Frontiers of Entrepreneurship Research, 1995

Frontiers of Entrepreneurship Research
1995 Edition


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    FRONTIERS OF ENTREPRENEURSHIP RESEARCH 1995.



    PLANNING AND BUILDING THE INFRASTRUCTURE FOR TECHNOLOGICAL ENTREPRENEURSHIP -- PART III: FIELD STUDIES IN UKRAINE

    Pier A. Abetti, Rensselaer Polytechnic Institute

    Mark P. Rice, Rensselaer Polytechnic Institute

    ABSTRACT

    Since early 1991, Rensselaer Polytechnic Institute has been actively involved in an ongoing effort to establish the infrastructure in Ukraine to support the development of technological entrepreneurship, and to provide training for both entrepreneurs and leaders of the university, government and business sectors who can influence the development of entrepreneurship. This paper describes the new business incubators in Kiev and Lviv, the training courses for entrepreneurs and the "train the trainers" programs in Ukraine and at Rensselaer, the Eastern Europe Business Development Center and Technology Ukraine, Inc. Lessons learned are summarized, and practical guidelines offered for the development of entrepreneurship in former socialist countries.

    INTRODUCTION

    This paper is the third of a series of field studies performed by the authors and their colleagues related to nurturing entrepreneurship in developing countries: Mexico (Abetti and Wheel- er, 1990); Poland (Abetti, O'Such and Porowski, 1992) and now Ukraine. Because of the economic, social and political situation of these three countries, the task of building the infrastructure for technological entrepreneurship became more difficult as we moved from the free market economy of Mexico, to the transitional economy of Poland, and to the chaotic situation in Ukraine, where privatization has not yet taken root, inflation is out of control, and the political situation, including the relationship with Russia, is uncertain and tense. On the other hand in Ukraine we had the benefit of utilizing our experiences, positive and negative, from the other two countries, plus additional experience from work in South Korea, Indonesia and Slovakia.

    Paradoxically, the worse the economic situation in Ukraine, the more the need for technological entrepreneurship, in order to fill the vacuum left by the collapsing state enterprises, to create high value added jobs for the laid off workers, technical managers, and the young graduates of the highly rated local universities, and to improve the highly unfavorable balance of trade with Russia and the West.

    The objectives of this study are: (a) to assess realistically the present status and prospects of technological entrepreneurship in Ukraine, (b) to relate our four-year field experience and lessons learned, and (c) to identify how technological entrepreneurship could be developed further, in order to contribute to the economic and social development of the country.

    This paper discusses:

    1) the status of Ukrainian entrepreneurship relative to other Central and Eastern European countries,

    2) the creation and development of the only two operating new business incubators in Ukraine, in Kiev since 1992 and in Lviv since 1993;

    3) the "Principles of Entrepreneurship" courses given in these two cities by Rensselaer faculty in the summers of 1993 and 1994, with a total of 124 graduates;

    4) the "Advanced Entrepreneurship" courses given on the Rensselaer campus in August 1992, March 1994, and February 1995 to 23 Ukrainian entrepreneurs, professors, incubator managers, and government officials;

    5) the Business Strategy Curriculum Project training courses during July and August 1994 conducted in Kiev and Lviv for a total of 39 business and economics professors from eight universities, and advanced training for 12 of the 39 participants at Rensselaer in February 1995;

    6) the creation of 20+ companies in Ukraine by the graduates of these courses, including sev-eral incubator client companies;

    7) the establishment within the RPI incubator of a non-profit Eastern European Business De-velopment Center to perform market research and to seek partners and customers for the Ukrainian companies;

    8) the incorporation of a private company, Technology Ukraine, Inc., to represent Ukrainian companies and entrepreneurs in the U.S. and to execute contracts on their behalf; and

    9) the "train the trainers" project funded by the United States Agency for International De-velopment, aimed at catalyzing the development of a Ukrainian software industry through the training of software programmer/entrepreneurs.

    > Finally we draw some preliminary conclusions based on our four year experience in Ukraine that may be useful to: (1) U.S. government agencies and private foundations working to set up incubators, technology parks, and small business development centers in countries in transition from centrally planned to free market economies; (2) practitioners and business people who wish to tap the technical and entrepreneurial talent in these counties, in order to promote business with the West; and (3) academicians and scholars who wish to study by the case method the creation and development of new companies in transitional economies.

