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International Journal of Economics and Financial
Issues
ISSN: 2146-4138
available at http: www.econjournals.com
International Journal of Economics and Financial Issues, 2016, 6(4), 1684-1689.
International Journal of Economics and Financial Issues | Vol 6 • Issue 4 • 2016
1684
Regional Resources Capitalization: Theoretical and
Methodological Basis
Julia V. Lyshchikova1*, Anna V. Orlova2, Yevgenia V. Nikulina3, Yevgeny I. Anokhin4
1Department of Economics, Belgorod State University, Belgorod, Russia, 2Department of Economics, Belgorod State University,
Belgorod, Russia, 3Department of Economics, Belgorod State University, Belgorod, Russia, 4Department of Economics, Belgorod
State University, Belgorod, Russia. *Email: lyshchikova@bsu.edu.ru
ABSTRACT
The article substantiates the holistic theoretical approach to the denition of the economic content, dominant characteristics, the structure and features
of the regional resource potential as the basis of the regional economy capitalization. The methodological platform, an updated and expanded conceptual
and categorical apparatus of capitalization of the regional economy is presented in the paper. The authors conducted identication, classication and
structural-functional decomposition of the elements of the resource potential, objectives, subjects, objects and mechanisms of capitalization of the
territory taking into account the differentiation of their role, scale and impact on the process.
Keywords: Capitalization, Regional Economy, Regional Resource Potential, Methodological Platform, Capitalization Mechanisms
JEL Classications: E22, O16, O18, P48
1. INTRODUCTION
The problem of capitalization of the territory as a systematic
activity of transformation of its resources, funds and assets into
working capital with value added was formulated in the early
20th century, particularly in developing countries. Currently,
one of the important directions of the analysis of this problem
is the study of capitalization of the territory in the context of
the search of long-term positioning strategies of countries and
regions in the global redistribution of geo-economic status
and inuence. The concentration of mobile forms of capital
(the rights to nance, technology, and information) becomes
the dominant factor in the development and economic growth
of countries and regions in the age of the global economy and
open market. At the same time traditional forms of territorial
resources gradually lose its former economic importance. So,
countries and regions which effectively control the ow of
goods, nancial assets, investment, technology, property rights,
and skills become more competitive.
Low capitalization of regional resources has already led to the
growth of dependence of the national economy on world markets.
Russia has to comply with the process of economic evolution,
including in terms of the cost of national and regional capital. It is
necessary to enter into the world economic system on acceptable
terms and to ensure the positioning of the regions in the global
markets. Pereslegin (2005) formulated dangers both of insufcient
and excessive capitalization. He noted that “undercapitalized”
territories are not able to hold capital “undercapitalized”
enterprises cannot keep the staff, “undercapitalized” countries
cannot save the population. At the same time, “overcapitalization”
of the area leads to escape from it productions, since all forms
of activity (except for the control) are ineffective there because
of the high cost of excessive resources. Deputy Prime Minister
A.G. Khloponin (2005) (in the past - the Plenipotentiary of the RF
President in the North Caucasus Federal District and the Governor
of Krasnoyarsk region) noted that undercapitalization of Russian
border territories, along with an increase in the capitalization of
the neighboring countries is fraught with territorial claims on
their part.
Requirement of identication of the relevant mechanisms of
the capitalization process causes attention to territorial resource
potential capitalization. It can be characterized as a tool, a
Lyshchikova, et al.: Regional Resources Capitalization: Theoretical and Methodological Basis
International Journal of Economics and Financial Issues | Vol 6 • Issue 4 • 2016 1685
result and an indicator of the formation of the position of the
region in multi-level distribution system of the economic and
political inuence. Relevance of the research is also determined
by the fact that from the second half of 2014 Russian regions
and the national economy as a whole develop in conditions of
economic sanctions, the sharp drop in prices for energy and raw
materials resources, devaluation of national currency, which is
a manifestation of the geopolitical and economic instability in
the world economy.
