It’s Not Just About the Money: What Actually Promotes New Firm Formation? Evidence from Polish Municipalities

Abstract

This paper examined whether regional differences in Poland affect the use of various tools for supporting local entrepreneurship. It also verified whether there is a universal set of tools that accounts for the level at which local entrepreneurship support tools are used by municipalities. This study was based on a survey conducted among 882 Polish municipalities. Analyses were carried out using classical measures of descriptive statistics, supplemented by the Mann–Whitney U test and Kruskal–Wallis rank. The results reveal that the likelihood of municipalities with a local spatial development plan (LSDP) use more support instruments is statistically significant. For municipalities, having an LSDP also correlates with higher levels of local entrepreneurship. Moreover, the presence of an LSDP contributes not only to increased local entrepreneurship, but also aligns with long-term, sustainable, spatial and economic development goals. It was concluded that municipalities should be encouraged to create comprehensive development plans and, above all, to develop and implement local spatial development plans. Local decision-makers should must be made aware of the role of the plan and its importance for the level of entrepreneurship in the area. More attention should also be focused on the use of tools aimed at direct cooperation with entrepreneurs.

1. Introduction

It is commonly known that, from the perspective of local entrepreneurship development, municipalities are simultaneously labour providers, clients, customers and investors; virtually every action taken by a municipality has a direct or indirect impact on local businesses [1]. Municipal policies play a key role in promoting local entrepreneurship by creating a favourable business environment, reducing local taxes, introducing benefits and incentives, implementing strategies, and simplifying regulations [2]. In this study, entrepreneurship is defined as the creation of local businesses [3] and is measured by the number of newly established businesses in a municipality (according to the Entrepreneurship Database Methodology-World Bank [4]).

Given the ongoing developments and changes affecting the economy and society, continuous development and implementation of policy interventions is necessary to evaluate the toolkit that is used to effectively support entrepreneurial activities [5]. It is undeniable that supporting local entrepreneurship affects the level of socio-economic development of an area and, most importantly, improves its residents’ quality of life. Furthermore, in the face of current global challenges, supporting local entrepreneurship has become an essential element of sustainable development as it promotes inclusive economic growth, job creation and territorial resilience. Municipalities that incorporate sustainable development management practices into their entrepreneurship support strategies contribute not only to economic progress but also to social cohesion and environmental responsibility. Research evidence shows that, in a volatile global economy, municipal entrepreneurial strategies have had mixed success [6]. Researchers examine the impact of specific toolkits on the local economy and formulate conclusions on specific aspects to strengthen an environment that fosters business [7,8,9,10,11,12,13]. Optimal toolkits in relation to the type of municipality are also verified [14,15,16,17].

The authors prove that the financial autonomy of the local government [18], especially the revenue autonomy [19], determines the ability of the local government to continuously meet the collective needs of the community [20]. Revenue autonomy also determines the conditions for economic development [21], including, in particular, the promotion of entrepreneurship [22]. However, there is still no general “key” that explains the promotion of local entrepreneurship. This is particularly important for understanding the determinants of success and designing local policies to stimulate and develop the local economy.

The authors of this study aimed to verify whether there is a toolkit that reflects the level of entrepreneurial support in municipalities. The approach used is new in the literature and fills the research gap in this area. In order to achieve the adopted goal, the research questions were:

RQ1: How do regional differences in Poland affect the use of different instruments to support local entrepreneurship?

RQ2: Is there a universal set of tools used by municipalities to support local entrepreneurship?

This paper is part of a publication cycle on tools for fostering local entrepreneurship, with the authors drawing on extensive research to formulate guidance for local decision-makers. The results so far have influenced the research direction adopted in this paper.

The structure of the paper stands as follows. After the theoretical framework, we provide the methodology. Section 3 presents results followed by discussion, conclusions, and implications for policymakers. In the last section, we describe the limitations of our study.

