CHARACTERISTICS OF THE IMPACT OF BUSINESS ENVIRONMENT

ON ENTERPRISE GROWTH IN SLOVENIA’S TRANSITION ECONOMY

Viljem Psenicny, GEA College of Entrepreneurship, Portoroz, Slovenia

Miroslav Glas, University of Ljubljana, Slovenia

ABSTRACT

In the year 2001 we completed the fourth comprehensive survey of growing

businesses in Slovenia. To enhance the growth of dynamic enterprises through
favorable external factors, the environment should favor entrepreneurship, offer a
highly supportive climate, and provide a prevalently entrepreneurial culture. We
evaluated the impact of business environment factors, e. g. the easy entry vs. the
existence of bureaucratic barriers, financial, social (cultural), legal and market
environment, the attitude of the government towards entrepreneurship, the
entrepreneurial education and training, as well as the genuine support for innovation.
The analysis indicates that virtually the same environmental factors are influencing
the business growth both in Slovenia and in EU. To foster entrepreneurs' motivation
for the fast growth, survey suggests changes are necessary in the economic
framework, regulations, taxation, and easing the access to capital for financing the
growth. Also the public attitude, and in particular, the attitude among government and
public institutions staff towards entrepreneurship and growing businesses is
considered as rather negative if not hostile with the tendency to deteriorate lately.

INTRODUCTION

The paper represents the most important results of a longitudinal survey (1994 –
2001) concerning dynamic entrepreneurship and the impact of those factors in the
environment of the fast-growing enterprises in Slovenia that can contribute
substantially to a faster growth of potential new dynamic enterprises, their better
performance, and lower risks. The study on Slovenian dynamic enterprises goes back
to the year 1991, when we envisioned, on the basis of preliminary research work on
gazelles comprised in »Enterprise Growth Promotion Model« (Psenicny, 1992), some
5,000 dynamic companies out of over one hundred thousand active commercial
entities (including sole traders) for the end of the decade; these five thousand
dynamic businesses comprise between 50 and 150 highly dynamic enterprises with a
high potential of growth in the global market; in exceptionally favorable
entrepreneurial atmosphere and a mix of other factors this number may even reach
250. Ten years after, there are 103,000 of commercial entities in Slovenia (Rebernik,
2000) and over 5,000 fast-growing enterprises among them.
 Slovenian research on dynamic entrepreneurship has continued in a wide-
ranging study comprising 750 dynamic enterprises in Slovenia and in four other
countries in transition (Zizek and Liechtenstein, 1994), with an in-depth study carried
out in the framework of the GEA College of Entrepreneurship over the last four
years.

The third annual study on gazelles has penetrated several areas: (1) in
cooperation with the Chamber of Commerce and Industry (GZS) we analyzed the
environmental impacts on the growth of dynamic enterprises, (2) for the Ministry of
Economic Affairs we studied the differences in financing the growth of dynamic
enterprises between Slovenia and EU member states, (3) we prepared the analysis on
differences in dynamic entrepreneurship in the gazelle behavior - research carried out
in 1988–1993 (Zizek and Liechtenstein, 1994), and 1995–2000 (Psenicny, 2001); (4)
in the year 2001 we started, jointly with the researchers of the Institute Jozef Stefan,
to build the decision trees, or set up the foundations for an expert decision support
system for predicting and planning the future development of a dynamic enterprise.

In the last decade, the attention of researchers has shifted from merely
determining personal entrepreneurial features of entrepreneurs and intrinsic
entrepreneurial factors to a wider scope, primarily detecting the impacts of external
factors that exert an important influence on entrepreneurs, on development of
entrepreneurship and the entrepreneurial climate.

