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

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

signifi 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

fi 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 fi 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 defi ned as internal factors or conditions that restrict the external growth

potential of fi 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 fi 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 Offi cial Journal of the European Union L

124, p.36 of 20 May 2003. Micro enterprises are included in the SME defi nition. According to such

recommendation, micro fi rms have up to ten employees; small enterprises are those with less than

50 employees; and fi rms with employees from 51 up to 250 are classifi ed as medium-sized. This

classifi 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). Specifi cally, they are faced with many obstacles in their business

activities: administrative barriers, limited access to fi 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 signifi 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 fi rst

study will infl uence how to proceed with the second study.This paper is an extension

of many scholars’ e orts to contribute in the identifi 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 infl 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 fi rms, especially the potentially

dynamic fast growth fi rms that will provide the largest part of future employment