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«Report 2d Fieldwork entrepreneurs, Budapest (Hungary) -Work package 6: Fieldwork entrepreneurs Deliverable nr.: D 7.1 Lead partner: Partner 3 (METU) ...»

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Governing Urban Diversity:

Creating Social Cohesion, Social Mobility and Economic Performance in Today’s Hyper-diversified


Report 2d

Fieldwork entrepreneurs, Budapest (Hungary)

---------------------------------------------------------------------------------------------------------Work package 6: Fieldwork entrepreneurs

Deliverable nr.: D 7.1

Lead partner: Partner 3 (METU)

Authors: Lajos Boros, Dániel Horváth, Szabolcs Fabula, Zoltán Kovács Nature: Report Dissemination level: PP Status: Final Draft Date: 20 March 2016

---------------------------------------------------------------------------------------------------------This project is funded by the European Union under the 7th Framework Programme; Theme: SSH.2012.2.2.2-1;

Governance of cohesion and diversity in urban contexts DIVERCITIES 319970 Report 2d (Hungary) 20 March 2016 To be cited as: Boros, L., Horváth, D., Fabula, Sz. and Kovács, Z. (2016). Fieldwork entrepreneurs, Budapest (Hungary). Szeged: University of Szeged.

This report has been put together by the authors, and revised on the basis of the valuable comments, suggestions, and contributions of all DIVERCITIES partners.

The views expressed in this report are the sole responsibility of the authors and do not necessarily reflect the views of European Commission.

DIVERCITIES 319970 Report 2d (Hungary) 20 March 2016 Contents

1. Introduction

2. The entrepreneurs and their businesses

2.1. Characteristics of the entrepreneurs

2.2. Characteristics of the businesses, their evolutionary path and core fields of activity.................9 2.3. The location and site/s of the enterprise

2.4. Conclusions

3. Motivations to start a business and the role of urban diversity

3.1. Introduction

3.2. Motivations for establishing a business

3.3. The importance of location and place diversity

3.4. Selecting the line of business

3.5. The availability of advice, start-up support, and finance

3.6. Conclusions

4. Economic performance and role of urban diversity

4.1. Introduction

4.2. Economic performance of the enterprises

4.3. Markets, customers and suppliers

4.4. Relations amongst entrepreneurs: Evidence of competition or co-operation?

4.5. Long-term plans and expectations of the entrepreneurs

4.6. Conclusions

5. Institutional support and government policies

5.1. Introduction

5.2. Views on the effectiveness of business support provided by local and central governments.......... 34

5.3. Wider awareness of organisations, programmes, and initiatives to support entrepreneurs.......... 36

5.4. Policy priorities for entrepreneurship

5.5. Conclusions

6. Conclusion

6.1. Summary of the key findings

6.2. Policy recommendations


Appendix 1: List of the interviewed entrepreneurs

DIVERCITIES 319970 Report 2d (Hungary) 20 March 2016

1. Introduction High levels of economic growth and increasing well-being of citizens (Bodaar and Rath, 2005; Fainstein, 2005), which are the main objectives of urban policies, are closely connected to entrepreneurship and the ability of local people to create new enterprises.

In the global era, cities compete for enterprises with high economic performance and talented entrepreneurs, besides creating conditions necessary for new start-ups. The literature emphasises that cities open to diversity are able to attract a wider range of entrepreneurs than those that are relatively closed (Eraydin et al., 2010; Fainstein, 2005;

Florida, 2002; Taşan-Kok and Vranken, 2008). Empirical research results on how economic competitiveness is connected to urban diversity, however, are rather limited and they provide evidence usually only on the macro level. One of the aims of this project is to close this gap with empirical evidence collected at neighbourhood level from 14 diverse cities of Europe and Canada.

In this report, we focus on the economic performance of enterprises in deprived, but dynamically changing and diverse neighbourhoods in selected cities and the conditions that support and sustain their competitiveness and longer term development. We aim to demonstrate the relationships between urban diversity and the success of entrepreneurs.

More specifically, we want to explain and document the reasons why some neighbourhoods can provide conditions for individuals or groups to strengthen their creative forces and enhance their economic performance.

First, the report examines the entrepreneurs, who start their businesses in a diversified neighbourhood of Budapest (Józsefváros) and the factors that define their economic performance. It might be expected that factors like ethnic background of the entrepreneur, his/her age, family background, gender, education and previous experiences are important variables in determining the success of their enterprises. These factors mediate the influence of diversity on the neighbourhood and city level. Second, the report explores the main motivations of entrepreneurs and assess whether neighbourhood diversity is important factor for starting their businesses, where they are located now. Third, we evaluate the market conditions that are important for the economic performance of entrepreneurs. Fourth, the report evaluates the role of policies and measures at different levels and the institutionalisation of such policies.

The evidence on these issues can be reached with concrete research questions listed

below, which will constitute the focus of the chapters in this report:

1. What are the main characteristics of entrepreneurs and their business? What are the evolutionary paths and the fields of activity? What are the physical conditions and the ownership pattern of their offices/production sites/shops? (Chapter 2)

2. What were the main motivations of entrepreneurs for establishing a business?

What is the importance of neighbourhood diversity for starting their business where they are located now? Why did he/she select this line of business and from whom the entrepreneur has received support in different forms in starting this enterprise? (Chapter 3)

3. What are the success and failure factors for the economic performance of enterprises? What is the current level of performance and how did it change? To what extent does the diversity of the neighbourhood play a role in economic performance? What are the long-term plans of entrepreneurs? Do they have any

–  –  –

This report is based on in-depth interviews conducted in the 8th district of Budapest, called Józsefváros. This is one of the most diversified areas of Budapest with a relatively high level of immigrant population. The housing stock is diverse as well due to the multilayered building activities affecting the district since the middle of the 19th century, and recently launched large-scale regeneration programmes. The development accelerated after the 1870s, when the inner part of the district was built up with 3-4 storey tenement buildings. A mix of lower and upper class residents inhabited the area. Prior to World War I the local economy was characterised by craftsmen, but the local cafés and restaurants were also widely known throughout Budapest. Lower status Jewish and Roma musician population was also present in Józsefváros at this time.