The authors of the extensive international research Global Entrepreneurship

Monitor and the authors of the research project »Not Just Peanuts« by the European
Association of the fast-growing enterprises GrowthPlus have proved the relation
between the success of gazelles with the advanced stage of (1) financial, (2) fiscal, (3)
regulative, and other incentives in the start-up stage, the attitude of people towards
entrepreneurship (here are the most relevant (4) tolerance to entrepreneurial failure
and (5) readiness to assume risk, (6) the general entrepreneurial climate, and (7)
supportive legislation for the growth of enterprises).

From the viewpoint of environment, we were primarily interested in those

external growth-affecting factors that were identified as key factors by Mei-Pochtler
(1999; 97–104) in her research on the European gazelles:
 Entrepreneur: the ratio between »risk : reward«, social recognition to
entrepreneurship and the entrepreneur, education and training, intrinsic
entrepreneurial climate for spin-offs.
 Innovation: furtherance of creativity in education, efficient protection of
intellectual property, research and developmental support (cooperation of science
and business).
 Strategy of growth: capacity for active strategy of growth on global markets,
internationalization.
 Employees – people: functioning of the labor market and access to the best-
qualified expert workers.
 Leadership – management: stimulating tax system on participation in the profit,
share options, redemption / buyout and other co-ownership plans.
 Financing: availability of venture capital, efficiency of finance markets, and
taxation on retained profits and re-investing.

METHODOLOGY

The dynamic enterprise samples for the years 1999, 2000 and 2001 comprise all
entities from the whole database of the Commercial Entities in Slovenia (with the
Agency for Payment Transactions) that satisfy the following criteria:

(1) Enterprises led by dynamic entrepreneurs holding at least 15% share (or a
significant share) in private limited liability companies, or minimum 5% share
(or a significant share) in stock corporations.
(2) Enterprises are not majority-owned by another company as its ‘subsidiary’.
(3) In 1994, they were classified as small enterprises under Slovenian laws.
(4) As a rule, the growth of the enterprise is organic (not mostly by acquisitions and
mergers).
(5) In 1999 the enterprise had no less than 50 employees.
(6) The enterprise's total sale was increased by 50% or more in the period 1994–
1999.
(7) The enterprise was founded before 1994.

The selection of 101 fast growing companies was done under the same criteria
as the EU fast growing companies are selected for the “Europe’s 500 yearly list”.
Certain criteria (such as the ownership share) were checked personally in interviews
held in course of the research. The questions were divided in several segments: A -
relating to the status and size of the enterprise, B - on the entrepreneur, C - on
founding and operation of the enterprise, D - on its business environment. Table 1
indicates fundamental information on dynamic enterprises in all four samples.

A statistical test (2-test) of the 1993 and 2001 samples revealed that the
differences between the standpoints of the entrepreneurs in both periods (1989–1993
and 1995–2000) are statistically significant practically for all questions, except the
ones relating to the experience of the entrepreneurs with the banks in obtaining loans,
the structure of the suppliers of raw materials and other materials, the assessment of
competition in the branch, the number of jobs to be created by investments in the
coming years, and the opinion of entrepreneurs on the tax rate imposed on profits; in
those questions the differences are less characteristic or even non-characteristic.

STATEMENTS ON ENVIRONMENTAL FACTORS

Accessibility and administrative obstacles affecting the growth

Among the most relevant reasons for setting up an enterprise, dynamic

entrepreneurs state their dissatisfaction in the public enterprise and identification of a
profitable opportunity. The share of opportunity-driven entrepreneurs has nearly
doubled over the last research term and has become the key factor. In the second
place we still find the dissatisfaction in the public (i. e. large) enterprise, leading to
the individual’s desire for independence. This aspiration for independence is so
strong that it probably restricts the emergence of a higher number of dynamic
enterprises as a joint project of two or several entrepreneurs, which is a very desirable
project for venture capital. Dynamic entrepreneurs do not set up their enterprises just
for the purpose of creating employment or generating higher earning.

