RESPONSIBLE ENTREPRENEURSHIP VISION DEVELOPMENT AND ETHICS

Government support for entrepreneurship: case of Azerbaijan 437
competitiveness, job creation and productivity (Leutkenhorst, 2004). The Development Concept
of Azerbaijan Republic approved by the President in 2012, “Azerbaijan 2020: Look into
the Future” emphasizes the establishment of market infrastructure network that serves to
develop the non-oil sector.
The role of government is crucial in creating an infrastructure that supports entrepreneurship
(Minniti, 2008). The government of Azerbaijan views moving away from an economy
based on natural resources to an economy with strong private sector that relies on entrepreneurship
as one of the high priority tasks. Thus, there is a need to analyze the government support
for entrepreneurship in Azerbaijan with specific focus on the financial, legal and
organizational support for entrepreneurship.
Literature is in consensus on the role of SME’s as the engine of national economies’ growth
(Spicer & Sadler-Smith, 2006). There is ample evidence in the literature that access to finance
by is fundamental for small and medium enterprises (SMEs) to grow (Beck & Demirguc-
Kunt, 2006). A number of factors including information asymmetry, lack of collateral and
inexperienced management are significant challenges to SMEs access to external funds (see
e.g. Shaban et al., 2014; Owualah,1990; Petersen & Rajan,1994).
Analysis of European experience reveals that the annual EU budget for 2015 realized
€ 145 billion which is about 1% of the GDP. However 46% spent to smart and inclusive growth
in the EU, out of which 34% – helping underdeveloped EU regions and disadvantaged sections
of society, 12% – making European firms more competitive (EU, 2015).
This paper addresses how government support in Azerbaijan has impacted the growth of
SME’s. It includes analysis of legal and financial infrastructure created in support of
entrepreneurship. Macroeconomic and firm level impact of the government support for
entrepreneurship is evaluated. The results of evaluation are used to develop recommendations
for policy makers. The rest of the paper proceeds as follows: the next section of this
paper discusses the financial support for entrepreneurship in Azerbaijan and its impact on
job creation and productivity. The third section focuses on the legal context of entrepreneurship
in Azerbaijan. The fourth section is on organizational support by government. The concluding
remarks and recommends are given in the last section.
General description of entrepreneurship environment in Azerbaijan
Between 2004 and 2015, more than 70 thousand companies were established and total
number of companies reached 100 thousand. In this timespan, 1.5 million new job openings
were created; 1 million of them were permanent.
Private sector in Azerbaijan rose from 29% in 1994 to more than 80% in 2014, employing
70% of labor force. More than 72,3% of all investment in the economy were internal,
63,4% of these investments were on public enterprises. It is worth to note that 87% of legal
entities are private and only 11% are public entities. During 2004-2013 internal investments
grew 14,6 times, investments in non-oil sector rose 12,9 times, and investments to regions
made up 50,7 billion manats from all sources. i
In 2014, sales of retail goods were 22 billion manats, which increased 10% from previous
year. 99.8% of these consumption goods were sold by private sector, out of which 52.5% was
sold by sole proprietors, 11.5% by companies, 35.8% in goods markets. This shows that private
sector, especially sole proprietors counted for a significant share of the trade (MERA, 2014).