    METHODOLOGY

    This research project has served dual purposes. First, it has attempted to act as a catalyst for stimulating the transition of the command economy of Ukraine to a market-driven economy. Second, given the limited scope of the research project, the investigators have chronicled their own experience and that of the other members of the team with an objective of building, in the words of Argyris and Schon (1991, pp. 85-96), "descriptions and theories within the practice context itself", and testing them "through intervention experiments, that is, through experiments that bear the double burden of testing hypotheses and effecting (putatively) desirable change in the situation." Therefore, this research can be viewed as action research, as defined by Argyris and Schon (1991, pp. 85-96). It is hoped that this research can (1) chart a course for efforts in Ukraine that, at this point, appear to be continuing and expanding under the auspices of the Center for Entrepreneurship of New Technological Ventures (CENTV) at Rensselaer, and (2) provide insight to other individuals and organizations that may also be participating in efforts to reform the Ukrainian economy.

    The co-authors have been principal investigators for two projects funded by the United States Information Agency. In addition, Abetti (from 1988 -- 92) and Rice (from 1992 -- present) have each served as the Director of CENTV and have held oversight and/or advisory responsibilities for three other Ukraine projects funded through (1) private sources, (2) the U.S. Information Agency (USIA), (3) the U.S. Agency for International Development (U.S.A.I.D.), and (4) the Eurasia Foundation. The first author played a leadership role in these projects from 1990 through early 1994. The second author played a supporting role during that period, and although he has served as principal investigator for the past eighteen months, other team members have assumed primary responsibility as project managers during that time. As a result, the co-authors have been sufficiently involved as active participants to understand the information that has been collected, but have also had sufficient distance from the day-to-day activities of the project to preserve a reasonably degree of objectivity.

    The paucity of secondary information sources and the difficulty of accumulating primary data in Ukraine have led us to rely on three sources of information:

    1) direct interaction (a) with the 175 participants in the training programs conducted in Lviv and Kiev, and at Rensselaer, (b) with Ukrainian leaders of the business, government and university sectors, and (c) with representatives of other U.S. agencies attempting to catalyze reform in Ukraine;

    2) debriefing of the Rensselaer team members (four professors, two Rensselaer entrepreneurs who have served as directors of business incubators in Ukraine, one Ph.D. student, and seven MBA students) who have been involved in the project courses; in the activities of the Eastern European Business Development Center (EEBDC) at Rensselaer; in the operation of the two incubator programs in Ukraine; and in the case writing activities, and

    3) review of the limited number of research papers reporting on Ukraine and other countries of the former Soviet bloc, and articles in the business press.

    > Because of the important role that the debriefings of the project team members from Rensselaer have played in the collection of data, their cumulative experience is summarized in Table 1, which follows.

    SITUATION ANALYSIS: TECHNOLOGICAL ENTREPRENEURSHIP IN UKRAINE

    The Republic of Ukraine proclaimed independence on January 1, 1992 with great hopes for transition to market economy, improved quality of life, and investment from Western nations. In fact, Ukraine is the largest Eastern European country after Russia, the size of France, with an area of 233,100 square miles (603,700 square kilometers.) It has a population of 52 million, of the same order of magnitude as France, Italy and Great Britain. Although Ukraine constituted only 2.7 percent of the territory of the former Soviet Union, it produced about 20 percent of the Soviet industrial output and one quarter of the agricultural output (Encyclopedia Britannica, 1992, p. 1038).

    However, today (February 1995) the Ukrainian economic situation is a disaster. (Economist, 1993, p. 49; Jones, 1994, pp. 49-50) Privatization, which had never really taken off, has been halted, inflation is rampant and there is only a trickle of investments from the West. Ukraine now depends on Russia for vital supplies, from gasoline to electronics, and is hopelessly in debt. When Abetti first visited Ukraine in June 1991, the open-market exchange rate of the ruble was 20 to a dollar, both in Kiev and Moscow. Now the exchange rate is 4000 rubles to a dollar in Russia, and 140,000 karbovanetz (the local currency, initially equivalent to a ruble) in Ukraine. As a result, the average salary of an Ukrainian professor is now $50 per month, insufficient for survival without income from second or third jobs.