For the majority of Slovenian dynamic entrepreneurs (over 90%) this is the first
and (for more than 60%) the only enterprise, in comparison with the European
dynamic entrepreneurs, whose current enterprise is their only and first enterprise only
in 40%, whereas in more than one half it is their second entrepreneurial attempt. This
can be partly attributed to a rather short period (only a decade) of the dynamic
entrepreneurial activity, but more likely it is an expression of the negative attitude of
Slovenes towards failure, which is why entrepreneurs may find it difficult to decide to
abandon a less successful idea and start up a new, more promising venture.

In 1993, the majority of dynamic entrepreneurs (81%) had practically no trouble

arranging their registration and acquiring permits for the operation, whereas in 2001
the share of these is only 46%. The proportion of entrepreneurs with moderate
difficulties has risen (from 13% to 50%), however, the number of entrepreneurs
experiencing great difficulties has not increased. The aftermath of higher incidence of
difficulties has reflected in a longer time required to set-up an enterprise. At the end
of '80s and in the early '90s, four in five entrepreneurs needed less than three months
to set-up an enterprise, and one in three managed to do that in less than one month; on
the other hand, in the year 2001 more than one half of entrepreneurs involved in the
research needed between one and three months, and for one third of entrepreneurs it
took more than three months, which is twice as long as in 1993. Entrepreneurs have
grown more demanding and believe that the national administration should function
flexibly and entrepreneur-friendly, and less time-consuming; in the last decade a
number of additional administrative requirements have been imposed, therefore the
‘anti-bureaucratic program' has become indispensable.

In the last three years, dynamic entrepreneurs have been pointing at the
bureaucracy in Slovenia that has been seriously affecting the growth of enterprises
and exports, which are increasingly growing in dynamic enterprises (Psenicny, 2001),
beyond the average rate. To illustrate this trend, the Slovenian gazelles increased their
exports by more than six times in the period 1995–2000, whereas the total income
increased by 4,4-times, and the number of employees by 2,2-times.

Table 2 shows that according to the impeding effects, the bureaucracy is

followed by the taxation policy (which is actually listed as the problem in all research
papers on enterprises), and labor legislation, affecting the adaptation of dynamic
enterprises to market fluctuations and impeding efficient selection of competent staff,
which results in breaking the law and discriminating the employees in the end.
Enterprises are further overloaded with the contribution imposed on wages and tax
applicable to the earnings generated by the entrepreneurs, which in turn fail to
stimulate higher efforts.

Availability of funding and financial discipline

Among major problems affecting their business, dynamic entrepreneurs list the
difficulties in payment collection from their buyers (1993: 22%; 2001: 16,6%), too
small market (1993: 18%; 2001: 11,4%), difficulties in obtaining finance (1993: 14%;
2001: 11,4%), and lack of qualified human resources (1993: 11,4%; 2001: 11,4%).
On the other hand, European gazelles quote different problems: the lack of qualified
staff (34%) and insufficient market (31%) are the main issues, yet the number of
entrepreneurs complaining about unavailability of funds to finance growth is also
high (15,6%). As for other research work (Glas, Drnovsek, Mirtic, 2000), the
complaints about collection difficulties are not so explicit because an above-average
portion of exports by dynamic enterprises go to international markets. The
entrepreneurs are not critical enough in regard to their employees qualifications,
which can be attributed to the fact that there are not enough technologically oriented
enterprises even among dynamic enterprises.

Since 1990 financial environment of enterprises has changed significantly. The

financial infrastructure has developed, commercial banks have qualified for operation
with more risky sector of SMEs, financial market has been largely established,
although a number of the financial market elements that support setting up new
enterprises, their growth and fast international assertion are still missing. In Slovenia,
the existence of the so-called ‘business angels' is practically unknown: there are not
enough wealthy individuals with entrepreneurial experience and inclination to
investing in enterprises, on the other hand well-performing companies remain rather
closed for equity. Te venture capital funds are scarce and inadequate to meet the
demands of enterprises for financing the growth. The growing enterprises practically
do not decide to sell the shares of their company, to undergo mergers and acquisitions
or public offering of securities, which are normal ways of financing the growth of
gazelles in the world (Tajnikar, 2000). This situation can be attributed to the socialist
system in this Country that lasted from 1945 to 1989: after the year 1990 the
government has been indecisive and rather slow in development of financial support
('soft' loans, guarantees, seed capital).