Theoretical and methodological foundations of the process of
capitalization in modern Russian conditions are considered in
the works of Arabkin (2003), Dedkova (2008), Malova (2007),
Gavkalova and Barka Zine (2012), Goryachuk et al. (2012),
Maslennikov (2014), Frolov (2015), Chebykina and Bobkova
(2014), Morozov (2014), Anopchenko (2015), and others. The
author’s approaches to determining the factors and directions of
increase of capitalization of the regional economy are set out in
publications of Darmilova (2007), Knyaginin (2003), Kolesnikov
(2012), Molchan (2011), Pereslegin (2005), Tsybulsky and
Silifonkina (2010), Nemkovich and Saveliev (2008). However,
a holistic theoretical and methodological approach to dene the
economic content, functions, subject-object basis and mechanisms
of the capitalization of the resource potential of the region, is
currently missing.
2. METHODOLOGICAL APPROACH
TOWARDS CAPITALIZATION OF
REGIONAL RESOURCE POTENTIAL
It is necessary to justify the holistic theoretical and methodological
basis of the research, based on a synthesis of different positions
in order to form a conceptual approach to the analysis of the
capitalization of the resource potential in the conditions of the
regional economy.
2.1. Reproduction Approach
The study of the capitalization process determines its investigation
as an integrated, objectively caused reproductive system in the
framework of achieving the required level of socio-economic
development of the region (Malova, 2007; Molchan, 2011).
Reproductive functions and processes are developed not only in
time but also in space. The originality of the territorial structures
forms the variety of manifestations of typological homogeneous
reproduction of relations applied to different regional conditions.
Reproduction approach allows considering the unity of the whole
system of the process of expanded reproduction of capital at
the regional level. It takes into consideration the economic and
geographic features together with the specic situation of the
region in the overall system of territorial and administrative-
territorial formations (Nemkovich and Saveliev, 2008).
2.2. Geo-economic Approach
Geo-economic approach to capitalization analysis suggests that
the dynamics of the capitalization process at the national and
regional level is largely due to the geographical location of the
subjects, combined with the international transport corridors,
shapes and volumes of commodity circulation (Knyaginin, 2003;
Pereslegin, 2005). Currently, a public conception of the economic
national and regional borders is changing. National and regional
economies are transformed into “country-systems” and “regions-
systems.” The reproductive value added chains are going beyond
a national and regional framework. It allows designating new
borders of their functioning on the geo-economic atlas. These
boundaries often do not coincide with administrative and are
characterized by mobility. They are virtual and represent some
kind of geographical outline of a supranational and supra-regional
reproduction. The parameters of this space are determined by
the level of infrastructural arrangement of the territory. The
new routes of the world reproduction “pipelines,” as well as
areas outside the scope of this activity, are looked through on
the geo-economic atlas of the world. Production and territorial
complexes join the movement of reproductive-technological
entities. Development of geo-economic processes at national
and regional level is determined by the following circumstances.
Firstly, economic resources are distributed between the countries
and regions extremely unevenly. Secondly, the efcient production
of various products requires different techniques or combinations
of resources. In order to increase the productivity of resources and
the volume of production economic actors develop specialization
and cooperation in the economic activity. It leads to the unication
of the production, nancial, intellectual and other resources in the
territorial structure of the reproduction on the basis of the latest
industrial infrastructures.
2.3. Institutional Approach
The institutional approach can be one of the theoretical approaches
to dening the essence of the capitalization process at the regional
level (Malova, 2007). It is based on the identication and study
of the institutional framework in which business processes take
place in the region’s economy. Institutional changes of any socio-
economic system largely determine the vector of its development
through qualitative structural transformation of its basic elements:
Actors, organizational and legal forms and mechanisms of
regulation of relations (Darmilova, 2007). A variety of regional
communities allows implementing a much wider range of
institutional changes within the country, especially with a federal
system. Possibility of subjects of the federation to implement
institutional changes in the scale of the part of the country, rstly,
enables to test practical variants of the decision of many socio-
economic problems. Secondly, it signicantly limits the scope
of the potential negative consequences of poor decisions. At the
same time horizontal cooperation between federal entities and
municipalities allows to share experience for the formation of
strategic management mechanisms of process of capitalization.
