Discussion Papers 2007.
Regionality and/or Locality 178-186. p.
THE IMPACT OF TECHNICAL INFRASTRUCTURE
ON ENTREPRENEURSHIP ACTIVITY – EXAMPLE
OF RURAL AREAS IN POLAND
DARIUSZ ŚWIĄTEK

The question of whether infrastructure stock affects private sector growth remains
unanswered, although the notion that the provision of public capital has an impact
on the economic activity of private sector was explored in literature for many years
(Mead, 1952; Hansen, 1965). The large discussion about the impact of infrastruc-
ture  equipment  or  investment  on  economic  growth  was  initiated  by  David  As-
chauer  at  the  end  of  the  1980’s  and  the  beginning  of  the  1990’s  (1989a,  1989b,
1989c, 1990), when he proved that the decrease of productivity that took place in
the US in 1970’s was preceded by a slow down of infrastructure investment. Much
of the studies that followed Aschauer’s papers have focused on the influence of a
rise  of  infrastructure  stocks  or  aggregate  public  capital1  on  private  sector  output
and  productivity.  Douglas  Holtz-Eakin  (1988,  1992)  confirmed  that  aggregate
public capital has significant impact on private sector productivity and similar con-
clusions were reached by Alicia Munnell’s (1990, 1992).
Further  studies showed that  growth  of infrastructure stock  enhance  output and
productivity of the companies, by decreasing their costs, stimulating technological
innovation  and  increasing  productivity  of  other  factors  of  production  (Lee  and
Anas 1992, Suarez-Villa and Hasnath 1993). Alternative explanation for the influ-
ence of infrastructure on firms’ activity was given by Rafael Flores de Frutos and
Pedro Pereira (1993). They assumed that public capital is an endogenous variable
in the macro growth system, proving that it is driven positively by output of private
companies  and  negatively  by  their  employment  changes.  Similarly  to  Aschauer
(1989a),  they  found  high  return  rates  of  the  public  capital  (Flores  de  Frutos  and
Pereira 1993). Although other studies state the positive dependency between infra-
structure stock and firms founding (Eberts 1991), differences among cases has been
demonstrated.  The  variation  depends  on  size  of  firm,  type  of  infrastructure  stock
and  the  development  stage  of  the  country.  Eberts’  evidence  shows  much  stronger
relation in case of small companies then larger firms. David Canning and Marianne
Fay (1993) found in their study of 96 countries that rate of return of transport net-
works in developed and industrializing countries is high to normal and moderate in
underdeveloped countries.

1Aggregate public capital – sum of public capitals.

Dariusz Swiatek :
The Impact of Technical Infrastructure on Entrepreneurship Activity - Example of Rural Areas in Poland.
In: Regionality and/or Locality. Pécs: Centre for Regional Studies, 2007. 178-186. p. Discussion Papers, Special
THE IMPACT OF TECHNICAL INFRASTRUCTURE ON ENTREPRENEURSHIP…
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9
Also agricultural production is affected by infrastructure stocks prove numerous
studies  (Ahmed–Hossain,  1990;  Antle,  1983,  1984;  Binswanger–Khandker–
Rozenzweig,  1993;  Pradhan–Ratha–Sarma,  1990).  However,  the  connection  be-
tween  existing  infrastructure  and  enterprises  (or  wider  speaking  productivity)  is
also criticized. This critical approach, nonetheless, will be here limited to few au-
thors  (e.g.  Henry  Aaron  (1990),  Charles  Schultze  (1990),  Dale Jorgenson  (1991),
John Tatom (1991, 1993) or Edward Gramlich (1994)) as, literature analysis is not
main goal of this paper.
This paper aims at checking if entrepreneurship is driven by infrastructure stock
in  rural  areas2  in  Poland  by  calculating  correlation  between  those  two  variables.
The dependent variable is the number of enterprises (per 1000 inhabitants) and the
independent the infrastructure stock (in various units according to the kind of infra-
structure). Such choice was made on basis of review of several documents of local
policy  in  Poland,  where  presence  of  infrastructural  stock  is  expected  to  change
entrepreneurship activity.
The character of available data makes difficult to measure long run dependency
between those two variables, mainly due to the lack of data before 1990 and to the
various  spatial  approaches  in  collecting  data  employed  during  transformation  pe-
riod.  Therefore,  this  paper  focuses  on  one  particular  year  (2002)  and  aggregates
data on the communes’ level. The infrastructural as well as entrepreneurship data
cover whole area of rural Poland (2171 communes) and were collected by the Pol-
ish National Statistical Office.
The infrastructure data gives measures of technical stocks (e.g.: water pipelines,
sewage systems, gas, electric and telephone networks and sewage plants) and were
collected during National Census in 2002. The data on firm formation is from the
Statistical  Office  Database  REGON  (the  National  Official  Business  Register),
which  is  the  most  representative  database  for  entrepreneurial  activity  in  Poland.
The basic unit of data contains information on company name and location, num-
ber  of  employees,  character  of  activity,  date  of  establishment,  and  branches.  The
REGON  database  collects  information  for  whole  Poland  however,  it  contains  in-
formation solely of companies with more than nine employees. Though the above-
mentioned  restriction  it  can  be  consider  as  the  most  valuable  polish  enterprises
database.
To proceed with the assessment of spatial differentiation of infrastructure stock
in rural areas in Poland, the first step is the calculation of the synthetic index sug-
gested by Parysek and Wojtasiewicz (1979) for evaluating spatial differentiation of
socio-economic  issues.  For  index  construction  purposes,  seven  features  were  se-
lected from various characteristics of communal infrastructure stock in rural areas