The majority of enterprises from the 1993 sample were founded with personal
savings, which represented the core financing in the first year of operation (as much
as 71%); lately this share is around 40%. Gradually, the share of providing funds
from the family, friends and banks is growing. There are minor discrepancies in time
and sources of financing the following stages of the company growth. Approximately
one fifth of the growth financing resources came from the entrepreneurs' savings;
funds ranging from 15% (1993) to 30% (2001) to finance investments and growth
were obtained from the banks (loans), and one third came from retained profits of the
enterprise; in the last two years the share of the own resources (savings and profits
/earnings of the enterprise) has decreased, whereas financing through the banks
(35%) and suppliers (8%) has risen to 43%. Noteworthy is that the funding provided
by foreign and newly established domestic banks is rising.

More and more dynamic entrepreneurs are gaining access to obtain funding
from the banks. They find better understanding with new private (minor) and foreign
banks. One third of entrepreneurs are stating that interest rates are too high, and 19–
25% of them list too expensive security for loans and exaggerated demands by the
banks for providing guarantees, 10–13% complain that the banks prefer to work with
larger enterprises or deal with more substantial loans.

Dynamic entrepreneurs will finance the future growth mostly (45%) from their
own funds (personal funds and retained profits), and about 42% by taking loans and
from other debt related sources. The role of external equity sources will still remain
moderate, which opens an opportunity for the private investors and the governmental
sources. Dynamic enterprises would be stimulated to faster growth by more favorable
loans (48%), primarily long-term loans (30%). Subsidizing interest rates and
providing more favorable credit terms (grace period, guarantees, lower processing
costs in granting loans, etc.) in dealing with the banks would also be an important
form of supporting the operation of various funds.

The attitude of the government to entrepreneurship

Although the transition period was a period of the fast normative changes, 25%
of dynamic entrepreneurs in 1993 and 15% of entrepreneurs in the years 1999–2001
believed that the governmental regulations were inadequate; one in five would like to
obtain an incentive in the form of ‘necessary positive changes of governmental
regulations'. However, entrepreneurs are gradually less expecting such incentives
from the government and more considering other factors: the general economic
situation that was aggravated in course of the year 2001, market conditions (increase
of consumption) and the problem of skilled workforce.

Dynamic entrepreneurs have become sensitive taxpayers. As many as 30% of

them are convinced that current tax rates and fiscal policy do not stimulate faster
growth, on the contrary, lower taxes would stimulate the development, as it is the
case in the EU countries. However, their views on the fiscal policy as a factor to
stimulate re-investing the enterprises' profits and growth are controversial. On one
side they believe that taxation policy is stimulating re-investing of profits (1993:
71%; 2001: 51,5%), on the other side they maintain that fiscal policy does not
encourage growth (1993: 82%; 2001: 93%). Negative estimates are getting more
severe, which is indicative of a weak developmental role of fiscal policy that is
mainly concerned with the budget and leaves entrepreneurs disappointed. As shown
in the Table 2, entrepreneurs regarded taxation of enterprises and personal taxation as
serious impeding factors to the exports.

Education and training for entrepreneurship

Employees enjoy a high degree of attention of dynamic entrepreneurs: they
mostly associate their success and achievements with skilled and motivated workers.
They place major importance on education and development of employees as well as
their internal career planning, and also encourage their initiative and creativity.

