Formal institutions in eastern Croatia

This paper has two purposes. First, it provides an assessment of the factors framing entrepreneurship in Croatia and how they influence the predominantly necessity-oriented entrepreneurship in the nation. The factors considered include – economics, formal institutions, culture, the industrial structure, human capital and social capital. The second purpose is to present possibilities on how different institutions, through their policies, programs and implementing organizations, impact the above factors. Understanding the sources influencing necessity entrepreneurship is important because the Croatian government’s goal is to reach 75% of the EU25 mean GDP by 2013, partly using entrepreneurship development as an engine of this growth. The method of research supports national economic strategies for increasing growth-oriented entrepreneurship because entrepreneurship is considered to be an effective way to raise national GDP (van Stel, Carree et al. 2005), increase employment (van Stel, Carree et al. 2005) create more robust industrial structures (Marshall 1919; Saxenian 1994; Uzzi 1997) as well as increasing social capital (Dakhli and De Clercq 2004). There are even benefits of growth-oriented entrepreneurship specific to the transition context. Researchers believe that it is a key factor in insuring the success of transition from Socialism to Capitalism (Ireland, Tihanyi et al. 2008; Smallbone and Welter 2009). The main results include three effects CEE that entrepreneurs have on economic development: being mechanisms for privatizing and restructuring state-owned enterprises; helping to transform the distorted and monopolistic centrally-planned industrial structure; and finally, establishing a private enterprise sector (Smallbone and Welter 2006).