Small Firms as a Development Factor in South East Europe

In recent decades, economic growth and development in the advanced economies has become increasingly dependent on the dynamism of entrepreneurial small firms. Analysts have noted the increasingly significant role of small firms in advanced economies in areas such as job creation, innovation and competitiveness (Acs and Audretsch, 1993; Storey, 1994). Since they tend to operate in more labour-intensive sectors of an economy than large firms do, the creation of a new small business sector may play an important role in the process of economic regeneration, and particularly in the process of job creation. In the context of high unemployment and of a declining role of large state firms, this aspect has been especially important in the transition economies of South East Europe (Bartlett and Hoggett, 1996). In creating jobs, there is an increasing understanding of the important role played by a minority of fast-growth small firms, which tend to create the greatest part of new jobs in most economies. Often based in more high-technology sectors, these ‘gazelles’ seem to thrive in economies in which institutional structures emphasize the importance of knowledge transfer and of freedom from government interference, which are more likely to characterize the business environment in developed market economies than in emerging and transition economies (Valliere and Peterson, 2009). This represents a challenge for policy makers in South East Europe (SEE), where knowledge transfer institutions are weak (Bartlett and Ċučković, 2006) and where government has only recently become rather more supportive of the small-firm sector in some countries (OECD. 2009).