Entrepreneurs state that it is all the more difficult to get qualified staff (1993:
81%; 2001: 94%). The shortage of the qualified staff is considered a major problem
of operation (20% of entrepreneurs). Some ten years ago dynamic entrepreneurs
found that about a quarter of their employees had acquired their qualification in
schools, but today they believe that only some 12% of staff work with their ‘school
knowledge’; the number of employees who have acquired their skills while working
in their previous jobs and at work in their enterprises has risen dramatically (up to
82%). It is evident that there is a mix of several complex unresolved issues with
education and qualification of labor for work in dynamic enterprises:
 employees (and applicants for employment) are not sufficiently skilled for these
enterprises,
 their formal knowledge is quite inadequate for (specialized) enterprises,
 employees need an intensive on-the-job training for which entrepreneurs do not
have time,
 the concept of a life-long training to be accepted by the employees as their
obligation has not been successfully implemented,
 education and training should enjoy support (and tax relief) as an investment in
knowledge,
 educational institutions should develop more “customer-designed” programs, etc.
Ten years ago, dynamic enterprises had great difficulty in recruiting technically
skilled staff (66%), today it is the most difficult to obtain good sales executive and
managerial staff (47%). The knowledge about modern sales techniques is rarely
found in successful small enterprises, as they lean too much on ‘acquired’ skills,
whereas dynamic advance calls for efficient marketing. Hand in hand with the growth
of enterprise goes the need for delegating tasks and responsibilities, which in turn
presumes entrepreneur’s trust in his/her personnel, and also the adequate knowledge,
potential and motivation of the middle management. The issue of trusting the co-
workers is one of the key problems of entrepreneurs, as they rather decide to take on
family members - despite their lack of skills and qualifications - for the sake of their
reliability and loyalty (Glas, Lovsin, 2000).

The dynamic entrepreneurs are technically qualified (45%), and on average

have college education (in European gazelles, entrepreneurs are technically qualified
in 52% and are close to university level, some 9% of them have post-graduate
master's or doctoral degree). This gap in the educational level of dynamic
entrepreneurs in Slovenia is a restrictive factor above all for high-tech enterprises that
need to assert themselves in foreign markets, although research often shows that
entrepreneurs feel self-confident about their qualifications.

Growth orientation, R&D and innovation

Numerous dynamic enterprises in Europe and the USA are highly innovative,
new production technologies, products and services being introduced on a daily basis,
including innovation in the management processes and leadership. Slovenian
dynamic entrepreneurs also find 'current' innovation self-evident, however, it is not
the key for break-through in the market, as it ranks rather low among the factors of
success: only two entrepreneurs state that innovation has been their primary reason
for success. Responses to other questions reveal that entrepreneurs are innovating all
the time, introducing new products and services, and developing new markets: only
one in four plans to achieve growth with the same product in the existing market,
three in four bet on introducing new products and entering new markets. The question
is whether they are aware of the risks involved therein. Key dilemmas of R&D
activities are:
 the entrepreneurs and employees qualification for such innovation,
 weakness in the technology and knowledge transfer between the points generating
new knowledge (laboratories, institutes, universities, along with the enterprises);
this area has the lowest score in the research study Benchmarking Slovenia
(1999),
 the lack of common research programs (in networks or 'clusters'),
 unavailability of specialists for many areas of the new technologies,
 funds insufficiency for investments in R&D activity and investments in new
equipment and products.

The introduction of changes in enterprises depends on entrepreneur's readiness

to accept the risk. Dynamic entrepreneurs state new opportunities and the desire for
achievement as the principal motive of their entrepreneurial commitment. They are
critical to the development of creativity in education, the find the protection of
intellectual property inadequate or deficient, and they believe the development and
research activities to be improving.

The first generations of dynamic entrepreneurs were mostly (59%) doing

business with the similar or even equal products and services as on their previous job.
The number of such responses is decreasing: in 2001 it only reached 46%.

Furthermore, among the reasons for their success entrepreneurs in particular

quote flexibility, fast adaptation to market requirements and the needs of customers.
It is often here that numerous small innovations appear but remain unregistered,
although they significantly contribute to the market performance of enterprises
(Julien, 1998).

