The impact of the environmental factors to the growth of small businesses - The case of Kosovo

Author:Shaip Gashi
Position:International Business College Mitrovica (IBC-M), Department of International Sales and Marketing (ISM)
Pages:76-94
SUMMARY

The understanding of the phenomenon of the growth of Small Businesses (SB) has been a significant and continuous subject of study for academics and scholars of economy and management. Interest on this phenomenon largely has been grown in transition countries with challenging environments of doing business. In these countries, Small Businesses faced with many obstacles in their activities,... (see full summary)

 
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76
Vol. 6 No.2
September, 2020
Balkan Journal of Interdisciplinary Research
IIPCCL Publishing, Graz-Austria
ISSN 2410-759X
Acces online at www.iipccl.org
The impact of the environmental factors to the growth of small businesses –
The case of Kosovo
Shaip Gashi
International Business College Mitrovica (IBC-M), Department of International Sales and
Marketing (ISM)
Abstract
The understanding of the phenomenon of the growth of Small Businesses (SB) has been a
signi cant and continuous subject of study for academics and scholars of economy and
management. Interest on this phenomenon largely has been grown in transition countries
with challenging environments of doing business. In these countries, Small Businesses faced
with many obstacles in their activities, including administrative barriers, limited access to
nance, lack of technology, lack of skills in entrepreneurship and so on.
In transition economies, including Kosovo, entrepreneurs are facing numerous formal and
informal di culties.The aim of this study is to identify the main barriers that hinder small
business growth in Kosovo, and a further endeavour to nd and suggest solutions to persist
and overcome such barriers.For this purpose, a qualitative empirical study is conducted,
initially 20 interviews direct face to face with owners/managers of SBs in Prishtina and 200
surveys in 7 regions of Kosovo.
Keywords: Entrepreneurship; small business; growth; barriers; institutions; internal barriers;
external barriers; human capital.
Introduction
Nowadays, a permanent question to scholars of economics, government leaders,
managers of institutions for economic issues and others is why small businesses do
not grow, or some of them fail to grow. One of the possible ways of explaining this
question is through the notion of barriers to growth. These obstacles (barriers) are
generally de ned as internal factors or conditions that restrict the external growth
potential of rms that want to grow (Storey D. J., 1994a).
The main purpose of this study is to recognize barriers of growth of small business
in Kosovo.1 Challenges to SB development and growth are a central topic that
characterises the process of transition. The process of transforming the centrelized
economic system into free market economy implies a redistribution of resources, and
an environment in which new rms are key factors to economic growth. As a period
of economic and institutional reforms, transition creates countless opportunities for
entrepreneurs, incentives for innovation and e ciency (Hayek, 1945).In a transition
1 In this doctoral thesis, the notion “small business” comes from the European Union Commission
Recommendations 2003/361/EC, as published in the Of cial Journal of the European Union L
124, p.36 of 20 May 2003. Micro enterprises are included in the SME de nition. According to such
recommendation, micro rms have up to ten employees; small enterprises are those with less than
50 employees; and rms with employees from 51 up to 250 are classi ed as medium-sized. This
classi cation has been adopted by Kosovo’s institutions as well.
77
Balkan Journal of Interdisciplinary Research
IIPCCL Publishing, Graz-Austria
ISSN 2410-759X
Acces online at www.iipccl.org
Vol. 6 No.2
September, 2020
economy, entrepreneurs are faced with numerous formal and informal di culties
(North D., 1990). Speci cally, they are faced with many obstacles in their business
activities: administrative barriers, limited access to nance, lack of technologies,
skills of entrepreneurship and so on (Kume, V. et al., 2009).Kosovo is the last country
in the region to go through such a process. Small businesses are considered to be the
main generator of new jobs and a key factor of development.
Even beyond signi cant contributions on this issue in literature, there is enough room
in comprehending this phenomenon. This study is based on what Davies, C.D. et al.
(1985) are referred to the method of "the course of study", in which results from the rst
study will in uence how to proceed with the second study.This paper is an extension
of many scholars’ e orts to contribute in the identi cation of obstacles and barriers
that hinder business growth and in giving recommendations for be er solutions. The
paperwill include wide spectrumof factors that hinder business growth in transition
countries. The study makes modest steps in addressing shortcomings, by identifying
critical factors deriving from perceptions of small business owners/managers, and
then applying an empirical study to further investigate the real current situation in
Kosovo. Moreover, the main purpose of the research is to identify those eventual
gaps related to barriers, which have an impact on small business growth in Kosovo,
and to clearly understand the correlation between di erent environmental factors
and small business growth.
For this purpose, a qualitative empirical study is conducted, initially 20 interviews
direct face to face with owners/managers of SBs in Prishtina and 200 surveys in 7
regions of Kosovo.Additionally, this paper will extend with an empirical study to
investigate:
a) Why these barriers impede business growth?
b) Which are the perceptions of owners/managers regarding to the phenomenon?
c) And to investigate why some businesses grow and some not?
Based on the reports of the owners / managers, we are going to deal with a relatively
large number of factors that a ect di erent areas in di erent ways. The presence of
these factors e ects on formulation of growth objectives and their realization. The
degree of in uence of these factors also depends on how the owners / managers
perceive the institutional environment within which their businesses operate.
Recentliterature explains that active growth of the private sector, especially SBs,
has been one of the main driving forces of economic improvement in transition
economies. In eddition, extensive research in the experience of other transition
economies notes that promoting entrepreneurship and SB support remains the only
and best way to encourage economic development in any country. The main goal
in small business development is the investigation of barriers to growth, and proposal
of strategies and policies how to overcome those (Sanders, M. et al., 2009).
It is clear that many authors hesitate to disclose institutional barriers against business
growth like (corruption and organized crime), obviously those related to politics
and ‘powerful people’. As regards owners/managers, many have argued that some
barriers are erected due to interventions by people in government, however, some
owners hesitate to declare on this issue.A more serious potential problem which may
hold up transition is with barriers to the growth of rms, especially the potentially
dynamic fast growth rms that will provide the largest part of future employment

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