    The present political and economic situation of Ukraine is not an isolated phenomenon; rather, it is part of a political backlash in Central and Eastern Europe. The worsening of the economic situation, high unemployment, incomes below the subsistence level, increase of profiteering and crime, coupled with unrealistic and unfulfilled expectations of massive aid from the West, have led to the "end of innocence" (the period with democratic governments) and the lack of faith in the "brave new world" that had been promised. As a result of this backlash, only three countries of Central and Eastern Europe are presently (February 1995) governed by politicians without ties to the former communist or socialist regimes. These three countries are: the Czech Republic, Estonia and Latvia, representing only 15 million people out of the 360 million of the former Soviet Union and its satellites. Other countries, such as Hungary and Poland, have already made the transition to market economies, and the momentum is so strong that the process can only be delayed but not reversed by the newly elected socialist governments.

    This backlash, naturally, has slowed down but not destroyed the development of techno-logical entrepreneurship in Eastern Europe. In a previous paper (Abetti and Wheeler, 1992) an attempt was made to rank Central and Eastern European countries according to their readiness for technological entrepreneurship. Now, three years later, we can rank the same countries according to our present perception of the status of technological entrepreneurship (Table 2).

    Our perception is based on several visits to most of these countries in 1993-95, interviews of local and Western experts, and a study of the often incomplete and contradictory literature.

    As can be seen from Table 2, Ukraine has fallen from eighth to twelfth place, behind Russia. Actually, Ukraine is not a homogenous country in regard to entrepreneurship. Western Uk- raine, with Leopolis (Lviv in Ukrainian, Lvov in Russian) as its capital, was part of Poland and Czechoslovakia between the two World Wars. There is still a strong tradition alive today of political and economic independence and many people remember the free economy of prewar years. In contrast, the main portion of Ukraine, centered around Kiev, was part of the Russian Empire since 1775. In 1917, Ukraine proclaimed its independence in Kiev, was occupied in turn by German, Soviet and Polish armies and became part of the Soviet Union in 1922. Consequently, there is no recollection of a free economy in the major part of present Ukraine. Since we set up new business incubators both in Kiev and Lviv, we are able to observe the differences between entrepreneurs in the two areas.

    Recent articles have discussed the formidable challenges and opportunities faced by entrepreneurs in the former Soviet Union (Brenner, 1992), in Russia (Hisrich and Grachev, 1993) in Hungary (Vecsenyi and Hisrich, 1990; Hisrich and Szirmai, 1993), and by small and medium enterprises in Central and Eastern Europe (Fiedler, 1991; Abetti, O'Such and Porowski, 1992; Gibb, 1993; Abetti, 1995). These need not be repeated here, but we will only state that the Ukrainian entrepreneurs face all these legal, political and social challenges, plus the challenges of a collapsing economy with hyperinflation. Nonetheless, there are technological entrepreneurs in Ukraine who are surviving, indeed growing, with the encouragement and assistance of Western programs, including the only two Ukrainian business incubators and related entrepreneurship training courses started by Rensselaer Polytechnic Institute.

    HISTORY

    In late 1990, the United Nations requested that Rensselaer Polytechnic Institute prepare a proposal for establishing a business incubator in Kiev, Ukraine, based on our experience in Mexico, France, and South Korea. Although U.N. officials reacted favorably to the proposal, no UN funds were available to support the proposed project. Fortunately, the spouse of one of the Rensselaer trustees was of Ukrainian descent, and she and her husband set up the "Pauline U. Bruggeman Fund for Entrepreneurship in Ukraine" with a $40,000 donation. This "seed money" has now grown to $790,000 with grants from various foundations and U.S. government organizations. A first visit to Ukraine in Summer 1991 resulted in a "protocol" (memorandum of understanding) signed by the Rector (President) of Kiev Polytechnic Institute (KPI, founded in 1899) to set up an incubator there.