In the interwar period a massive slum formation took place in the district as the strata gradually moved to other more elegant parts of Budapest, e.g. Buda Hills (Czirfusz et al., 2015; Ladányi, 2008). After World War II, the emerging housing shortage (caused by the inflow of industrial workforce) was tackled by splitting larger apartments into smaller ones. In this period, Józsefváros suffered from disinvestment, resulting in deteriorating housing stock and bad image. Subsequently, Józsefváros became one of the most stigmatised areas of Budapest, especially when the inflow of poorer Roma population accelerated in the early 1970s (Ladányi, 1989; 2008).

After the change of regime (1990) the main aim of local government was to improve the quality of the housing stock and transform the social structure of Józsefváros by attracting young professionals, tourists, students and well-off foreigners (Czirfusz et al., 2015). The students and other young people who move to the District can benefit from the huge variety of rental dwellings and the affordable rents. As the Józsefváros Integrated Development Strategy emphasises, the District is a higher educational centre with national-level significance since 10 per cent of the total student population studying in Hungary are registered at Józsefváros-bound institutions. The concentration of highereducation institutions is also outstanding here: 11 universities and colleges with 18 faculties are located in the area (Pest-Budapest Konzorcium, 2015). This is an important driving force of a studentification process which goes hand in hand with other more classical forms of gentrification. Józsefváros with a diversified housing stock and hospitality and leisure facilities offers a good compromise for students between the ‘boring’ outskirts and the tourist-flooded city centre. In addition, in 1993, the largest Chinese market (‘Four Tigers Market’) in Budapest has been established and it remained open until 2013. This was not just the centre of Asian commerce and a focal point of Chinese economic activity, but also an infamous place because of the illegal trade activities.

The post-1990 socio-economic processes – i.e. urban regeneration and concomitant gentrification, the strengthening of studentification, the arrival of African and Asian immigrants – have made the local society exceptionally mixed by Hungarian comparison.

With its 76,250 inhabitants (2011) Józsefváros is only eleventh among the 23 districts in the city, but the ratio of ethnic (non-Hungarian) people is far the highest with 12 percent.

DIVERCITIES 319970 Report 2d (Hungary) 20 March 2016 Among the ethnic minorities the Roma/Gypsy has the largest community in Józsefváros with a 4 percent share of the total population (for the entire city this figure is 1.17%).

The other major non-Hungarian ethnic groups in the area are the German (1.31%), the Romanian (0.82%) and the Chinese (0.72%) (Hungarian Central Statistical Office, 2011;

Pest-Budapest Konzorcium, 2015) Among the ethnic entrepreneurs, Chinese and Vietnamese traders are important for both the middle and lower class. The major income of Chinese entrepreneurs stems from wholesale activities which create the opportunity of resale of cloths, consumer goods, furniture and electronics in the shopping malls. Arabs originally came to Budapest to do business as money brokers, or in delicacy shops, and restaurants. Turkish and Kurdish people are living here as tradesmen, businesspeople or owners of gyros-fast food bistros (Kohlbacher & Protasiewcz, 2012).

This development path formed a diverse local economy with the mix of traditional economic activities and newly settled or emerged businesses which aim to attract different types of consumers. Furthermore, the relatively high rate of foreign born population lead to a more visible presence of ethnic entrepreneurship. Due to constant immigration, the social status of the area is slowly increasing, but this is a spatially differentiated process: the most intense changes take place in the core areas of large-scale urban rehabilitation programs (most prominent being the Corvin Promenade project).

This report is based on in-depth interviews conducted with 40 entrepreneurs and key actors of local entrepreneurship in Józsefváros, between September 2015 and January

2016. During the fieldwork is was an imperative that the group of interviewees reflect the diversity in entrepreneurship within the case study area. For this purpose, we tried to contact as many types of entrepreneurs as possible (e.g. firms from various sectors, private entrepreneurs, SMEs and large companies, ventures with non-Hungarian ethnic background, etc.). In addition, we conducted interviews with four key actors (e.g.

representative of the local economic chamber) who all had deeper knowledge on the business climate of Józsefváros.

Interview partners were recruited through different channels. Firstly, one of the local residents – also interviewee in a previous research (the Work Package 6 of this project;

see Fabula et al., 2015) – acted as key person and mediated between us and the entrepreneurs; we got approximately one third of the interviewees’ addresses through this channel (mostly private, micro- and small-sized enterprises). Secondly, RÉV8 Plc.1 helped us reach more powerful economic actors, since it has developed a broad professional network in Józsefváros. Thirdly, a small part of the respondents (2 persons) were approached by the ‘snowball’ method, and some of them – especially ethnic entrepreneurs – were asked for interview without mediator, just popping in from the street.

Although we intended to compose a group of interviewees which appropriately represent a balanced picture of diversity in Józsefváros (Appendix 1), the sample has certain shortcomings. Firstly, female entrepreneurs are underrepresented, as only six out of 40 respondents are women. Secondly, in Józsefváros and the neighbouring districts there are RÉV8 is a company founded by the local government of Józsefváros. Its primary aim is to manage local urban renewal programmes.

–  –  –

2. The entrepreneurs and their businesses A growing diversity can be observed in the typologies of entrepreneurs in the literature.

The typologies of entrepreneurs traditionally can be based on business orientation, sector, size of business, educational background, demography etc. (Tang et al., 2007).

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