2. Theoretical Framework

Municipalities have a wide range of instruments at their disposal that can support local entrepreneurship, which is widely described in the literature [23,24,25]. The main distinction is between soft support, infrastructural, financial and legal instruments. Researchers prove that local cooperation between municipalities and entrepreneurs is conducive to strengthening the competitive advantages of cooperating enterprises, increasing the resilience of local socio-economic systems [26]. It is indisputable that the creation of a positive business environment is of great importance, as entrepreneurship contributes to the growth of the supply of goods, citizens’ incomes, and local budget revenues [2]. At the same time, entrepreneurship increases investment attractiveness around smaller industrial centres [27].

Municipal governments most commonly use spending policies [28] or revenue policies, with a particular focus on tax instruments [29,30], to support businesses. However, the indicated channels of influence on stimulating entrepreneurship are rarely combined with each other [31]. The parallel pursuit of a “tax expenditure” policy causes budget resources to be depleted [32,33], thus limiting the ability of municipalities to engage in new pro-development projects, oriented at creating conditions for entrepreneurship [34]. Researchers believe that the centre of gravity in the discussion of municipal financial policy’s role in stimulating entrepreneurship should focus on the revenue side of budgets [35,36].

Revenue instruments at the disposal of municipalities constitute a wide range of tools including classic tax preferences, pricing policy instruments for municipal services, and even guarantees and loan guarantees [17,37]. At the same time, their effectiveness in stimulus processes varies significantly [38,39]. There is also no consensus about the effectiveness of individual instruments because studies of the effects of their use are usually conducted on small samples [40,41,42,43]. This argument is raised by Inglot-Brzęk and Skica [44]. Also, municipalities often do not verify their own efforts toward instruments that stimulate individual entrepreneurship [45].

While smaller municipalities mainly use tax concessions and exemptions, larger municipalities resort to the use of lower tax rates [31]. Despite the fact that solutions that reduce fiscal burdens create a positive image of the municipality, constituting its attractiveness in economic terms, practice does not unequivocally confirm the positive impact of such instruments on the formation of new businesses [46]. It does, however, strongly confirm their negative budgetary effects [47]. This means that tax-based solutions, while attractive in their premise, will not translate into stimulative effects on entrepreneurship when used in isolation from other instruments [29,48], or at least they will not have the same level of effect on each form of business entry. Fiscal preferences have a stronger effect on incumbents (rather than potential entrepreneurs considering starting a business) and those who choose complex forms of entrepreneurship rather than sole proprietorships when starting a business [31].

Relatively limited attention has been dedicated in the literature to sureties and guarantees provided by municipalities to stimulate entrepreneurship. Although researchers emphasise the availability of these instruments to municipalities [49,50,51], little is known about the effects of their use, let alone their impact on business formation. Grycuk and Russel [52] showed that the largest percentage of municipalities that participated or co-participated in the creation of business environment institutions were specifically involved in the establishment of credit guarantee funds.

In the discussion of financial solutions to support entrepreneurship aimed at the revenue side of municipal budgets, the management of municipal property cannot be overlooked. This is extremely important, because, as Łukomska-Szarek [53] points out, the dynamics with which local systems develop is determined not only by the amount of their own income or investments, but precisely by the municipal assets they own. The literature emphasises the role of these instruments, including, among others, the preferential policy of leasing real estate owned by municipalities in the processes of business formation [54,55]. Also analysed is the importance of the pricing policy for municipal services (including the amount of rent for rental of municipal premises and the approach to privatisation of municipal property), the rules for the acquisition, disposal and encumbrance of local government property that are transparent and consistent over time, a stable policy of prices and fees for municipal services, as well as fees for rent or lease of real estate belonging to municipalities [56].

The acquisition of external funds by municipalities influences the local level of entrepreneurship because of its role in promoting new business ventures and investments, especially in low-income and emerging countries [57]. The effect of correctly selected and implemented entrepreneurship support instruments is the financial development of municipalities, induced by the dynamics of new business formation in the municipality [58].

Spatial and regional aspects also play a significant role in shaping the level of local entrepreneurship. Studies confirm that the more knowledge is produced in a region, the more entrepreneurial opportunities are available in it. They also show that the level of entrepreneurial activity depends on the configuration of the local knowledge base, not just its size [59].