    From this modest beginning emerged a stream of activities over the past four years that has included the following five primary initiatives:

    1) Entrepreneurship Training Programs in Ukraine and at Rensselaer

    2) Establishment of Business Incubators in Kiev and Lviv

    3) Development of the Eastern European Business Development Center

    4) Training in the Use of the Case Method for Teaching Business Strategy, and

    5) A Training and Facilities Initiative for Launching a Ukrainian Software Industry.

    Entrepreneurship Training Programs in Ukraine and at Rensselaer

    A three week full-time course in "Entrepreneurship and Economic Development" was given in August 1992 to eight Ukrainian professors, entrepreneurs and government officials. In July and August 1993 we offered two-week full-time Technological Entrepreneurship courses in Kiev and Lviv. More than 100 candidates applied in each city. Less than half were selected on the basis of entrepreneurial drive and knowledge of the English language. The participants followed classes in the morning, including lectures and cases, and worked in the afternoons in teams to prepare business plans for their companies under supervision of RPI faculty and graduate students. There was strong competition between teams, because the prize for the authors of the best plans was a three-week visit to Rensselaer Polytechnic Institute to attend the "Advanced Entrepreneurship" course and work with local companies. In all, 69 participants graduated from the first two courses and 9 were invited to Rensselaer in March 1994. The same program was repeated in Summer 1994 in Kiev and Lviv and at Rensselaer in February 1995 with a total, to date, of 124 graduates from the Ukraine entrepreneurial courses and 23 from the U.S. advanced courses.

    Establishment of Business Incubators in Kiev and Lviv

    One participant in the early stages of this project was Andrew Dressel, one of the four Rensselaer students who founded the MapInfo Company in 1986 with $5000 each. (This company had its Initial Public Offering in February 1994, for a total value of $117 million.) In October 1992 Dressel, who had been exploring the possibility of becoming a Peace Corps volunteer in Russia, offered to manage the business incubator in Kiev as a public service, with $15/month salary from Kiev Polytechnic Institute and a Peace Corps-level salary from his United States sponsors. In spite of many administrative difficulties and delays, the Kiev Incubator assisted the startup of several companies by researchers and professors associated with Kiev Polytechnic Institute (KPI). However in May 1993 Dressel was told by the new Rector that he was no longer welcome and, in fact, he was not allowed access to his office with the excuse that no stranger was allowed in KPI buildings during examinations! Fortunately, we found alternative and more appropriate space for the incubator in the Management Training Institute of the Ministry of Heavy Machinery and Reconstruction. In the meantime, the Lviv Incubator was set up at Lviv Polytechnic Institute (LPI, founded in 1845) and managed by another successful Rensselaer entrepreneur, Mark Kapij, who is of Ukrainian descent and whose family ties were to that part of Ukraine. In both incubators, Ukrainian counterparts were recruited to co-lead the incubators.

    As a result of our business development activities in Ukraine and United States, we estimate that more than 20 companies have been created in Kiev and Lviv. All are doing business in Ukraine, several are marketing in other countries of Central and Eastern Europe, and a few in the United States. With some exceptions, most of the Ukrainian entrepreneurs are technology rather than market oriented and do not realize the importance of marketing and selling for survival and growth. That is why, in all our courses and practical work, we emphasize the role of market research, market planning and selling, even if such long-range planning may appear highly uncertain given the present situation of Ukraine.

    Development of the Eastern European Business Development Center

    We encouraged the entrepreneurs to target Western markets for the following reasons (Abetti, O'Such and Porowski, 1992):

    1) low demand for high-tech products in Ukraine, coupled with inability to pay,

    2) to learn how to be competitive in the international marketplace and thus achieve a sustain-able advantage,

    3) to earn hard currency needed to acquire equipment, marketing know how and complemen-tary western technology, and

    4) to set up partnerships and joint ventures, that could lead to a flow of technology and capi-tal from the United States to Ukraine, for instance for local production and worldwide commercialization.

