In the Western Balkans, small and medium sized businesses face considerable practical challenges in being able to internationalise their operations and become more competitive. This is according to a 2010 study by academics at the University of Novi Sad, Serbia (Zrnic, D Andjelic, GB and Djakovic, V). The team drew on their own research from 2008-9 and findings on the barriers to SME internationalisation and competitiveness from other transitional econmies, including Slovakia, Slovenia, Romania, Bulgaria etc.
They found a range of factors external to and internal to firms that affect their ability to successfully internationalise and be competitive. These factors including environmental factors relating to the focus of government and banking policies and SME access to finance. Internal management practises to the firm such as workforce fit and the lack of preparedness by SME managers to develop skills in strategic planning were also important. The dynamic nature of change in the regions institutional frameworks, its fluctuating exchange rate policies and the variable economic stability of countries in the regions markets along with accompanying societal changes have had a profound impact on the ability of SMEs in the region to secure investment and international partners and develop their trading capacity more generally.
The situation of knowledge based firms in the Western Balkans reflected those of their central and eastern european colleagues in the early 2000's. Managers are often motivated intelligent individuals with excellent academic qualifications. Moreover like similar university spin-outs and early stage technology enterprises in the rest of the EU they often lack the management skills and experience to plan their internationalisation and improve their businesses competitiveness. As the study makes clear - a situation exacerbated by lack of support structures and lending and investment policies.
A 2011 EC conference in Brussels, recently noted that industry participation is dropping in the Framework Programme from 39 per cent in FP4 to 25 per cent in FP7, despite more targeted money for industry (public-private partnerships and Joint Technology Initiatives). Industry research spending equals 1.8 per cent of EU GDP lower than Japan and the US.
A key question for Western Balkans innovative firms and R&D institutions interested in developing technology transfer partnerships and commercialisation of intellectual property partnerships is how can they avoid the low rates of collaborative funding and particiption of their private sector colleagues in the EU. There is no easy answer. They have no other options. Local funds are not available and EU funds despite the complexity of their application procedures and funding conditions are the only opportunity available over the next 3-5 year.The experience of the new member states is that until the process of EU convergence starts to gain momentum the confidence to change banking rules and lending frameworks will not fully start to develop.
Business, Universities and Government will need to engage with these programmes and try to adapt them to the realities of theWestern Blakans. This will be the key challenge.