation This is same for incubator houses. Also, no that there were micro-businesses in great great importance is seen for co-operatives extent among the asked ones, where the and sorting out. However, the co-operati- main goal was rather to exist and not to ex- on, industrial park and supplies are men- pand at all. tioned useful. The 82% of the small businesses ranked As shown in our researches in the North- the taxation system at grade one/two. The Hungarian Region, the greatest problem current taxation sytem mainly reduces of today is that the small businesses even competitiveness of small businesses of the do not know their possibilities. One of the North-Hungarian Region. The tax burden most important goals is to change this for small businesses is high in both regio- nal and European context. Especially, the situation. very complicated taxation system, annual- Some hope is seen that the small busi- ly made hectic changes on taxation system nesses not only think supplies important and outstanding high level of tax burden but they also take part in it in great extent, after labour, which are unfavourite by the it is 49%. small businesses. Concerning the manager’s mentality the Important purpose of our research was questionnair contained a combined ques- to estimate wether what environmental tion, which invited the manager’s attribu- factors are meant most important by the tes. The order of manager’s attributes set small businesses in their operation. We re- up by them is the following: ceived the following sequence: 1. Problem solving ability 1. Good relations with customers 2. Business sense 2. Domestic market 3. High-level professional knowledge 3. Financial resources 4. Ability of organising 4. Purchasing opportunities 5. Practise – oriented 5. Good relations with suppliers 6. Developed communication skills 6. Economic policy 7. Managerial knowledge 7. Foreign market 8. Co-operation ability 8. EU market 9. Risk taking ability The 48% of the asked small businesses 10. Analysing skills already required credit. Among these ones 11. Ability of representing ideas the most popular was the Széchenyi-card, 12. Computer skills followed by Micro Credit. Managerial style of the managers was The small businesses set up the follo- summarised in four models: wing order depending on what organisati- • Optimising approach on supported them most efficiently: • Elementery solutions 1. Interest representation organisations • Prestige principle 2. Ministries • Intuitive solutions 3. Financial institutes gazdálkodás • Vol. 52. • Special edition No. 22 63

4. Mainly state-maintained small busi- and role in development of the small busi- ness oriented advisory nesses. Based on it and in agreement with 5. Industrial parks other sub-research results such a strategy 6. Sub-regional development offices was elaborated, which is able to help deve- 7. Municipalities lopment, co-operation skills improvement 8. Federations and increasing competitiveness of the 9. Innovation organisations small businesses working in the North- 10. Colleges, universities Hungarian Region in efficient manner. 11. Inkubator houses 12. Research institutes 6.3. Sampling 13. Foundations 14. Business angels The researching principal mass was 15. Civil organisation consisted of mayors, sub-regional exper- The 61% of 82 small businesses invol- ts, small businesses supporting organi- ved in the questionnaire prepare strategy sations and higher-education institutes for some time, which can be considered a of the North-Hungarian Region. Because good ratio. The 30% of the answering busi- of large number of settlements not all the nesses do not prepare strategy for any pe- mayors were asked, but they were selected riod of time. It can be concluded that ma- based on the number of inhabitants of the king strategy is independent from size of settlemens. the company. 6.4. Structure of the questionnaire

6. Small business supporting Verbal and written questionnaire con- organisations in the North- tained the following subjects: Hungarian Region 1. Basic data 2. Managerial attributes 3. Management style, mentality, 6.1. Research hypothesis attitude Recognition and increasing efficincy of 4. Environment awareness activity of the organisations, mayors and 5. Innovation sub-regional experts supporting the small 6. Small businesses businesses operating in the North-Hunga- In order to make process of the ques- rian Region provide the small businesses tionnaire easy the method of alternative with ability of more efficient resources uti- answer option and ranking of importance lisation and improvement of their compe- and qualification was also used within the titiveness and co-operation skills. closed question group. A few open questi- ons were asked as well. 6.2. Purpose of the research In Hungary – and of course also in the North-Hungarian Region – the small bu- Purpose of the research was – through siness development supporting instituti- estimation of elements of the small busi- onal system is extensive, however its effi- nesses supporting organisations – to know ciency, goal-focusing ability and service- activity of the organisations influencing, oriented activity are not perfect at all. If supporting the operation and competitive- the supporting organisations worked in a ness of the small businesses and also their sub-regional structure then efficiency of services provided to the small businesses their activity would be much higher. 64

7. Regional small business businesses operated and to be establis- supporting system – REKTÁR hed in the North-Hungarian Region, con- sequently income of the population of the 7.1. Substance of the development region will be stabilised and/or increase as well. REKTÁR is serving professional and bu- For small businesses found in the North- siness interests of industrial and service Hungarian Region to provide basic, gene- small businesses in order to get socially ral advisory and specific advisory con- recognised and reasonable income from cerning production of a given product or their successful activity supported by re- service to be made by REKTÁR. commendations. Activity of REKTÁR ef- REKTÁR helps organising of indust- ficiently contributes to sustainable imp- rial clusters fulfilling important role in rovement of competitiveness of the small the North-Hungarian Region and Eu- businesses. Through its activity REKTÁR ropean Union and of other production, increases employment and living stan- service clusters, industrial co-operati- dards in the North-Hungarian Region on networks, other formations of network economy, service co-operations, purcha- and improves life quality of people living sing-selling associations, machine utili- there. sation associations, marketing networks 7.2. Purpose and activities of interests, vertical and horizontal integ- of REKTÁR rations, industrial parks, technological in- cubator houses, logistic service centres, Its purpose is to establish an indepen- regional innovation transfer centres; and dent advisory organisation, main interest efficiently supports their successful opera- of which is to increase income of the small tion with its activity.

