The Rural Enterprise Economy

Birgit Leick, Susanne Gretzinger, Teemu Makkonen, Birgit Leick, Susanne Gretzinger, Teemu Makkonen

• Publisher: Routledge
• Year: 2021
• ISBN:
  9781000465914
• Edition: 1
• Topic: Économie
• Subtopic: Microéconomie

Enterprises located in rural regions face various challenges in the globalised and digitised world. This book offers comprehensive answers to the question of what makes up the rural enterprise economy in the contemporary business world. It addresses the competitiveness and viability, strategic management and strategic change, and marketing issues for both incumbent and start-up companies in rural regions. The book presents new concepts that shed light on the rural enterprise economy with its entrepreneurs.

With a broad range of cases from European regions, the book provides theoretical insights for scholars, practical case-based evidence for lecturers and teachers, and practical knowledge for business practitioners and planning specialists. Academic experts from European universities and research institutes provide compelling answers to this under-researched topic in business studies and economics.

Part I

Introduction to the rural enterprise economy

1 Introduction to the rural enterprise economy

Birgit Leick, Susanne Gretzinger, and Teemu Makkonen

DOI: 10.4324/9781003034001-1

Motivation for and background of this book

The present book explores the rural enterprise from a business and economics perspective through the study of state-of-the-art cases from various European countries. The book is dedicated to providing answers to some unresolved questions about the rural enterprise in the business and economics literature. To start with, one of these questions is whether there is a rural enterprise in terms of a specific type of firm or company in rural locations, and, if so, how it can be described, characterised, and understood.

As a matter of fact, the rural enterprise does not represent a clearly defined concept in itself. Although the distinction between rural and urban locations of enterprises is made, and the implications of this distinction are discussed in the empirical literature (for example, Lyee and Cowling, 2015; Eliasson and Westlund, 2013; Wagner and Sternberg, 2004; Keeble and Tyler, 1995), whether there is a systematic difference between these enterprises has not been fully explored. We do not know if the enterprises located in rural regions actually represent a distinct enterprise type or model, or whether enterprises are the same everywhere, no matter where they operate from, and the differences lie only in the specific regional contexts. The same holds true for the factors influencing the locational choice of enterprises and the effects of these choices, particularly when it comes to newly founded businesses and start-ups. Questions arise about whether there are specific factors pushing or pulling entrepreneurs to locate with their enterprises in rural regions, or not, and influencing their operations, employment, production, and growth perspectives after the start-up period.

Simultaneously, we observe that the notion of ‘the rural’ changes as the world becomes increasingly globalised and globally integrated by means of digital technologies, which leads to a decrease in the actual and perceived differences between ‘the rural’ and ‘the urban’. In addition, it is unclear whether the representation of ‘the rural’ versus ‘the urban’, as two somewhat opposed poles, constitutes an appropriate conceptual approach with which to understand the characteristics of rural regions, or whether there exists a more finely grained spectrum of regional characteristics than the dichotomous urban–rural poles upon which to rely. Altogether, these observations lead us to conclude that neither the notion of the ‘rural enterprise’ represents a well-defined concept, nor is there abundant and convincing evidence from empirical studies that might illuminate the specific factors that influence enterprise in the rural context and, hence, explain what constitutes the essence of a rural enterprise.

