Possibilities of increasing the competitiveness of the business support system in the border regions of Latvia – Lithuania Scientific monograph edited by J. Vanags The Institute of Economics of the Latvian Academy of Sciences (Riga, Latvia) 2020 Possibilities of increasing the competitiveness of the business support system in the border regions of Latvia – Lithuania Possibilities of increasing the competitiveness of the business support system in the border regions of Latvia – Lithuania. Scientific monograph / edited by J. Vanags / The Institute of Economics of the Latvian Academy of Sciences. – Riga, 2020. – 300 p. Research was made by the request of Zemgale Planning region in the framework of the project Nr. LLI-131 “Creating of business support system and the availability in Zemgale, Kurzeme and Northern Lithuania (Business Support)” in terms of Interreg V-A Latvia-Lithuania 2014–2020 program. The research was funded by European Union. The content of this research does not reflect the official opinion of European Union. Scientific editor: Dr. oec., prof. Jānis Vanags Authors: Dr. oec., prof. Jānis Vanags Dr., asoc. prof. Ņina Linde Dr. habil.oec., prof. Baiba Rivža Dr.oec., prof. Maksym Bezpartochnyi Dr.oec., prof. Viktoriia Riashchenko Reviewers (international scientific editorial board): Dr.oec. Elīna Konstantīnova, Latvian Scientific Council expert Dr.oec. Elita Jermolajeva, Latvian Scientific Council expert The scientific monograph is approved for publication at the meeting of the Council of the Institute of Economics of the Latvian Academy of Sciences in Riga of 23th January 2020, protocol Nr. 2020/1. Reproduction or citation reference is mandatory. © The Institute of Economics of the Latvian Academy of Sciences, 2020 ISBN 978-9984-774-29-9 (print) ISBN 978-9984-774-30-5 (pdf) The Institute of Economics of the Latvian Academy of Sciences Akademijas laukums 1, Riga, Latvia, LV-1050 Phone: +371 2020 7092, e-mail: [email protected] 2 Possibilities of increasing the competitiveness of the business support system in the border regions of Latvia – Lithuania CONTENT INTRODUCTION ........................................................................... 5 Chapter 1. BUSINESS SUPPORT ENVIRONMENT IN LATVIAN AND LITHUANIAN RESEARCH TERRITORIES: CURRENT SITUATION ................................................................................. 11 1.1 Support of businesses and its objective and subjective necessity ...................................................................................... 11 1.2 An analytical evaluation of Latvian and Lithuanian business support regulatory normative enactments ................................... 15 1.3 Existing business support organizations, their activities, goals and functions, provided support services, target groups ............ 33 1.4 An analysis of the business support services provided in Latvia and Lithuania .................................................................... 57 1.5 An evaluation of cooperation within the activities of business support organisations .................................................................. 74 1.6 Business support organisation useful experience and practice in Latvia, Lithuania and other countries .................................... 101 Chapter 1 Conclusions .............................................................. 117 Chapter 2. AN EVALUATION OF THE EFFECTIVENESS OF LATVIA AND LITHUANIA BORDER REGION-BASE BUSINESS SUPPORT ORGANISATION .................................................... 128 2.1 The result of business support organisation activities ........ 128 The Institute of Economics of the Latvian Academy of Sciences Akademijas laukums 1, Riga, Latvia, LV-1050 Phone: +371 2020 7092, e-mail: [email protected] 3 Possibilities of increasing the competitiveness of the business support system in the border regions of Latvia – Lithuania 2.2 The effectiveness of business support organisation activities in the border regions ................................................................. 150 2.3 A questionnaire for business support organisation system participants from Latvia and Lithuania, and an evaluation of the results ........................................................................................ 159 2.4 Mutual entrepreneur networking events, cooperation principles and practice ............................................................... 198 Chapter 2 Conclusions .............................................................. 217 Chapter 3. APPLICABLE MODELS FOR INCREASING THE EFFECTIVENES OF LATVIAN AND LITHUANIAN BORDER REGION BUSINESS SUPPORT ORGANISATIONS ............... 232 3.1 A systematic approach to the construction of models for increasing the effectiveness of the business support system ... 232 3.2 Latvian and Lithuanian border region business support system activity model for increasing effectiveness ................... 243 Chapter 3 Conclusions .............................................................. 266 Chapter 4. RECOMMENDATIONS FOR INCREASING THE EFFECTIVENESS OF BUSINESS SUPPORT ......................... 273 4.1 Suggestions for business support policy developers and facilitating organisations ............................................................ 273 4.2 The most important recommendations for creating a business support system in Latvian and Lithuanian border region .......... 283 CONCLUSIONS ........................................................................ 288 REFERENCES .......................................................................... 290 ABBREVIATIONS USED IN THE RESEARCH ........................ 293 IMPORTANT TERMS USED IN THE RESEARCH .................. 296 The Institute of Economics of the Latvian Academy of Sciences Akademijas laukums 1, Riga, Latvia, LV-1050 Phone: +371 2020 7092, e-mail: [email protected] 4 Possibilities of increasing the competitiveness of the business support system in the border regions of Latvia – Lithuania INTRODUCTION Relevance of the research. The relevance of the research topic (from this point only known as the Research) “Research into implementation options of business support system in Latvia and Lithuania” ordered by the Zemgale planning region is determined by a number of mutually related aspects. Firstly, the theme of the research disclosed the customer’s attempts to encourage the development of business in the region. It has been proven through practical application that at least half out of 10 newly created companies cease their activity in the first year, often designating unprofitability as the reason the reason, which cannot be remedied due to the lack of the necessary knowledge and advice. In turn, the state and society at large is interested in securing the stability of bigger companies operations, newly created companies included. Therefore, business support organisations are being formed, the goals of which are to constantly oversee various events in the outer business environment, so as to be able to apply preventative and/or corrective measures for the continued support and growth of entrepreneurship. Of similar importance is also the aspect of employment. Entrepreneurship has a decisive role in the production of GDP necessary for the development of the Latvian and Lithuanian states, which further materializes in the products and services necessary for the population, the end result of which is the increased well-being of the state and the population. It is for this reason that state and municipalities have to pay closer attention towards the understanding of business development disrupting aspects and towards goal-oriented improvements for the state and municipality support system functionality. The social dimension of the research is also relevant. The founders of a company are also de facto job creators – they gain The Institute of Economics of the Latvian Academy of Sciences Akademijas laukums 1, Riga, Latvia, LV-1050 Phone: +371 2020 7092, e-mail: [email protected] 5 Possibilities of increasing the competitiveness of the business support system in the border regions of Latvia – Lithuania livelihoods for themselves and give others a chance to do the same by offering them a job in their company. It is for this reason that it is more profitable for the state and municipalities to provide support for entrepreneurs and founders that operate on their territory rather than giving out allowances or passively observing the poor conditions in which a certain part of the population live in or join the emigration wave. It has been proven in practice, that the European Union and different socio-economic development levels united within it provides the Latvian and Lithuanian states not only with development opportunities, but also with a rather noteworthy threat without pairing up and without using the innovative, knowledge enriched mid-to-high tier and high tier technology entrepreneurship to improve the economy. A current effort to compensate the high development level economically active part of the population with immigrants from cheap labour providing countries is not the solution. This is because, firstly, it can cause insurmountable return barriers for the part of the population which emigrated to other countries and, secondly, such a workforce deficit compensation policy will encourage the preservation of low wages in various branches of the national economy while keeping the local workforce emigration flow at a relatively high quantitative level. Latvia and Lithuania cannot remain being cheap labour countries in the long term because that can