2.4. Systematic Approach
The regional economy can be represented as a complex
multi-level system which consists of a plurality of interacting
subsystems, components, connections, integrated into the structure
(Kolesnikov, 2012). At the same time, the regional economy is a
subsystem of systems of higher order: The economy as a whole,
the world economy, and the economy of separate macro-region,
as it is endowed with independent functions in such systems. With
the development of the regional economy the capitalization as a
Lyshchikova, et al.: Regional Resources Capitalization: Theoretical and Methodological Basis
International Journal of Economics and Financial Issues | Vol 6 • Issue 4 • 2016
1686
system of economic relations is evolving. The objects become
more complicated, new subjects of this process and new forms
of relationships appear (Molchan, 2011). It is accepted to study
complex processes and the subject-object relationships on the
basis of the system approach as a synthesis of systemology,
systems engineering and system analysis. A systematic approach
to the study of the capitalization process can reveal its essence
in unity with spatiotemporal organization, concretization of the
objects, entities and regional particularities. However, universal
general scientic systematic approach as the primary linear model
of cognition reveals a number of deciencies in the application
of various types of economic issues. Therefore it is necessary
to develop a systematic approach for the formation of complex
research methodology of the capitalization of resource potential
of the region.
2.5. Synergetic Approach
The synergy as a model of cognition of volumetric spatial
processes on the basis of non-linear dynamics can serve as the
basis of synthesis of the foregoing theoretical and methodological
approaches to investigation of the capitalization process. Synergetic
approach allows adequately comprehend the content of the spatial
and temporal characteristics of the regional economy capitalization
as a system of the subject-object relationship with the primacy of
the subjective over the objective (Yevstigneyeva and Yevstigneyev,
2010). Traditional object-subjective system of socio-economic
relations is complemented by the purposeful system of subject-object
relations, a system of object-object (or structural-reproductive)
relations and the system of subject-subject relations (socio-economic
actors within the boundaries of the unity of the regional economy
in the socio-political and historical - cultural context).
There is a structural boundary between the current and strategic
market in the regional economy as an integral synergistic system.
The basis of the current market is the monetary capital. It is
controlled with the balance system. The strategic market is based
on the nancial capital (direct long-term investment programs).
It forms a reproductive model of the region. The potential of
the capitalization of the regional economy has structural and
institutional dynamic construction. It includes the process of
capacity-building as the realization of the investment process in
the framework of the “dual economic spiral,” which unites the
circulation of nancial capital and the turnover of regional income.
Regional income is the basis for extended reproduction of GRP.
It has the property of system integrity and implies the formation
of the mesostructure of monetary capital. The monetary capital is
attached to the income as a basis for dening the scope and structure
of investment at all levels. The state and the regions are designed
to ensure the integrity of the investment process of capitalization.
The compound of corporate and government investment resources
has to overcome the limitations of the investment choices of the
corporate capital. This process determines the formation of a
regional cluster system. It is based on distribution of investment
in strategic market of program investments within the framework
of internal convergence between nancial capital and the state.
Thus, a synergistic structural-institutional dynamic potential of
capitalization consists of two qualitatively different parts. They
cover the whole cycle of the regional strategic nancial capital
and turnover of regional income in the current market. In this case
the cycle of nancial capital is represented by metamorphosis
“monetary capital - financial capital - productive regional
capital - social capital.”
The capitalization of the personal income takes place in the social
capital markets. They include the markets for consumer goods
and services, savings and private banking (including mortgages),
massive stock markets (Gavkalova and Barka Zine, 2012). They
work closely with the regional markets of productive capital,
monetary capital and the market of strategic program investments.
In the current linear model of economic growth the regional
markets are related to the nancial capital rather unsystematically.
The companies perform their choice between the existing assets,
rather than regions in the process of forming their regional
strategies. Large foreign TNCs play an increasingly important
role in the regional capital. They are guided by the position of
their subsidiaries in existing global supply chains while creating
the new ones in the regions of Russia. Domestic and foreign
investors contribute to the formation of incipient local investment
units (“points of growth”). However, it is impossible to equate the
processes of regionalization of large capital and the formation of
productive capital on the basis of regional investment territorial
clusters. Ultimately, the productive capital forms the market of
strategic program investments. It provides the conversion of the
country’s productive capital in the regional capital, which integrity
is determined by the regional investment units.
Synergetic approach allows replacing a linear set of tangible
and institutional capitalization factors in the amount of separate
structural and geo-economic perspectives by a special type of
social and economic integrity of the region. It is created by the
balance processes of entropy and dissipative (temporary structural
and institutional) entities of the regional economy.
3. FUNDAMENTALS ON CAPITALIZATION
OF THE REGIONAL ECONOMY
3.1. Conceptual and Categorical Apparatus of the
Research
Despite a rarity and fragmentary nature of the researches devoted
to process of capitalization at the regional level there is a number
of interpretations of the term “capitalization of the region” now.