Indeed, defining the rural enterprise involves several challenges. Firstly, the term ‘rural enterprise’ has traditionally been associated, and, thus, often equated, with traditional sectors in rural regions, such as agriculture, farming, the extractive industries, and tourism, i.e., those sectors that have developed and thrived for centuries in rural locations and have, thus, shaped the face of the rural region. Indeed, a major part of the discussions on rural enterprises deals with this traditional understanding of enterprises in rural contexts, e.g., farmers, and tourist enterprises, or large extractive companies. While these sectors are still represented in many rural locations as of today (García-Cortijo et al., 2019; Srholec et al., 2019; OECD, 2006), it is important to acknowledge that rural locations have also become more attractive for the development of a more variegated structure of enterprises and industries. This is largely a result of the overarching global trends, such as post-industrial change to the service economies, globalisation, and digitisation (Räisänen and Tuovinen, 2020), the latter reducing the spatial distance between places through virtual and online communication opportunities, regardless of how far the actual distance and remoteness is. Secondly, what rurality represents and how we understand it needs to be defined. The questions concerning this challenge are as follows: Is rurality a specific and unavoidable condition for enterprises operating in rural locations, which they have to deal with, or is it rather an intentional lifestyle choice by the individual entrepreneur and owner-manager who settles and starts a business because of the amenities represented in the rural location? Hence, do we talk about enterprises in the rural context, or rural enterprises? Although scholars such as Murdoch and Marsden (2013) claim that the rural is being re-constructed nowadays and more positively connoted (see, also, De Noronha Vaz et al., 2006), it is not clear how the understanding of rurality shapes the perception of challenges and opportunities by entrepreneurs in rural locations. Thirdly, another challenge about defining the rural enterprise is that we need to consider in more depth what makes the rural region special, compared to the non-rural ones, in order to avoid ‘black-and-white’ dichotomies about the opportunities and challenges for enterprises in rural versus urban regions (cf., Leick and Lang, 2018).

Based upon this knowledge gap, and in the light of the unanswered questions, this book presents a broader understanding of what constitutes and drives the ‘rural enterprise’ in today’s global and digital marketplace. Its aim is to build connections between two only loosely connected research strands in the contemporary business and economics literature:

• ‘Rural enterprise development’, which we understand as the processes of business operations and development, mostly growth but also closure, of the incumbent enterprises in rural areas. Established enterprises in rural regions and their managers and owner-managers, respectively, are challenged by or contested with their business models due to the changing economic landscape both regionally and globally, while they can, at the same time, exploit opportunities in the location or due to the location.
• ‘Rural entrepreneurship’, defined as newly established enterprises and start-ups that develop and start operating their new, and often innovative, business models in rural contexts and are based upon the self-employment of individuals who bear the risks of failure, but in return, if successful, also enjoy the fruits of their labour. This definition encompasses early start-ups after their initial months and years in operation (cf., GEM Monitor, 2020) as well as entrepreneurial individuals who have been successful in the market after the initial months and years. Irrespective of the date of foundation, entrepreneurship is typically equated with self-employment as an alternative to wage-employment (cf., Bögenhold, 2000); self-employment, in turn, may result from various motivations, such as the necessity to make a living in a given place, or the perception of opportunities in the regional, national, or global markets, operated from the rural location. Our understanding of rural entrepreneurship encompasses all these variants of entrepreneurial activities, which is in line with our wide definition, as provided above.

By combining these two perspectives, the book will provide new insights on the essence of rural enterprises, both understood through the lens of incumbent enterprises (enterprise development) and start-up enterprises (entrepreneurship) in rural contexts. Each of these debates will be addressed in its own section in the book, and the debates will be collected as a coherent knowledge repository for scholars and academics researching rural enterprises and entrepreneurs, lecturers and students studying enterprise development and entrepreneurship, as well as practitioners working with rural enterprises.

The representation of rural enterprises in the existing literature and emerging questions about rural enterprises

Rural enterprises and entrepreneurs are, to some extent, and in a rather indirect fashion, discussed in the contemporary entrepreneurship and small business management literature (Berglund et al., 2016; Reidolf, 2016; Anderson, 2000). However, this literature remains fragmented when it comes to understanding the essence of rural enterprises.

