In terms of intense globalization, the development of economics acquires certain peculiarities. National, regional and 
international interests intersect and much effort is needed to avoid conflicts, support the development and strengthening of the country. Small scales of economy have a certain affect on the limited resources, and therefore, some extra stimuli to make the development permanent and irreversible are needed. In this respect, direct foreign 
investments can be prioritized. When describing the association between the GDP and direct foreign investments, the reliability and methods of calculation of statistical data must be considered. In addition, the question as how reasonable 
it is to make direct foreign investments in some or other field is to be considered. Thorough understanding of the problem and foreseeing the prospects gives the countries with small open economies a chance to develop their national production in the way to support the improvement of the country’s competitiveness

Mikiashvili, N.

Institutional Repository of Vadym Hetman Kyiv National Economic University

59
які дані необхідні та як правильно з ними працювати, та потребує
вирішення низки нових завдань з питань інформаційної безпеки.
Висновки. Ускладнення середовища призводить появи нових
факторів впливу на підприємство. Це доводить необхідність удо-
сконалення існуючої методології дослідження систем моніторин-
гу з метою своєчасного та оперативного опису середовища функ-
ціонування підприємства, на основі суміжних областей знань:
математики, програмування і економічної теорії. Подальші до-
слідження будуть пов’язані з побудовою інформаційної моделі
підприємства, що поєднує описані технології управління, дозво-
ляє інтегрувати цю модель у загальну систему економічного
управління підприємства з метою пошуку рішень на нові виклики
у середовища його функціонування.
Література
1. Интеллектуальный анализ динамики бизнес-систем: Учеб. /
Н. М. Абдикеев, С. Н. Брускин и др.; Под науч. ред. Н. М. Абдикеева и
др. — М.: ИНФРА-М, 2010. — 320 с.
2. Леоненков Александр Васильевич. Самоучитель UML / Александр
Васильевич Леоненков, 2 изд., перераб. и допол. — СПб.: БХВ-Петер-
бург, 2004. — 432 с.
3. Репин В. В., Елиферов В. Г. Процессный подход к управлению.
Моделирование бизнес-процессов / Репин В. В., Елиферов В. Г. — М.:
РИА «Стандарты и качество», 2006. — 408 с.
4. Системы управления эффективностью бизнеса: Учеб. пособие /
Н. М. Абдикеев; Под науч.ред. Н. М. Абдикеева, О. В. Китовой. — М.:
ИНФРА-М, 2010. — 282 с.
5. Шеер А.-В. Моделирование бизнес-процессов. — М.: Весть-Мета-
Технология, 2000. — 205 с.
N. Mikiashvili, Ph.D.,
Associate Professor of Econometrics Department,
Ivane avakhishvili Tbilisi State University
nino.mikiashvili@tsu.ge
SOME PECULIARITIES OF THE DEVELOPMENT
OF SMALL ECONOMIES
ABSTRACT. In terms of intense globalization, the development of
economics acquires certain peculiarities. National, regional and
international interests intersect and much effort is needed to avoid
conflicts, support the development and strengthening of the country.
60
Small scales of economy have a certain affect on the limited
resources, and therefore, some extra stimuli to make the development
permanent and irreversible are needed. In this respect, direct foreign
investments can be prioritized.
When describing the association between the GDP and direct foreign
investments, the reliability and methods of calculation of statistical
data must be considered. In addition, the question as how reasonable
it is to make direct foreign investments in some or other field is to be
considered. Thorough understanding of the problem and foreseeing
the prospects gives the countries with small open economies a chance
to develop their national production in the way to support the
improvement of the country’s competitiveness.
KEY WORDS:Development, Small Open Economies, Direct Forein
Investment
Introduction. In the course of rational management of small
economies, a number of vitally important questions related to the
economic and national security, among other things, are determined.
The governmental bodies must try to maintain the achieved level of
economic development and activate the reserves supporting the
improvement of the economic growth.
Modern trends of global development clearly evidence that as the
economic integration of small countries at the world and regional
levels expands, the urgency of extending and perfecting the national
economy, importance of the national ideology, necessity for using
quantitative methods to characterize the economic regularities
increase, investment environment improves, etc. Only through a
thorough approach it is possible to maintain and develop the diversity,
one of the principal values of modern world.
There are a number of scientific views about competition and
competitiveness. One of the evidences is the urgency of development
of innovative economy in the developed countries. Consequently,
unless the prospects to develop the innovative economy in small
countries are identified, a number of problems are anticipated in the
future. In this respect, increasing GDP is one of the strongest urges for
such changes to happen.