Spatial conditions in regions, including the urban–rural divide, significantly affect the situation of micro, small, and medium-sized enterprises and their development at the local level [60]. Local planning processes play a key role in Europe, for example, in managing urban and rural development, taking into account local considerations and fostering innovation for sustainable development [61]. If the investment in hand is in line with the purpose included in the LSDP, implementation can proceed relatively quickly. The local spatial development plan is one of the fundamental documents containing information about space (land use, conditions for its development, location of public purpose investments) [62]. Municipal authorities, through the provisions of the LSDP, determine the direction of development of the municipality, outline the spatial policy pursued, influence the economic development of the local government unit and the economic value of the space, as well as affect many aspects of daily life, society and the natural environment [63]. When creating and enacting the LSDP, the municipality as a local self-government unit must take both public and private interests into account [64].

The instruments and tools described here, cooperative linkages, preferences, concessions, legal regulations, regional conditions and the level of local socio-economic development are all integral and very complex elements of the local entrepreneurial landscape. The main challenge for municipalities should be to consciously strive to develop and use the optimal range of opportunities for them so as to strengthen the level of local entrepreneurship as much as possible.

3. Data and Methods

The survey was conducted in June–October 2019 using a two-stage process for selecting units. Poland was chosen as the research context due to its unique institutional conditions, in which municipalities have considerable autonomy in shaping local development policy while also facing diverse socio-economic conditions and financial constraints. These characteristics make Poland an important and transferable case for studying local mechanisms for supporting entrepreneurship. The initial purposive selection was based on 735 municipalities from an earlier project (“Support for entrepreneurship by the local government at the communal level”, conducted in 2014–2016, financed by the National Science Centre Poland). Dependent selection was then applied to select 347 municipalities to match the actual structure of municipalities in Poland. Proportional stratified selection was chosen for its efficiency [65] and generalisability [66]. Dependent randomisation without return was used. CAWI (Computer-Assisted Web Interviewing) and CATI (Computer-Assisted Telephone Interviewing) methods were used to survey municipalities. CAWI and CATI are standardised survey methods that use computer support to conduct structured interviews via online questionnaires and telephone calls, respectively. The survey included 882 local government units, representing more than 35% of the population. The structure of the units in the survey corresponded to the general population. The survey was representative as it ensured an appropriate structure and sample size (Figure 1).

As part of studying the collected statistical material, tools included in the unidimensional and bivariate analysis were used. In terms of one-dimensional analysis, classical measures of descriptive statistics were used (frequency of responses, arithmetic mean, minimum, maximum, quartile I (lower), quartile III (upper), median and standard deviation). In order to determine the occurring differences in the formation of the values of the analysed characteristics in the various subgroups of the studied municipalities (due to the characteristics indicated in the questionnaire metric), the Mann–Whitney U test and Kruskal–Wallis rank ANOVA were used. In each case, the levels of p-value for which the variable under study is statistically significantly different in the analysed subgroups of municipalities are given. All calculations were performed using the STATISTICA 13.3 statistical software package.

The survey analysed four groups of instruments (full version of the survey—Appendix A):

Group 1—cooperation with entrepreneurs (C in the survey),

Group 2—finance, taxes, administration (D in the survey),

Group 3—attracting investors and funds from outside (E in the survey),

Group 4—supporting NGOs (F in the survey).

4. Results

Based on the results, it can be concluded that the surveyed municipalities were highly differentiated in terms of the degree to which each group of pre-entrepreneurship support tools was used (

Table 1. Use of each group of tools intended to support local entrepreneurship by municipalities in Poland.

Group Tools	Average Level of Use	Municipalities Not Using the Tools at All	Municipalities Using All the Tools Listed
1	24.82%	1.02%	0.34%
2	29.82%	15.65%	0.45%
3	37.67%	2.49%	0.79%
4	63.86%	13.83%	30.84%

Source: Own elaboration based on conducted research.

). The most frequently used tools were from supporting NGOs (63.86%), the least frequently used tools were from cooperation with entrepreneurs (24.82%).

