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SME Policy and the Emerging Knowledge Economy in Croatia: Competitive Pressures and Employee Skills

The paper investigates the institutional framework to support SME policy links between business community and academic organisations in Croatia. The success of these policies strongly depends upon the ability of academic institutions and the business sector to efficiently collaborate in technology networks, innovation clusters and the mobility of researchers between the two sectors. The paper reviews the present knowledge transfer policies, institutional framework, and policy outcomes. The paper concludes that policies to support technology parks and business incubators have failed to generate much spin-off activity in the country. This suggests that market failures in knowledge transfer have a significant negative impact on the policy outcomes. Paper also attempts to draw attention towards the topic that was somewhat less researched in previous analyses- namely the skills of the workforce in the small businesses. Briefly stated, the authors ask whether the source of the larger flexibility of SME sector in Croatia, as a response towards the increased competitive pressures resulting from the EU integration process, lies in the use of low-skill, low-cost workforce, and cost-cutting through substitution of unskilled labour for high-tech capital or a more socially responsible business strategy which emphasises high-skill, high-technology work, improved innovation and knowledge transfer with employee-friendly working conditions is needed. Both approaches are theoretically capable of contributing to improved international competitiveness of the sector, but have different effects on labour demand. The paper examines the cost and benefits of these policy choices in Croatia, and draws on a variety of statistical sources to identify the emerging pattern of skills demand in the Croatian SME sector.

knowledge; innovation; skills; SME policy; transition

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