Purpose. The purpose of the paper is to show the association
between the direct foreign investments, one of the most important
resources of small economies, and gross domestic product.
Results. Georgia is a small open economy with scarce local
finances to develop the economy. A country’s international rating
plays an important role in attracting foreign investments. As the latest
report published by the World Economic Forum suggests, Georgia
61
ranked the 69th among 144 countries with 4,2 points (7 as a maximum
point) [11]. Georgia has been referred to the Forum reports since 2004
showing an apparent progress for 11 years. As per the estimations of
the World Economic Forum, Georgia is in the phase of development
where its economic growth depends both, on natural factors and
foreign financial resources.
Of the foreign financial resources, direct foreign investments and
investment environment established in the country are of a particular
importance. The investment climate in Georgia is usually determined
by such factors, as social-economic and political situation of the
country, personal safety and business security, legislative base, tax
system, value of production factors, etc.
The major trend of the last decade seen in the world and
particularly, in the developing and Asian countries is the evidence of a
very acute competition in attracting direct foreign investments. In
such terms, the relevant bodies need more efforts to establish
attractive investment environment, which, inter alia, must be
favorable for protecting both, state and national interests. The major
function of investments is to support the acceleration of the national
economy growth, revive and support the industries in crisis, supply
the production with necessary funds, support the engagement in the
process of integration, improve the local staff qualification, etc.
Direct foreign investments are very important for developing
countries, including Georgia. In order for a country to change a
developing status, it must overcome and abolish poverty and reach as
high rate of the economic growth as possible and maintain it for as
long as possible. Direct foreign investments may be used as
measurement of trust expressed to the economy of some or other
country.
Direct foreign investments do not mean only the flow of foreign
capital to the country, but as the International Currency Fund explains,
direct foreign investment gives the recipient country the following
opportunities: technology transfer and support of the competition
growth on the domestic market; the employees of the recipient
countries of the direct foreign investments gain knowledge,
experience and new skills and are given trainings what in the final
run, is a good precondition for human capital growth; the profit
increases what on its turn, boosts tax incomes in the country [4]. As
the International Currency Fund explains, direct foreign investment is
the investment made by a resident of a foreign country in a local
enterprise, with a significant influence over the enterprise
management. In fact, significant influence means the right to vote, and
62
the investor must own more than 10 % of the company shares, or
direct foreign investment is the investment of an investor owning
more than 10 % of the local enterprise (company). In case of a simple
transfer of the property from one entity (who is foreigner) to another
(country native), the total size of the investments does not change, but
the total size of the direct foreign investments changes. Moreover, less
than 10 % of the shareholding is fixed with his method what surely
leads to an error.
The liberal investment environment in the country, equal conditi-
ons for local and foreign investments, stable economic development,
free market economic policy, tax rates, reduced number of licenses
and permits, geographical location, integrated vehicle system,
qualified labor and many other factors make Georgia attractive for
foreign investors.
The link between the GDP growth and direct foreign investments
is important. A simple regressive analysis of the macro-economic
indicators of 2013-2015 showed that the correlation between the
direct foreign investments and Gross Domestic Product was 0.544584,
coefficient of determination was 0.296571 and corrected coefficient of
determination was 0.218412, not implying a close link between these
values. However, a similar study [5] accomplished for the period of
1997-2010 showed a close association.
Conclusions. The indicator of the direct foreign investments does
not consider the nature of investments and sees all kinds of
investments as of a one type only. This means that calculating the
foreign investments, or considering their dynamics with absolute
indicators yields less reliable data. Desirable investments must give
the country the real profit in a pre-determined time. Certainly, not all
direct foreign investments can be equally useful or profitable,
particularly, if they cause damage to the eco-system or fail to generate
employment, and/or exploit the local labor.
How much the growth of the size of the direct foreign investments
is desirable, particularly for small economies, cannot be determined
unilaterally. In this case, the size and field of the concrete investment
must be considered. Advantages of investing can be the opportunity of
the production process perfection, contribution to the competitive
environment, stimulation of the qualification improvement, income
growth, etc. However, as it was mentioned, direct foreign investments
contain some threats, too. Certain regulations are needed for the direct
foreign investments to support production and not to put the
enterprises or group of enterprises to bonded labor. The government
must evaluate the economic impact of the attracted direct foreign
63
investments and support the useful investments and refuse the
doubtful ones. Only such an approach can guarantee the GDP growth.