2Rural areas, according to the Polish Statistical Office, are all areas located outside of the city or town
borders.

Dariusz Swiatek :
The Impact of Technical Infrastructure on Entrepreneurship Activity - Example of Rural Areas in Poland.
In: Regionality and/or Locality. Pécs: Centre for Regional Studies, 2007. 178-186. p. Discussion Papers, Special
THE IMPACT OF TECHNICAL INFRASTRUCTURE ON ENTREPRENEURSHIP…
18
1
Figure 1
Technical Infrastructure Index in rural communes in Poland 2002

Source: Author’s own elaboration based on the Polish National Census 2002.
The  synthetic  index  of  infrastructure  equipment  shows  a  distinct  division  of
polish  communes  into  two  groups:  units  located  in  eastern  part  of  the  country
which are poorer equipped with technical infrastructure on the one hand and com-
munes located in western part of Poland which are strongly differentiate but gener-
ally better equipped with infrastructure stocks on the other hand. This phenomenon
can  be  partly  explained  by  historical  determinants:  like  inheriting  German  infra-
structure  stock  after  the  WWII  in  west  part  of  Poland  (Siemiński,  1992;  Pięcek,
2001; Świątek, 2003, 2004). There are few groups of rural communes with higher
number  of  infrastructure  stock  index  can  be  observed:  a)  communes  located  in
vicinity  of  large  cities  like  Poznań,  Kraków,  Bielsko  Biała,  and  Sielsian  agglom-
eration, and; b) communes that are under strong influence of middle size towns and
c) communes where former state farms were located (Dzun, 2005).
Rural communes with high and average infrastructure index create spatial shape
similar to spatial layout of areas with high values of the synthetic index of national
economy created in 60’s by the polish geographer Stanisław Leszczyki. The index
was created based on three groups of indicators: value of fixed capital assets, na-
tional  income  generated  and  national  income  per  capita  (Leszczycki,  1964).
Leszczycki’s  index  revealed  areas  with  high  living  standard,  characterised  by  in-