An analogous analysis at the level of municipality types showed that, for the fourth group of tools alone, the different types of municipalities did not have a statistically significant difference (Figure 2). In terms of supporting NGOs, cities with county rights used an average of 72.73% of the available tools; urban municipalities, 68.53%; urban–rural municipalities, 62.86%; and rural municipalities, 62.42%. There were also no such differences in the degree of use of tools included in the area of finance, taxation and administration between cities with county rights and urban municipalities, and urban and urban–rural municipalities. In all other cases, the different groups of municipalities showed statistically significant differences (p-value < 0.0001) in the use of each group of tools.

The differences in the degree of use of individual entrepreneurship support tools, however, were not generally due to the spatial location of a given municipality in Poland. In the case of tools describing the municipality’s cooperation with entrepreneurs, some statistically significant (p-value = 0.0510) variation could be observed in how often the surveyed municipalities used such tools, depending on the voivodeship to which they administratively belonged (from an average of 20% in the case of Podlaskie Voivodeship to 33.33% in Zachodniopomorskie Voivodeship). At the level of individual types of municipalities (cities with county rights, urban, urban-rural or rural), such differences were no longer visible. There were also no statistically significant differences in the use of other groups of tools between regional districts.

There were statistically significant differences in the use of each group of tools by different types of municipalities within a single voivodeship. This is particularly evident in the case of tools describing the municipality’s cooperation with entrepreneurs, and tools used by the municipality to attract investors and external funds. Significant differences in the use of tools included in group 2 (finance, taxation and administration) by cities with county rights, urban, urban–rural or rural municipalities occurred only in some voivodeships (Kujawsko-Pomorskie, Lubelskie, Świętokrzyskie and Zachodniopomorskie), and in terms of tools related to supporting NGOs, only in the Podlaskie Voivodeship (

Table 2. The range of use (min–max) of each group of entrepreneurship support tools by municipalities and p-values for the Kruskal–Wallis test examining differences in the use of the studied groups of tools by different types of municipalities.

Voivodeship		Group 1	Group 2	Group 3	Group 4
Dolnośląskie	min-max	18.27% (D)–48.72% (A)	27.44% (D)–53.03% (A)	32.14% (D)–64.29% (A)	47.32% (C)–95.83% (A)
	p-value	0.002	0.348	0.0943	0.0946
Kujawsko-Pomorskie	min-max	17.90% (D)–79.49% (A)	15.91% (B)–62.12% (A)	32.14% (B)–94.05% (A)	59.82% (C)–87.50% (A)
	p-value	0.0053	0.0379	0.0394	0.6315
Lubelskie	min-max	18.32% (D)–40.38% (A)	23.70% (D)–53.98% (B)	29.34% (D)–57.14% (A)	43.75% (A)–75.00% (B)
	p-value	0.0112	0.0162	0.0115	0.5659
Lubuskie	min-max	16.67% (D)–63.46% (A)	26.26% (D)–35.23% (B)	30.16% (D)–64.29% (A)	37.50% (A)–65.63% (B)
	p-value	0.0353	0.9150	0.2783	0.5829
Łódzkie	min-max	14.60% (D)–67.31% (A)	19.35% (D)–68.18% (A)	27.11% (D)–82.14% (A)	50.00% (A)–81.25% (B)
	p-value	0	0.0808	0.0056	0.9536
Małopolskie	min-max	17.81% (D)–61.54% (A)	25.00% (D)–50.00% (B)	31.22% (D)–89.29% (A)	54.17% (B)–75.00% (A)
	p-value	0.0001	0.1341	0.0025	0.838
Mazowieckie	min-max	16.67% (D)–100.00% (A)	20.61% (D)–81.82% (A)	29.84% (D)–100.00% (A)	46.88% (C)–87.50% (A)
	p-value	0.0051	0.1349	0.0028	0.2185
Opolski	min-max	19.93% (D)–46.15% (B)	27.27% (D)–59.09% (B)	39.61% (D)–71.43% (B)	59.82% (C)–100.00% (B)
	p-value	0.0664	0.1875	0.2333	0.2283
Podkarpackie	min-max	19.07% (D)–55.77% (A)	22.16% (D)–39.77% (A)	25.79% (D)–64.29% (A)	45.83% (D)–100.00% (A)
	p-value	0.0008	0.1489	0.0367	0.5688
Pomorskie	min-max	16.08% (D)–79.81% (A)	28.41% (A)–41.82% (C)	33.93% (D)–66.96% (A)	57.81% (B)–81.25% (A)
	p-value	0.0063	0.8271	0.3237	0.8274
Śląskie	min-max	18.40% (D)–56.87% (A)	24.82% (D)–38.31% (A)	26.54% (D)–66.33% (A)	57.14% (B)–60.71% (A)
	p-value	0	0.317	0	0.9862
Świętokrzyskie	min-max	20.14% (D)–84.62% (B)	19.79% (D)–79.55% (B)	33.40% (D)–96.43% (A)	61.76% (C)–100.00% (B)
	p-value	0.0072	0.0434	0.0505	0.2332
Warmińsko-Mazurskie	min-max	21.15% (C)–92.31% (A)	27.27% (C)–45.45% (A)	39.12% (D)–85.71% (A)	67.86% (C)–100.00% (A)
	p-value	0.0416	0.0416	0.0416	0.0416
Wielkopolskie	min-max	18.62% (D)–44.23% (B)	26.45% (D)–46.02% (B)	28.57% (A)–51.34% (B)	61.65% (D)–90.63% (B)
	p-value	0.0004	0.0698	0.0132	0.0896
Zachodniopomorskie	min-max	21.37% (D)–85.90% (A)	26.36% (C)–86.36% (A)	28.57% (D)–82.14% (A)	58.33% (D)–93.75% (B)
	p-value	0.0104	0.0253	0.0349	0.3736

