Potential for Development and Limitations of Regional Business Environment

Abstract

The article considers some questions of institutional support for the development of the regional business environment. In connection with constantly growing social liabilities of regional and municipal authorities, which results in the upsurge of risks of budget imbalance at respective levels, the research provides a foundation to the necessity of forming favorable business environment promoting enterprise activity in regions. The process of creating institutes of a region’s business environment is analyzed with applying a matrix institutional model of entrepreneurship. The article reveals the mechanism stipulating the emergence of specific peculiarities of institutional configurations of the regional business environment. A conclusion is drawn about the decisive role of the institutional configuration of the business environment in the existing differences in the levels of social and economic development of regions. The researchers put forward a hypothesis that supporting a favorable institutional configuration of a region’s business environment that stimulates enterprise activity in the area cannot last indefinitely as its development is of a cyclical nature. Simulation parameters for the formation and maintenance of a favorable institutional configuration of the business environment are given. With the aim of practical application of the suggested approach, the authors suggest a methodology allowing for regional authorities to estimate the expediency of favorable institutional configuration of business environment, and on this basis to formulate rules of play for business so that these rules could boost business activity and increase the contribution of entrepreneurship to the region’s social and economic development. The approach under consideration provides an opportunity to substantiate a theoretical and methodological framework for developing practical mechanisms of projecting and further long-term maintenance of favorable institutional configuration of business environment which will contribute to expanding the region’s business activity, and which is resistant to negative effects of the external environment.