Institutions As A Factor Of Competitiveness Improvement

The context of competitiveness can be defined as a set of institutions, policies and factors which, in a particular economy, determine the volume of national productivity and the level of economic well-being of the population. In brief, competition reflects the capacity of a national economy to generate sustainable economic growth in the mid-term period. The best way to increase productivity and, hence, raise living standards, is by improving the competitiveness of the country, which implies exposing the domestic economy to the global market, as well as strong competition from companies that have mastered and are using the cutting-edge technology. Based on the aforementioned conclusions, this chapter aims to: a) explain the new conditions regarding the competitiveness of enterprises and countries in the world, b) analyze the characteristics and examine the components that make the “competitiveness structure” of the national economy and c) analyze the importance of the institutional environment in the process of improving the competitiveness of individual countries, especially Serbia, as well as its neighbouring countries. Institutional environment is determined by the legal and administrative frameworks within which individuals, businesses and government interact in order to stimulate production and raise the citizens' standard of living. Thus, it can be concluded that institutions represent an important factor in increasing competitiveness of a national economy. Due to their effect on decreasing the economic, as well as any other risk, competent authorities contribute to creating a favourable environment for conducting business activities. The importance of establishing appropriate institutional framework is particularly manifested in times of crisis, which inevitably calls for more significant participation of government as an actor in the facilitation of economic activities.