Small and Medium Enterprises Facing Institutional Barriers in Kosovo

Abstract

The purpose of this paper is to study in-depth the impact of formal and informal factors on the growth of small and medium enterprises (SMEs). Kosovo, as one of the last countries in transition characterized by difficult social and economic conditions, is used as a case study in this paper. The main institutional obstacles faced by SMEs in Kosovo that are involved in international trade will be analyzed from the perspective of the institutional theory developed by North (1990). The case study is based on in-depth interviews of firms in Kosovo, using an unstructured questionnaire, conducted in 2010. The paper's key findings show that informal activities caused by low levels of professional and ethics of officials in respective institutions, as well as poor enforcement of regulations, have significant impact on increasing transaction costs, which in turn represents a major obstacle to the further growth of SMEs.

Fostering productive entrepreneurship in post-conflict economies: the importance of institutional alignment

“…Kosovo, typical of other post-conflict environments, faces numerous obstacles to economic and social development. In the aftermath of the war Kosovo became partially dependent on the international aid and remittances from the Kosovar diaspora (Loxha, 2012;Peci et al, 2012). Hoxha (2009) describes the new born state as characterised by high levels of insecurity and, in line with Collier's (2007) identification of a development trap being 'landlocked with bad neighbours', it suffers from political marginalisation given that it is not recognised by some other countries including neighbouring Serbia.…”

“…Prior to unilaterally declaring independence in 2008, Kosovo was part of former socialist Yugoslavia and then Serbia, and suffered heavily during the war of the late 1990s (Judah, 2008;Yannis, 2009;Ramandani, 2015). It was formerly the poorest province of Yugoslavia and the war served to further damage its already fragile economy (Peci et al, 2012). At first glance Kosovo appears to face similar challenges to transition economies, as it has moved from a centrally planned economic system under the former Yugoslavia to a market based economy, which has meant a changing environment for entrepreneurs.…”

Fostering entrepreneurship and economic growth: pathways to economic resilience in Kosovo

“…Kosovo faces numerous development obstacles, many of which are a consequence of the previous socialist system and the legacy of war (Peci et al, 2012). Kosovo remains characterised by high levels of insecurity and political marginalisation (Hoxha, 2009).…”

“…In under-developed and uncertain institutional environments creates significant barriers to entrepreneurial activity (Panda and Dash, 2014), and this is the case in Kosovo (Solymossy, 2005;Peci, et al, 2012). Barriers include difficulties in accessing finance, poor regulation, weakly defined property rights, poor education, lack of experience, corruption and bribery, and obstacles to internationalization caused by the political marginalisation of Kosovo (Krasniqi, 2003;Hoxha, 2009).…”

“…Prior to independence, Kosovo was part of the former Yugoslavia and then Serbia, and suffered heavily during the Kosovo War of the late 1990s (Judah, 2008;Dana, 2010;Peci et al, 2012). The country therefore faces the challenge of developing institutions which support resilience, entrepreneurship and competitiveness.…”