    > In the preparation of the business plans, data on markets in the former Soviet Union was incomplete, outdated and unreliable. No information sources and databases related to potential Western markets were available in Ukrainian libraries. We first planned to import such databases from the United States, but, aside from the expense, we realized that this data would soon become obsolete. Also, in our experience, market research in the library must be supplemented, indeed validated, by field research, that is, interviewing potential customers, trade associations, etc. Obviously, such research can only be done in the United States by experienced personnel, starting with MBA students. Therefore, in May of 1993, we decided to set up an Eastern Europe Business Development Center (EEBDC), to serve first Ukraine and later neighboring countries. For convenience and networking, this center was located in the Rensselaer Incubator Center and staffed part-time by MBA students taking the marketing and entrepreneurship concentrations.

    > The role of the EEBDC is to locate potential customers and partners in the United States for Ukrainian technological entrepreneurs. We soon found out that there was a serious gap in the expectations of both parties: a) the Ukrainians expected to sell disembodied technology and usually were either not ready or were reluctant to send samples and reveal the technical details of their products or services; (b) the Americans wanted embodied technology, fully described, before committing their interest, let alone their money.

    > In order to bring the two parties together, we had to perform extensive market and patent research to establish the market value, if any, of the Ukrainian technology. Then we would contact the most likely prospects and try to get them interested in receiving technical information and, if available, a sample for testing, after signing a non-disclosure agreement. In some cases, we arranged for meetings between the two parties, and this led to further cooperation. In practice it was much easier to market software than hardware and, in fact, there are now three Ukrainian software factories selling their services here to prestigious clients such as General Electric and MapInfo. They are also selling application packages, such as Isolines, Polygons of Influence Generators and Painter, a program that assigns the minimum number of colors and patterns to a region so that no two touching regions look the same. Prices for software services start at $150 per workday, compared to $500 per day for in-house programming costs at western corporations. The quality of the programs was high, but initially there were problems with documentation and adherence to standards. We told the US clients not to pay the full amount due until they were satisfied, and this was a powerful incentive to get the job done right and on time!

    > During negotiations with potential customers, it became clear that they had no intention of dealing directly with the Ukrainian entrepreneurs for correspondence, contracts and payments. Customers wanted U.S. addresses, phone and fax numbers, and bank accounts for their dealings. The Eastern Europe Business Development Center, which is part of a non-profit institution, could not legally enter into contracts and accept moneys on behalf of the Ukrainian companies, and there was an impasse. Here again, the entrepreneurial spirit solved the problem. The Rensselaer trustee who had donated the seed funds of the Ukraine program and the managers of the Kiev and Lviv Incubators incorporated a new company, Technology Ukraine, Inc., to handle all the communication, transportation, currency, support and cultural problems, and to take responsibility for all contractual obligations. The company is conveniently located in the Rensselaer Incubator Center. It has started to include Ukrainian entrepreneurs among its stockholders and is planning to expand its activities from software to hardware.

    Training in the Use of the Case Method for Teaching Business Strategy

    In May 1994 Rensselaer was awarded its second contract by the United States Information Agency (USIA), which funded the Business Strategy Curriculum Project. This project had two objectives: (1) to provide training to Ukrainian business professors in the use of the case method to teach business strategy, and (2) to develop case studies of Ukrainian enterprises that could subsequently be used by Ukrainian professors in teaching by the case method.

    > Training programs under this contract have been run concurrently with those offered under the original USIA contract that has provided entrepreneurship training. The courses were conducted in Kiev and Lviv for a total of 39 professors during the Summer of 1994, and for twelve professors out of the original group at Rensselaer in February 1995. Interviews for the case studies were conducted by Professors Bigelow and Rice, and detailed data collection and preparation of drafts of the case studies were undertaken by five MBA students during the Summer of 1995.

    > The subjects of the case studies included:

    * a ceramics factory undergoing privatization,

    * a state-owned heavy machinery manufacturer,

    * a metal working plant,

    * a startup software company,

    * a startup of a western distributor of computer hardware, and

    * a university department attempting to transform itself to reflect the dramatic change in political, social and economic conditions in Ukraine.

    The handbook of cases will be published in both English and Ukrainian on facing pages and distributed to the university partners in Ukraine in mid to late 1995.