A—city with district rights, B—urban municipality, C—urban–rural municipality, D—rural municipality. Source: Own elaboration based on conducted research.

).

In the next step, the relationship between each group of entrepreneurship support tools and whether the municipality has (n = 724) or does not have an LSDP (n = 158) was analysed (

Table 3. Relationship between the use of tools from the group and whether the municipality has a land use plan.

Tool Group	LSDP	Average	Median	Min.	Max.	Lower Quartile	Upper Quartile	Standard Deviation
1	yes	26.70%	23.08%	0.00%	100.00%	15.38%	34.62%	18.46%
	no	16.19%	15.38%	0.00%	57.69%	11.54%	23.08%	9.75%
2	yes	32.08%	27.27%	0.00%	100.00%	13.64%	45.45%	23.53%
	no	16.43%	9.09%	0.00%	72.73%	0.00%	27.27%	18.99%
3	yes	39.71%	39.29%	0.00%	100.00%	25.00%	53.57%	21.96%
	no	28.32%	26.79%	0.00%	71.43%	14.29%	42.86%	18.42%
4	yes	66.52%	75.00%	0.00%	100.00%	37.50%	100.00%	34.83%
	no	51.66%	62.50%	0.00%	100.00%	0.00%	87.50%	39.13%

Source: Own elaboration based on conducted research.

). It was found that the increased frequency with which municipalities with developed LSDPs used individual groups of tools was statistically significant (p-value < 0.0001). In the group of tools describing the municipality’s cooperation with enterprises (group 1), municipalities that had LSDPs used an average of 27% of such tools, while municipalities that did not have LSDPs used only 16% of all pre-entrepreneurship support tools available to them.

The situation is similar for tools included in the catalogue of financial, tax and administrative instruments (group 2). Municipalities with LSDPs used an average of 32% of the available tools in this group, while municipalities without LSDPs used an average of only 16% of the tools available to them.

In the group of instruments relating to the municipality’s solicitation of investors and ze-funds (group 3), municipalities with LSDPs used almost 40% of the available tools, compared to 28% that did not have an LSDP. On the other hand, in terms of tools included in supporting NGOs (group 4), municipalities with LSDPs that used an average of 67% of the available tools, while municipalities without such a plan used the available tools at an average of about 50%.