Their generalization and systematization allows identifying four
main areas of the consideration of the capitalization:
• The process of accumulation of the productive regional capital
which is carried out in various ways;
• The process of involvement of resources of the region in
economic turnover and their transformation into the capital;
• The process of changing forms of the regional capital;
• The estimated characteristic of cost of the existing regional
capital or the method of estimation of cost of regional assets
(Table 1).
However, each of the identied approaches to the capitalization
of the region is the expression of a narrow understanding of
Lyshchikova, et al.: Regional Resources Capitalization: Theoretical and Methodological Basis
International Journal of Economics and Financial Issues | Vol 6 • Issue 4 • 2016 1687
this process. It is necessary to look more widely at the category
to get rid of fragmentariness in consideration of this term. It
will give the chance to dene capitalization of the region as
the multidimensional process of expanded reproduction of the
regional capital and transformation of its forms. It is carried out
by the involvement of resources of the region into economic
circulation and resulting in the growth of cost of regional assets.
This treatment considers the existence of various, capable to be
mutually converted, forms of capital, including some new forms
(the human, social, cultural, political capital). They often don’t
have quantitative expression, but form the structure of horizontal
and vertical links. The expanded understanding of capitalization
of the region also includes the process of direct involvement of
resources in the turnover of the economic capital. In this aspect
the capitalization is considered as an activity of transformation of
any resource into the capital.
The implementation of the regional economy’s capitalization
process is manifested in its functional content (Table 2).
Due to the complex of the functions the capitalization of the
region is at the same time not only the result, but the cause of
the quality and quantity of productive economic changes in
the regional economy. The complex of capitalization functions
promotes uniform distribution of capital between sectors and actors
of the regional economy, the growth of consumer spending and
investment in various stages of reproduction, increase in regional
resource potential and productive capital, change in the balance
between traditional and innovative sectors of economy.
3.2. Subject-object Basis of Capitalization of the
Regional Economy
The concept of the capitalization process in the conditions of the
regional economy allows us to represent this process as a system of
economic relations of the accumulation of capital by the subjects
of capitalization. The subjects of capitalization are the households,
the enterprises, and the region as a whole. The objects of the
capitalization are property rights provided by household wealth,
assets of the companies and resource potential of the region.
Households distribute their income on consumption and saving
and seek to maximize not only the current consumer utility, but
also future market value of the wealth, and also the individual
social capital. The wealth of households is understood as all net
assets including savings, investments and inheritance minus debts.
Enterprises capitalize their business assets, intangible assets,
monetary assets, the state and corporate securities, inventory
holdings. It is reected in the growth of market value of the share
capital of the company or increase of a market assessment of rm.
The region as the subject of capitalization provides growth of cost
of the economic assets of the region. The assets are involved in the
system of global exchanges on the basis of improvement of quality
of production, innovative and other infrastructure at the expense of
a regular gain of a gross regional product. As a result investment
appeal of the region increases. This fact leads to capitalization
process development. The property of the region as an object of
capitalization includes the valuation of natural resources (land,
minerals, water and forest resources), physical assets (xed assets,
inventories, and current assets), intangible assets (patents, licenses,
etc.), and nancial investments. It provides a sufcient potential
Table 1: Systematization of interpretations of the term “capitalization of the region”
Number Interpretation Authors
1 The process of accumulation of the productive regional capital
which is carried out in various ways (the growth of the value
of regional assets)
Knyaginin (2003), Malova (2007)
2 The process of involvement of resources of the region in
economic turnover and their transformation into the capital
Molchan (2011), Kolesnikov (2012), Darmilova (2007),
Chernyshyov (2007), Pereslegin (2005)
3 The process of changing forms of the regional capital Nemkovich and Savelyev (2008), Yevstigneyeva and
Yevstigneyev (2010)
4 The estimated characteristic of cost of the existing regional
capital (the method of estimation of cost of assets of the
region)
Arabkin (2003), Dedkova (2008), Tsybulsky and
Silifonkina (2010)
Table 2: Functions of capitalization of regional economy
Function Content
Distribution function Promotes redistribution of capital between
sectors and economic actors in the region
Reproduction function Supports a continuous process of
circulation and accumulation of regional
capital
Strategic function Consists in the formation of resources,
ensuring the strategic development of the
region in the long term
Innovative function Consists in nancing of innovations by
increasing the value of intangible and
current assets as well as human capital
Information function Is formed through the capital ratios that
reect the current and future state of a
particular region
Forecasting function Serves as an indicator of the future status
of the region through the assessment of its
potential
Mobilization function Provides concentration of investors’ funds
for regional development in the context
of the modernization and expansion of
production
Investment function Reects the potential of the region as
an indicator of regional investment
attractiveness
Marketing function Denes the attractiveness of the region in
the global market of various goods and
services
Lyshchikova, et al.: Regional Resources Capitalization: Theoretical and Methodological Basis
International Journal of Economics and Financial Issues | Vol 6 • Issue 4 • 2016
1688
to ensure development of the region, with considering the real
possibilities and peculiarities of each subject of the federation.