    A Training and Facilities Initiative for Launching a Ukrainian Software Industry

    During the summer of 1994, the visit of the second author to Ukraine catalyzed the development of a proposal to the U.S. Agency for International Development, which, in October 1994, approved Rensselaer's third contract for work in Ukraine. This project built on the success of the Kiev and Lviv incubators in supporting development of software start up companies and the aggressive business development effort of CVD, Inc., the Apple Computer distributor in Ukraine. The contract provided funding for three interrelated activities. First, a software incubator was established with the purchase of twelve Apple computers from CVD. Second, Apple Developer University provided programmer training to twelve course participants under a "train the trainers" model. Third, in order to provide impetus for converting the special facilities and training in programming into a commercial capacity, Rensselaer presented four one week modules in Ukraine to the twelve participants: (1) international business strategy, (2) marketing, (3) finance / accounting and (4) technological entrepreneurship. It appears at this stage that there is substantial interest from funding sources and from the three contractors to expand this program.

    LESSONS LEARNED

    The previously presented case histories of Mexico and Poland and the present case of Ukraine clearly demonstrate our approach of "learning by doing" and applying what we have learned to more complex and challenging environments. The findings presented below represent a distillation of the collective observations of the fourteen members of the Rensselaer team over four years, reflecting extensive interaction and in-depth discussions with the 175 Ukrainian course participants, the senior management of the Ukrainian enterprises that served as subjects of the case studies, and the myriad other government officials (both Ukrainian and U.S.), university faculty and administrators, and business leaders.

    Lesson #1

    The six primary Rensselaer professors involved in teaching these courses collectively make the following observations about the course participants.

    * The scientific and technical knowledge of the participants was equal to or better than that of Rensselaer students.

    * The entrepreneurial initiative of the best students was again equivalent to that of the best Rensselaer students taking our entrepreneurship courses.

    * The participants enjoyed instruction according to the case method, but deplored the lack of Ukrainian cases.

    * Participants, including some professors of economics and management, had very little understanding of the fundamentals of finance, economics, accounting and marketing. They could not differentiate between cost and price, understand the concept of break-even volume, or prepare a simple profit and loss statement. However, once we explained these basic concepts, some participants caught on very fast. One professor of economics spent all night preparing the P&L forecast for her simple business plan and stated, "This was the hardest assignment of my life!"

    Lesson #2

    Ukraine possesses a solid base of scientists and technologists, especially in the area of software development, who have the capacity and the aspirations, indeed the will, to become technological entrepreneurs, and to contribute to the economic and social renaissance of their country. The main obstacles are:

    * a lack of enabling legislation for entrepreneurship and lack of support, or worse, distrust by the government and old-guard bureaucrats,

    * a variety of economic factors, such as underdevelopment and mismanagement of the banking system, runaway inflation and volatile taxation policies, which are often implemented retroactively and which make financial planning for new ventures extremely uncertain and difficult,

    * a lack of understanding among prospective entrepreneurs of the importance of business planning, marketing and sales, particularly for export to the West, and

    * a lack of infrastructure in Ukraine necessary to support entrepreneurship, from computers to venture capital, from copying machines to market data bases.

    Lesson #3

    In spite of these formidable challenges there are many entrepreneurs in Ukraine who keep the country going through underground or open-market activities. Unfortunately many of these activities are little more than trading of scarce supplies, with very short-range vision, and, worse, in some cases connected with criminal elements. The challenge is then to channel the better entrepreneurial potential into longer-range, higher-value added activities. Following is our practical response to the barriers listed under Lesson #2.

    * Work with local institutions, such as universities, keep the local government informed, but do not expect much beyond benign neglect and perfunctory commendations from the central government.

    * Give practical entrepreneurship and management courses in Ukraine, and advanced courses in USA, emphasizing the role of business planning, marketing and sales. Encourage the participants to start their own companies, with emphasis on marketing concrete products and services (rather than technology) to the West, in order to prove their international competitiveness and earn the hard currency needed to grow their businesses.

    * Utilize new business incubators, connected with local institutes of higher learning, as the basic infrastructure on site. Strengthen this local infrastructure through non-profit support headquarters in the USA such as the Eastern Europe Business Development Center. As soon as a commercial transaction is ready for negotiations, enlist the assistance of specialized for-profit trade organizations, such as Technology Ukraine.

