Barriers to Entrepreneurship and Sme Growth in Transition: The Case of Kosova

This study investigates the barriers to growth of small- and medium-sized enterprises (SMEs) in Kosova. It is based on a SME survey conducted by Riinvest Institute at the end of 2002 which identified critical business environment barriers perceived by entrepreneurs such as legal environment, administrative burden, external financing, tax burden and unfair competition. First, based on this SME survey, the econometric model is constructed in order to test empirically the validity of Gibrat's Law. Then, in order to identify and measure the impact of current reported business environment barriers on SME growth, the Gibrat's Law is augmented with other business environment variables. The econometric results suggest that firms' growth is negatively linked to firms' size and age, suggesting that Gibrat's Law does not hold for growing SMEs in Kosova. Also, the growth of the SMEs is reduced by the presence of the business environmental barriers such as tax burden, unfair competition and inadequate financing. Econometric results raise important issues and policy implications for the development of the SME sector in Kosova.