Distinguishing by type of municipality (

Table 4. Relationship between the use of tools from the group and whether the municipality has a land use plan, by municipality type.

Municipality Type	Tool Group	LSDP	Average	Median	Min.	Max.	Lower Quartile	Upper Quartile	Standard Deviation
Urban	1	No	16.03%	13.46%	3.85%	30.77%	7.69%	25.00%	9.68%
		Yes	39.13%	34.62%	3.85%	96.15%	23.08%	50.00%	18.75%
	2	No	17.05%	0.00%	0.00%	72.73%	0.00%	36.36%	25.28%
		Yes	40.34%	36.36%	0.00%	100.00%	18.18%	59.09%	26.40%
	3	No	25.00%	16.07%	3.57%	71.43%	7.14%	39.29%	22.38%
		Yes	50.17%	53.57%	0.00%	96.43%	35.71%	64.29%	21.95%
	4	No	65.63%	75.00%	0.00%	100.00%	43.75%	100.00%	37.74%
		Yes	68.87%	75.00%	0.00%	100.00%	50.00%	100.00%	34.40%
Urban–rural	1	No	21.39%	19.23%	0.00%	57.69%	11.54%	26.92%	12.73%
		Yes	26.46%	23.08%	0.00%	92.31%	15.38%	34.62%	14.71%
	2	No	18.74%	13.64%	0.00%	63.64%	0.00%	36.36%	20.64%
		Yes	34.60%	31.82%	0.00%	100.00%	18.18%	50.00%	24.12%
	3	No	32.23%	28.57%	0.00%	67.86%	17.86%	46.43%	18.25%
		Yes	40.83%	39.29%	0.00%	85.71%	28.57%	53.57%	18.66%
	4	No	48.78%	62.50%	0.00%	100.00%	0.00%	87.50%	40.97%
		Yes	65.77%	75.00%	0.00%	100.00%	37.50%	100.00%	36.05%
Rural	1	No	14.24%	15.38%	0.00%	34.62%	9.62%	19.23%	7.52%
		Yes	18.97%	19.23%	0.00%	73.08%	11.54%	23.08%	10.37%
	2	No	15.60%	9.09%	0.00%	68.18%	0.00%	22.73%	17.63%
		Yes	26.76%	22.73%	0.00%	95.45%	9.09%	40.91%	20.19%
	3	No	27.16%	25.00%	0.00%	71.43%	14.29%	42.86%	18.04%
		Yes	32.45%	32.14%	0.00%	100.00%	17.86%	46.43%	18.45%
	4	No	51.68%	56.25%	0.00%	100.00%	12.50%	87.50%	38.44%
		Yes	65.38%	75.00%	0.00%	100.00%	37.50%	100.00%	34.57%
City with district rights	1	Yes	64.42%	67.31%	15.38%	100.00%	46.15%	84.62%	24.59%
	2	Yes	46.18%	47.73%	0.00%	100.00%	27.27%	68.18%	27.62%
	3	Yes	71.92%	75.00%	0.00%	100.00%	53.57%	89.29%	23.92%
	4	Yes	72.73%	87.50%	0.00%	100.00%	62.50%	100.00%	33.81%

Source: Own elaboration based on conducted research.

), it can be concluded that having a zoning plan in the case of urban municipalities had a statistically significant (p-value < 0.0001) effect on the degree of use of instruments relating to municipalities’ co-working with businesses; finance, taxation and administration (p-value = 0.0023); and the municipality’s acquisition of investors and external funds (p-value = 0.0012). In contrast, there was no such difference for the extent of use of tools related to supporting NGOs (p-value = 0.1400). In the case of urban–rural municipalities, significant differences in the degree of use of tools belonging to each group of support forms were present in all four groups of instruments: for the first group, p-value = 0.004, for the second group, p-value = 0.0001, for the third group, p-value = 0.0130, and for the fourth group of support, p-value = 0.01. The situation was similar for rural municipalities, with p-value < 0.0001 for instruments included in groups one and two, p-value = 0.0100 for group three, and p-value = 0.001 for group four. An analogous analysis was not performed for cities with county rights as all 44 MNPPs surveyed had an LSDP drawn up.