The role of the region as a subject of capitalization is strengthened
in the conditions of transition from the integrated (centralized)
model of the spatial organization of regions to model of network
regions and production and investment clusters.
Conceptual representation of subject-object and process
foundations of the capitalization of the resource potential of the
regional economy is presented in Figure 1.
Circulation of the various forms of regional capital and the ability
of capital to transform under certain conditions and factors reveals
more opportunities to identify capitalization potential of the
regional economy, its quantitative and qualitative assessments.
The coordination of activities of federal and regional economic
policy is aimed at efcient use of the resource potential of the
regions and country.
3.3. Mechanisms of Capitalization of the Region’s
Resource Potential
The capitalization of the region is not only the accumulation of a
regional capital in its various forms and the market valuation of
its value, but also the formation of the institutional environment
and revitalization of infrastructure. It gives the opportunity for
transformation of idle resources, assets, entities opportunities to
invest in the framework of certain development goals.
The implementation of the capitalization process is not automatic.
It is associated with the presence of developed institutional
mechanisms to ensure the effective regulation of economic
processes. The main mechanisms of the capitalization process
used by economic agents are nancial institutions (in particular,
stock market, nancial and credit institutions) and the institute of
public-private partnership (PPP).
The stock market performs the function of redistribution of
available funds, mediates movement and evaluation of property
rights, redistributes information and risks between parties of
the business turnover. Thereby it creates the conditions for
capitalization as a self-expanding value. The banking sector is
intended to ensure the systematic development of the capitalization
process through the transformation of money capital into nancial
capital based on investments in the real sector of economy.
Institute of PPP is a relatively new mechanism for capitalization. It
is able to create the momentum to a sharp build of basic capacities
and nancial performance indicators of the economic entities of
different levels, as well as growth in the value of the national
wealth.
Infrastructural complex of the region should be formed and
evolve depending on its specics: Size of territory, population
density, climate, availability of cities, operating manufacturing
industries. The complex of constructions and communications of
Figure 1: Conceptual model of the process of capitalization of the resource potential of the regional economy
Lyshchikova, et al.: Regional Resources Capitalization: Theoretical and Methodological Basis
International Journal of Economics and Financial Issues | Vol 6 • Issue 4 • 2016 1689
transport, the engineering equipment, and also objects of social
and cultural and community service of the population is created
in accordance with the specic characteristics of the region. This
complex provides a sustainable development of the region on the
basis of capitalization of its competitive advantages.
4. CONCLUSION
The analysis of the theoretical and methodological aspects of the
capitalization in the conditions of the regional economy allows
forming a complex methodological research platform based on the
synthesis of reproduction, geo-economic, institutional, systematic
and synergetic approach.
The essence of the capitalization process at the mesolevel is
dened as a multidimensional process of expanded reproduction of
regional capital through the involvement of the resource potential
of the region in the economic cycle within the constantly evolving
system of subject-object economic relations.
The implementation of the regional economy’s capitalization
process is carried out through a set of functions and is associated
with purposeful activity on formation of institutional and
infrastructural arrangements of capitalization. The implementation
of capitalization process results in rising cost of regional assets
and national wealth as a whole.
5. ACKNOWLEDGMENT
The research is conducted with the nancial support from the
Grant of the President of the Russian Federation in the frames of
the scientic and research project “Institutional and infrastructural
mechanisms of the capitalization of the resource potential of
Russian regions”, project No. МК-4674.2016.6.
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