Dariusz Swiatek :
The Impact of Technical Infrastructure on Entrepreneurship Activity - Example of Rural Areas in Poland.
In: Regionality and/or Locality. Pécs: Centre for Regional Studies, 2007. 178-186. p. Discussion Papers, Special
THE IMPACT OF TECHNICAL INFRASTRUCTURE ON ENTREPRENEURSHIP…
18
3
During  the  period  of  transformation  from  central  planning  to  market  driven
economy started in 1989, entrepreneurship in Poland rose significantly. Changes in
law  regulations  reduced  to  minimum  the  administrative  requirements  for  opening
new companies, and thus resulting in quick increase of enterprises’ number. Poland
had 624,4 thus registered firms in 1989, while in 2002 this number rose to 2 261,9
thus.  The  most  significant  increase  of  entrepreneurial  activity  was  noticed  at  the
beginning of transformation period (years 1989–1992), when quantity of registered
companies rose 227,2% (Kamińska, 2006).
Increase of private activity in rural areas was observed especially in communes
located  in  the  neighbourhood  or  within  the  borders  of  the  Special  Economic
Zones;3  as  well  as  in  communes  that  beneficiated  by  international  aid  programs
(like PHARE); areas with potential for tourism and spa; and communes located in
the fringe of large cities. The latter group gathered 13% of all private companies in
rural areas in 2002. It is worth noting that all above mentioned communes had ex-
tra source of founds that allowed them not only to support entrepreneurship in di-
rect and indirect ways but also to promote general development in their area.
The  highest  concentration  of  private  firms  in  rural  Poland  was  in  the  north-
western  part  of  the  country  (voievodships:  Wielkopolskie,  Kujawsko-Pomorskie,
Pomorskie and Zachodniopomorskie), which had on average over than 58 compa-
nies  per  1000  inhabitants.  The  leading  position  was  reached  by  communes  with
potential for tourism (like  seashore, Mazury lake district or mountain communes)
as  well  as  those  located  in  vicinity  of  large  cities  (like  Poznań,  Budgoszcz,
Gdańsk).  On  the  other  hand,  the  smallest  number  of  companies  per  1000  inhabi-
tants  was  registered  in  the  eastern  part  of  Poland  (Lubelskie,  Podkarpackie,  Pod-
laskie voievodship), where even large cities do not seem to generate high entrepre-
neurial activity (e.g. Lublin, Rzeszów).
Hence,  to  check  how  technical  infrastructure  stock  (measured  by  the  infra-
structure  index)  influence  non-agricultural  economic  activity  (measured  by  the
number of companies registered per 1000 people) in rural areas in Poland, we must
analyse the result of the correlation analysis, which can be seen in Figure 3.
The correlation indicates moderate association between entrepreneurship and in-
frastructure  index  with  a  correlation  coefficient  of  0.270  and  sinusoidal  fit  where
y=68.739+19.725*cos (1.483x–2.387). The moderate association between analysed
variables means that the influence of technical infrastructure can not be considered
as a crucial for ‘new firm birth’. This level of dependency was confirmed also by
analysis of Canning and Fay (1993) for developing countries.
One of the reasons of the discovered lack of strong dependency can be found in
generally short history of technical infrastructure investments in rural areas. During

3Special  Economic  Zone  are  areas  created  to  stimulate  the  economic  activity  in  underprivileged
regions (e.g. diverse kinds of tax exemption).

Dariusz Swiatek :
The Impact of Technical Infrastructure on Entrepreneurship Activity - Example of Rural Areas in Poland.
In: Regionality and/or Locality. Pécs: Centre for Regional Studies, 2007. 178-186. p. Discussion Papers, Special
THE IMPACT OF TECHNICAL INFRASTRUCTURE ON ENTREPRENEURSHIP…
18
5
A  separate  problem  requiring  further  analysis  is  the  direction  of  causation  be-
tween infrastructure and entrepreneurship in rural areas. However, the goal of the
present  study  is  to  analyse  only  if  ‘firm  birth is  driven  by  infrastructure stock’,  a
statement frequently taken for granted in local policy making in Poland. Thus, the
causation problem between the above mentioned variables was omitted in this pa-
per,  which  is  based  on  the  assumption  that  infrastructure  is  independent  variable
that may influence or not entrepreneurial behaviour. Considering the results of the
undertaken analysis is recommended that the line of reasoning of dependency be-
tween infrastructure and entrepreneurship should be more cautiously applied, espe-
cially  concerning  the  low  level  of  infrastructure  development  experienced  in  Po-
land. Nonetheless, bearing in mind the theory of circular causation (Myrdal, 1957)
the more developed commune is, the bigger its development will be and therefore
the  possibility  of  infrastructure  driving  entrepreneurial  behaviour  should  be
strongly considered.
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