    Lesson #4

    With respect to the general lack of infrastructure, Vecsenyi and Hisrich (1990) have sug-gested that three types of infrastructure need to be developed: (1) governmental, (2) educational and (3) business. At this point the governmental infrastructure works against entrepreneurship, rather than supporting it. The educational and business infrastructures are just beginning to show signs of transformation, driven by the role of economic desperation in creating the entrepreneurial spirit. The response by academics and businesspeople to the training and incubator initiatives undertaken as part of this four year long project has been overwhelming. In a sense these programs have created small oases of entrepreneurial economic activity in the harsh desert of a rapidly failing centrally planned economy that so far has been unable to transform itself.

    CONCLUSION

    In spite of the formidable challenges presently faced by Ukraine and the backlash in Central and Eastern Europe, we believe that entrepreneurship will be a major factor in the expected and unavoidable transformation of the country. The longer range potential of the Ukrainian market is attractive to both local and western companies. In fact, there is at present hardly any local or foreign competition in technology-intensive products and services. There is a large pool of well-trained engineers, scientists and skilled workers available, and wage levels are modest. The younger generation, if properly trained, could develop many highly-motivated entrepreneurs and business persons. Also, many enlightened and progressive Ukrainians realize that political independence can only be achieved by entrepreneurial and innovative small and medium size companies, rather than by converted inefficient and obsolescent state enterprises.

    Western assistance is critical to strengthen the emerging Ukrainian entrepreneurial activities in order to avoid a disastrous relapse into economic overdependence on Russia, Ukraine's present major creditor, that, in turn, could lead to the loss of the political independence of Ukraine.

    REFERENCES

    Abetti, P. A. (1995). Planning for Entrepreneurial Innovation: Field Studies in Poland and Ukraine and Lessons Learned. Creativity and Innovation Management, 4, 45 - 51.

    Abetti, P.A. and Wheeler, P.A. (1990). Planning and Building the Infrastructure for Technological Entrepreneurship: Field Studies in the USA, France and Mexico. Frontiers of Entrepreneurship Research 1990, 422 - 437.

    Abetti, P.A.; O'Such F.M.; and Porowski, S. (1992). Planning and Building the Infrastructure for Technological Entrepreneurship -- Part II: Field Studies in Poland. Frontiers of Entrepreneurship Research 1992, 469 - 480.

    Argyris, C. and Schon, D. (1991). Participatory Action Research and Action Science Compared. In W. Whyte (ed.). Participatory Action Research. Newbury Park, California: Sage Publications. Brenner, R. (1992). Entrepreneurship and Business Ventures in the New Commonwealth. Journal of Business Venturing, 7, 431 - 437.

    Ukraine: Galloping Towards the Brink. (1993, July 3). Economist, 328, 49.

    Encyclopedia Britannica (1992). Macropaedia 28, 1038.

    Fiedler, H. (1991, April). Innovation Centres in Eastern Europe. Presentation at the Fifth Annual Conference on Business Incubation, Charlotte, NC.

    Gibb, A.A. (1993). Small Business Development in Central and Eastern Europe -- Opportunity to Rethink? Journal of Business Venturing, 9, 461 - 486.

    Hisrich, R. D. and Grachev, M.V. (1993). The Russian Entrepreneur. Journal of Business Venturing, 8, 487 - 497.

    Hisrich, R. D. and Szirmai, P. (1993). Developing a Market-Oriented Economy: A Hungarian Perspective. Entrepreneurship and Regional Development, 5, 61 -71.

    Jones, C. (1994, June). Ukraine: The Last Chance Saloon. The Banker, 144, 49 - 50.

    Vescenyi, J. and Hisrich, R. D. (1990). Entrepreneurship in the Hungarian Economy. Frontiers of Entrepreneurship Research 1990, pp. 492 - 503.

    ACKNOWLEDGMENT

    This research was funded in part by the Pauline U. and Warren H. Bruggeman Fund for Entrepreneurship in Ukraine, the United States Information Agency, the U.S. Agency for International Development and the Eurasia Foundation.


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