European Enlargement and Expansion of Polish SMEs

This paper investigates the determinants of Polish SME’s intentions to expand production in the context of possible economic expansion on accession to the EU. A model is developed using twenty-six explanatory variables derived from a questionnaire given to Polish SMEs in late 1999. Seven of these are found to be significant, namely: export activity, franchising activity, the technological level of an SME’s products, a recent increase in fixed assets, the difficulty in obtaining a bank loan, the level of human capital and the estimated proportionate change in income from 1997 to 1999. The latter is found to have a non-linear effect consistent with the interpretation of diminishing returns to intended expansion. Non-linearity also applied to the technological level of the firm’s products. This indicates that the optimism of an SME to future expansion is related to recent increase in turnover and investment, the size of the enterprise, the technological level of its products, the availability of credit, the extent to which it engages in international activity and the educational level of its workforce.