As a final step, a relationship was tested between the level of entrepreneurship as measured by the average number of start-ups in 2020 (the first available data after the survey implementation period) and the municipality’s ownership of LSDP (

Table 5. Relationship between the level of entrepreneurship and the municipality’s possession of LSDP.

Municipality Type	LSDP	n	Average	Median	Min.	Max.	Lower Quartile	Upper Quartile	Standard Deviation	p-Value
total	Yes	724	197.0304	73.5	8	20752	37.0	143.0	905.8983	3.05 × 10−10
	No	158	64.66456	40.5	4	472	26.0	75.0	68.6654
city with district rights	Yes	44	1730.614	708.5	250	20752	403.5	1434.5	3332.5050	-
	No	0	-	-	-	-	-	-	-
urban municipality	Yes	104	198.1250	180.0	36	554	104.0	266.5	117.3379	0.3340
	No	12	171.1667	140.500	19	472	67.5	241.5	144.6028
urban-rural municipality	Yes	198	111.5303	88.5	18	552	48.0	143.0	87.6791	0.0151
	No	42	80.35714	64.5	15	277	36.0	100.0	59.3332
rural municipality	Yes	378	63.00265	45.0	8	423	29.0	81.0	54.9401	3.71 × 10−4
	No	104	46.03846	36.0	4	243	19.0	57.0	42.1926

Source: Own elaboration based on conducted research.

). The Mann–Whitney U test indicated the presence of a statistically significant relationship (p-value =3.05 × 10^-10) for all surveyed municipalities. An analogous verification by type of municipality showed that there was no statistical relationship for urban municipalities, but there was for rural–urban and urban municipalities (all surveyed county-level cities had LSDP).

5. Discussion

The results of this study showed considerable variation among Polish municipalities in terms of the use of different groups of tools to support local entrepreneurship.

The fact that municipalities most often use tools to support NGOs in entrepreneurship stimulation procedures may be due to the goals of their activities and local focus, making local governments a natural partner for joint initiatives [67]. This unity in the use of NGO support may suggest a widespread recognition of the importance of NGOs in local development in different urban contexts. At the same time, it is puzzling that tools related to cooperation with entrepreneurs were the least used. This discrepancy indicates a greater emphasis on indirect support mechanisms, compared to direct support of entrepreneurs. This finding is in line with a study by Cieślukowski [68], which states that support for innovation in Poland, including tax breaks and public subsidies, is more focused on indirect measures, such as tax incentives for R&D, which mainly benefit small and medium-sized enterprises. In addition, the discrepancy between the ideals of implementing and managing direct cooperation practices and actual daily practices translates into municipalities relying more on indirect mechanisms to support entrepreneurship [69].

The results confirm the importance of regional socio-economic conditions and local policy priorities for the use of cooperation and financial tools (RQ1). This fits with the insights of Wichowska and Lizińska [70], who emphasise the importance of factors such as demographic issues, economic activity and budget expenditures competing with capital expenditures, which may influence the investment activity of municipalities in the eastern part of Poland. This differentiation may also be a function of the region’s knowledge deposits [71]. Their lower resource correlates negatively with the potential for entrepreneurship in a given area. Equally important in this regard is the configuration of knowledge in the region. Its adequate base (not only in terms of size, but also in terms of structure), translates into greater opportunities for entrepreneurial activities [59]. Inter-regional variation in entrepreneurship is also explained by Aparicio et al. [72], who referred to the activity of regional governments. The authors point out that regional governments investing in research and development play the role of entrepreneurs in the public sector. Thus, they go beyond the role of purely regulatory bodies [73]. Their support through indirect spending on R&D in the region is responsible for the creation of knowledge spillover effects [74] and the emergence of new business ventures [75].