Talking about the economic development only referring to the
growing or reducing indicator of the direct foreign investments cannot
be expedient.
There is another issue regarding the reliability of the statistical
data, or information provision worth mentioning. The discussion may
be generalized to a certain extent to cover other macro-economic
indicators, as well.
In the course of any study, it is implied that the data processed by
using various methods or models are reliable. However, it should be
noted that sometimes, the question of reliability needs further
specification. In relation to the direct foreign investments, the data are
gathered by the National Statistics Office of Georgia for different
quarters for different the sectors and countries. The sources of the data
gathered were the questionnaires filled in by different companies and
information supplied by the National Bank of Georgia and Ministry of
Economic and Sustainable Development of Georgia. If the two last
sources are reliable, this is hardly true with the first one.
In respect to the interpretation of macroeconomic indicators, there
is another worthwhile issue, which is related to the size of economy.
A large single injection for a relatively small economy may drastically
change the current picture, but the qualitative change may be minor.
So, generally, an expedient management of the investments
including direct foreign investments may play a key role in the
economic development of a country.
References
1. Cimini, G.& Gabrielli, A.& Sylos, Labini F. The Scientific
Competitiveness of Nations. Tobias Press, University of Warwick, United
Kingdom (2014),Retrieved from: http://journals.plos.org/plosone/article?id=
10.1371/journal.pone.0113470#authcontrib
2. Carneliu, P.& Blank J.& Pau F. The Growth Competitiveness Index:
Resent Economic Developments and the Prospects for a Sustained Recovery.
The Global Competitiveness Report 2002, Ch. 1.1. New York: Oxford
University Press for World Economic Forum(2003), pp. 3-21.
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Retrieved from: http://www-wds.worldbank.org/external/default/WDSContent
Server/WDSP/IB/2015/01/26/000477144_20150126123837/Rendered/PDF/89
6080ESW0whit0P14734400PUBLIC00CEM.pdf
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external/pubs/ft/fandd/2001/06/loungani.htm
64
5. Gürsoy F. & Kalyoncu H. Foreign Direct Investment and Growth
Relationship in Georgia International Journal of Economics and Financial
Issues. Vol. 2, No. 3 (2012), pp.267-271 Retrieved from: file:///C:/
Users/ADMIN/Downloads/238-4133-1-PB.pdf
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tional Economics Reader. N.Y.: Foreign Affairs, March/April (1994),
pp. 1—17.
7. Papava V. Georgian economy — reforms and pseudo-reforms. Tbilisi.
Inteleqti (2015), pp. 238 (in Georgian).
8. Porter, Michael E. The Competitive Advantage of Nations. Harvard
Business Review, March–Aprilissue. New York: Free Press(1990), p.437.
9. Porter, Michael E.& Heppelmann Jemes E. How Smart, Connected
Products are Transforming Competition. Harvard Business Review,
November(2014), Retrieved from: https://hbr.org/2014/11/how-smart-
connected-products-are-transforming-competition
10. Suprun, V. A. Intellectual capital: the main factor of competitiveness
of the economy in the XXI century. Moscow. URSS: KomKniga. (2006),
pp.190.
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2015. New York: Oxford University Press for World Economic Forum.
Retrieved from: http://www.weforum.org/reports/global-competitiveness-
report-2014-2015
Natsvlishvili I., PhD.,
Assosiate Professor, Faculty of Economics and Business,
Tbilisi State University named after Ivane Javakhishvili,
Ia.natsvlishvili@tsu.ge
 SOCIAL ATTITUDES TOWARD STARTING BUSINESS
AND CHALLENGES OF ENTREPRENEURIAL
ACTIVITIES IN GEORGIA
ABSTRACT. The paper describes the tendencies of social attitudes
toward entrepreneurship, analysis the results of research on
population’s attitude towards entrepreneurship in Georgia conducted
by several prominent research organizations, discusses the empiric
data derived from the survey. The analyzed survey reveals specific
characteristics of respondents attitudes toward entrepreneurship. One
of the research question of the study is identification of Georgians
attitudes toward entrepreneurship, its specific features, various
aspects of entrepreneurial attitudes, future expectations of
respondents, identification of attractive sectors for self-employment
and entrepreneurial activity.
KEY WORDS: Entrepreneurial Attitudes, Entrepreneurial Activity,
Female Entrepreneurship, Post-Soviet Georgia


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