Small- and medium-sized enterprises (SMEs) are the backbone of many European economies, including Scandinavia, for instance (OECD, 2016). In some national contexts, SMEs and their locations, including rural regions, are discussed. One example is Germany with its ‘Mittelstand’, consisting of SMEs with a high degree of competitiveness on global markets (Pahnke and Welter, 2019). The debate on Germany’s ‘Mittelstand’ partly overlaps with that of the ‘hidden champions’ in the country (Audretsch et al., 2018; Simon, 2009). The ‘hidden champions’ are characterised as enterprises operating in business-to-business or business-to-consumer markets which have been developing into the backbone of Germany’s economy since the 1970s – at a time when the world markets had been dominated by large enterprises. Interestingly, these SMEs, including the ‘hidden champions’, are not necessarily located in Germany’s urban hubs and seem to perform well in the country’s non-urban locations as well because they focus on the development of a specific market segment or niche, for which they often turn into market leaders. Such enterprises have even been discussed as potential role models for SMEs with long-term growth potential and were under academic scrutiny nationally. Notwithstanding this, the conceptual underpinnings of these ‘hidden champions’ from the SME sector are clearly understudied.

Similarly, as another example, SMEs form the backbone of the United Kingdom economy (e.g., Mawson and Brown, 2017). In the UK, several research organisations and universities address small business development, for example, the ERC (ERC, 2020) and the ISBE (https://isbe.org.uk/). However, their focus rests on SMEs and their contribution to economic growth and development in the UK, and less on specific rural market environments for SMEs. Most notably, these research initiatives do not provide a conceptual idea about enterprises in rural regions. Hence, scholars in the UK have been researching SMEs, entrepreneurs, and policies from the perspective of a centralised national system, for instance, the impact of national funding and support policies on enterprises in various regions, including rural, peripheral, and remote regions of the country, often compared to the capital city region as a central hub in the UK (Huggins and Williams, 2011; Anderson et al., 2005; Bennett and Smith, 2002). Overlooking these scattered national debates from the SME management and entrepreneurship literature, it can be concluded that rurality is indirectly addressed as a condition in these debates, but its role for, and contribution to, the success of enterprises in the rural context as well as the influence of policy support (if any) remain clearly understudied.

By contrast, the topic of rural entrepreneurship (cf., McElwee and Atherton, 2021) represents a more intensively studied subject in rural sociology and human geography (Andersen and Lent, 2017; De Haan et al., 2017; Pato and Teixeira, 2016). However, beyond a few related exceptions (e.g., Gretzinger et al., 2018), it is not prominently represented in business and economics studies, although it has been acknowledged that context matters for the understanding of entrepreneurship (Welter, 2011). Moreover, it is quite common that rural areas, particularly in the Global South, are approached through theories developed in the Global North and for urban economies (Newbery et al., 2017). Fortunato’s (2014) comprehensive review on the representation of rural entrepreneurship in the literature from a business and economics perspective is a notable exception as an academic paper that provides insights into the conditions and factors influencing entrepreneurship and start-up processes in rural contexts. The topic of rurality is, nevertheless, one of the contexts discussed in the entrepreneurship literature (Gaddefors and Andersson, 2019; Korsgaard et al., 2015), following Welter’s (2011) call for more contextualised entrepreneurship research. Various concepts are used to operationalise the meaning of contexts in this emerging stream of literature, such as embeddedness, networking, social capital, local culture, norms, and traditions.

Hence, both the topics, ‘rural enterprise development’ and ‘rural entrepreneurship’, seem to receive little direct attention outside these scattered research streams, although the topics are at the core of understanding the connections between rural enterprises and the economy. Some of the questions that deserve closer attention are, for instance, related to the competitiveness and viability of rural enterprises, the strategic change and turn-around situations affecting them, and their internationalisation and marketing plans. Moreover, questions arise as to how new business ventures are established in a rural market environment as a potential alternative to urban areas with their abundance of resources and amenities, and how incumbent enterprises gain and sustain competitive advantage in a rural location in terms of access to input factors and national–international connections. In this context, a related question is which factors influence the employment and investment decisions of large companies in rural regions in the light of the recent negative demographic and migration trends across rural Europe (population ageing and youth outmigration), and how such large ...

Table of contents

• Cover
• Half-Title
• Series
• Title
• Copyright
• Dedication
• Contents
• List of figures
• List of tables
• Contributors
• Foreword: Return of the rural?
• PART I Introduction to the rural enterprise economy
• PART II Rural enterprise development
• PART III Rural entrepreneurship
• PART IV The rural enterprise economy: Conclusions and implications
• Index