Although a universal set of tools used by municipalities to support local entrepreneurship was not identified (RQ2), it was found that municipalities with LSDP were statistically more likely to use a wider range of support tools in all categories. This was particularly evident in the areas of cooperation with entrepreneurs, financial and administrative tools, and attracting investors. This suggests that awareness of the need to use a range of tools is reflected in the municipality’s development of LSDPs and thus correlates with a more proactive and structured approach to supporting local entrepreneurship. At the same time, it is important to highlight the positive correlation between having an LSDP and a higher level of pre-entrepreneurship, as measured by the average number of new companies established in 2020.

6. Implications

Municipalities should be encouraged to complete comprehensive development planning and, above all, to develop and implement local spatial development plans. These plans appear to be a key factor in the effective use of various tools to support economic initiatives and increase local entrepreneurship. Local decision-makers need to gain awareness of the role of the plan and its importance for the level of entrepreneurship in the area.

More attention should be focused on using tools aimed at working directly with entrepreneurs. Local policies should focus on strengthening these interactions.

Regional differences in the use of tools, especially in cooperation with entrepreneurs, underscore the need for region-specific strategies. This is particularly important when Poland’s Eastern Wall is adjacent to areas of armed conflict. These unique contexts determine the need to design support mechanisms dedicated to specific areas, while not exempting municipalities from the need to develop LSDPs.

The high use of NGO support tools indicates their importance in local entrepreneurial ecosystems. Therefore, it is worth considering directions for optimal use of the potential of NGOs and supporting partnerships between them and local businesses.

Although these recommendations are based on data from Poland, they provide valuable lessons for countries with decentralised systems, financial constraints at the municipal level, and strong regional disparities. The case of Poland—representing a post-transition economy that balances local autonomy and structural constraints—can serve as a valuable reference point for local entrepreneurship strategies in other contexts facing similar challenges in terms of governance and sustainable development.

7. Conclusions

The research performed proved that there is no universal set of tools used by municipalities to support local entrepreneurship. Despite this, strategic planning in municipalities, expressed by the LSDPs, contributes to more thoughtful entrepreneurship-oriented public policies. These, in turn, are characterised by a broader set of (most likely complementary) instruments used to support economic initiatives. This position is valid regardless of the group of instruments estimated. Strategic planning in municipalities is coupled with a broader use by municipalities of the support instruments available to them, regardless of the nature of the development policies they choose and pursue.

The status of urban municipalities did not statistically significantly differentiate them from other municipalities in terms of the use of tools related to supporting NGOs. Thus, this type of support is universal, and “all surveyed municipalities” are involved in providing it, regardless of the type of category.

The study also leads to the conclusion that, when discussing the role of municipal financial policy in stimulating entrepreneurship, the focus should be on the income side of budgets. On the one hand, the debt capacity of municipal budgets is a derivative of the ability to repay debt and the cost of servicing it (these, in turn, are conditioned by income potential). On the other hand, the use of fiscal preferences for the creation of a business-friendly climate requires a stable and abundant budget.. Only then will the effects of revenue depletion (implemented with the expected stimulative effects in mind) not be devastating to the budget. Entrepreneurship-oriented municipal policies—especially when embedded in long-term spatial and strategic planning—can serve as a platform for sustainable development by fostering local job creation, strengthening community resilience, and encouraging responsible use of local resources.

8. Limitations

The study focuses primarily on the use of specific groups of support tools; thus, there is a risk of overlooking unconventional innovative approaches that may be used by some municipalities and limiting the comprehensiveness of the findings.

The data used in this study are cross-sectional and reflect a specific period. Changes in political, economic or social conditions over time were not taken into account. One interesting direction for the continuation of the study is the level of long-term survival of companies and the development of new companies after 2020 (that is, taking into account the effects of the COVID-19 pandemic and the war in Ukraine, among others).

The study is based on data declared by municipalities with regard to their use of support tools. This method can introduce biases, such as over-reporting of positive activities or under-reporting of challenges and failures. This can affect the accuracy and reliability of the findings.

The study does not analyse the impact of external factors, such as national policies, economic cycles or international influences, which can also significantly affect local entrepreneurship and the effectiveness of urban support tools. The aforementioned aspects provide direction for further research in this area.