Figure 7 Most important activities of REKTÁR

• Advisory • Training – small businesses • Extension training – municipal • Small business softver-management – technical • Organising research co-operations • Company foundation • Organising cluster with participation of - To start business small businesses - Not to start, giving reasons • Inviting small businesses in industrial park - Goal, product, competition analysis • Small business participation in logistic - Legal frames service centres - Finansing • Small business participation in incubator - First business plan houses • Development • Small business participation in regional • Company strategy innovation transfer centres • Company management • Knowledge centre • Occasional advisory • Basic services to small businesses • Gathering small business information, • Charged services process and forward to decision makers – corporate strategy • Recommendations to change regulations – investment feasibility study gazdálkodás • Vol. 52. • Special edition No. 22 65

7.3. Tasks of REKTÁR in different lowing figure there are different tasks at situations of small businesses time of foundation, operation, growth, crisis and winding up. REKTÁR shall support small busines- ses in each situation. As shown in the fol-

Figure 8 Tasks of REKTÁR in different life situations of the small businesses

FOUNDATION OPERATION

• Business plan • Operation management • Marketing advisory • Selecting legal frames • Technical advisory • Capital- and credit searching • Legal advisory • To support first steps • Applications • Training, extension training • Training, extension training

GROWTH • Development plan • Capital – and credit search • Applications • Change over advisory (management routine, nem organisation, style) • Planning the needed transformation • Planning growth monitoring, realisation • Planning the needed corrections, realisation • Training, exension training

CRISIS WINDING UP • Crisis recognition • Guiding out from market • Capital- and credit • Loss minimasing searching • Saving and selling properties generated • Applications on operation of small business • Crisis management • Value transfer to other business (process, • Psychological support product, market, business culture) • Training, extension • Psychological support training • Training, extension training

7.4. Financing of REKTÁR ness and moderation of disadvantageous situation of the North-Hungarian Region. It is worth to establish REKTÁR from REKTÁR collects incomes through acti- tax incomes and European Union funds vity of the advisor done at 20–25% lower because its progressive role to be fulfilled cost than usual, market price is. Compo- in modernisation, increase of competitive- nents of finacing are the Hungarian State, 66

EU funds and own incomes of REKTÁR. lated with GDP of 20,429 billion HUF in Their distribution is in the first year 40- the North-Hungarian Region in 2004 – 60-0%, which would gradually reach – du- the annual growth can extend from 30.64 ring 10 years – the income ratio 20-40- billion HUF up to 61.29 billion HUF. 40%, it means own service income of 40%. In the increase of employment the REK- TÁR can have role in the most disadvan- 7.5. Operational results of REKTÁR tageous sub-regions, regions and settle- in the North-Hungarian Region ments of the North-Hungarian Region by helping activity of there operating munic- From the second year the small busines- ipalities, small businesses through its ad- ses helped by REKTÁR at a more efficient visory and other services. Its job maintai- operational level can generate a GDP grow- ning and new jobs creating effect can be es- th of 0.15–0.30 % in the economy of North- timated between 3500 and 5500 annually, Hungarian Region. It means that – calcu- considering the most careful estimation.

References

(1) Buzás, N. – Lengyel, I. (ed., 2002): Development possibilities of Industrial parks: Regional Economy Deve- lopment, Innovation Processes and Clusters. SZTE GTK, JATEPRess, Szeged, 125–153. pp. – (2) Enright, M. J. – Fowcs-Williams, I. (2001): Local Partnership, Clusters and SME Globalization. In Enhancing SME Competi- tiveness. The OECD Bologna Ministerial Conference. OECD, Paris, 115–150. pp. – (3) Gergely, S. (1990): Adviso- ry Structure of the Hungarian Agriculture of Mixed Ownership. Management, MÉM, , 1990. IX. – (4) Gergely, S. (1990): Barriers, Possibilities and Direction of Further Development in the Karancs System of Inte- rests and Undertaking, Manual of Businesses within the Agricultural Company, MÜSZI, Budapest – (5) Gergely, S. (1996): Specific Formation of Co-operative Integration: Integration of Savings Co-operatives. Management, GATE „Rudolf Fleischmann” Agricultural Research Institute, Kompolt, 1996. V. – (6) Gergely, S. (1996): Liget- Hungary Program. Liget-Hungary Nation-wide Association, Budapest – (7) Gergely, S. – Magda, S. (2002): Re- commendations for Establishment of Agricultural Buying-up Guarantee Fund (MEFA). Management Volume XLVI./ 5. 68–74. pp., Mátra-Tan Research-Training Co., Gyöngyös – (8) Gergely, S. – Nagy, Zs. (2006): Treasure of . Szaktudás Publishing House, Budapest, 212 p. – (9) Gergely, S. (2006): Small Businesses for Rural De- velopment. Szaktudás Publishing House, Budapest, 241 p. – (10) Gergely, S. (2007): Regional Small Businesses Supporting System (REKTÁR). Szaktudás Publishing House, Budapest, 292. p. – (11) Gergely, S. (2007): Conditi- on and Possibilities of Small Businesses in the North-Hungarian Region. Hungarian Regional Scientific Associa- tion. V. General Meeting. Miskolc. 25-26. 10. 2007. – () Lengyel, L. (2001): Industrial branch and Regional Clus- ters: Main Questions of their Standardisation, Spatial Location and Development. Managerial Sciences, 11. 19– 43. pp. – (12) Porter, M.E. (2001): Clusters of Innovation: Regional Foundations of U.S. Competitiveness. Council of Competitiveness, Washington – () J. Rechnitzer, J. (1998): Area Strategies. Dialóg Campus Publisher, Buda- pest–Pécs – (13) www.ksh.hu – (14) Ministry of Economics and Transportation: Condition of Small-and Medium Businesses 2003-2004 – Annual Report, 2005

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