Market environment

Dynamic entrepreneurs believe that insufficient size of the Slovenian market is

one of their problems (1993: 18%, 2000: 15%), and attribute the primary reason for
their success to the good relations with the customers (21%). A small market regards
exports as a conditio sine qua non for dynamic growth, therefor the market structure
changes and heads for a higher share of sales in export. Dynamic enterprises have
increased their share of exports into advanced European countries and are breaking
through into the CEE markets, in particular to the former Yugoslav territories.

The structure of buyers is changing, mainly towards a higher share of end users
and public orders, whereas the share of manufacturers is falling. This reflects the fact
that most gazelles come from service providers rather than manufacturers, and this
segment aims at end users; there is no significant development of co-operation with
larger enterprises, the so-called ‘outsourcing’ or co-operation of a larger number of
small- and medium-sized enterprises in clusters. Small changes in the structure of
suppliers show that qualitative changes are not running fast enough within dynamic
enterprises.

As for the competition, the market situation is gradually changing: the

competition is growing tough (designated as very tough by 65% of entrepreneurs in
1993, and 70% in 2001; designated as moderate by 29% entrepreneurs in 1993, and
23% in 2001). Bigger enterprises are gradually gaining momentum and becoming
competitive (49% in 2001), while dynamic enterprises feel threatened by foreign
competitors, which is to culminate at the time of Slovenia’s accession as a full
member to the EU.

Legal, cultural and social environment

Entrepreneurs are critical in their assessment of regulations that form the legal
environment of the enterprise, in particular the financial discipline, however only one
in five believes that his or her enterprise would achieve a higher growth rate in a
more entrepreneur-friendly legislation. An impeding effect results from the laws
regulating labor relations, the company law is rather neutral, and regulations from the
scope of social security, health and pension insurance considerably hinder the growth
of enterprises.

The dynamic entrepreneurs feel less and less the need for cooperation in
entrepreneurial organizations and associations (only 15% did not have any wish for
membership in 1993, in contrast to 37% in 2001). Less than one half feel as
(compulsory) members of a formal or informal organization of entrepreneurs. These
organizations are evidently not enterprising enough and might be useful for the new
enterprises but not for the demanding fast-growing enterprises. Among motives for
joining the organizations and associations is the wish for information exchange - 31%
- which is a characteristic response in all research studies, followed by the wish for
influencing the economic policy, the wish for networking and establishing
connections, and the hope to gain access to capital, etc.
 The dynamic entrepreneurs have expressed severe disappointment with social
attitude towards entrepreneurship (Table 3). Although the government in its
developmental plans admits the key developmental role of entrepreneurship, the
entrepreneurs assessed in 1993 the attitude of the government, civil servants and
officials or managers towards entrepreneurship and profit making as negative in 38%
(which was the most favorable score among the five CEE countries in transitional
stage), and fell to 58% in the year 2001. As neutral it was designated by 29% in 1993
and 36% in 2001, and the score of favorable designations ('positive') has fallen
dramatically from 24% to only 3%. In terms of political support to the development
of entrepreneurial atmosphere in Slovenia, entrepreneurs have assessed the
functioning of the state and its institutions as very problematic: the administration and
institutions lack the actual awareness of the fact that entrepreneurs are bearing
progressive changes; furthermore, entrepreneurs do not feel the responsibility of the
government to facilitate and provide for an improvement in conducting business.

The dynamic entrepreneurs perceive the attitude of citizens towards

entrepreneurship as less negative, though it is growing worse over the period in
question: from 26% in 1993 to 44% in 2001. The promotion of entrepreneurship was
left over to inertia, incidental action of various actors (awarding recognition to the
entrepreneurs or entrepreneurial families), without underlying long-term strategy
characteristic for e. g. Ireland, Scotland, Taiwan, Singapore (Glas, 2001).

Table 3 also shows the standpoints and opinions of the dynamic entrepreneurs
on social recognition, governmental support and entrepreneurial climate in the
country, as well as the influence of consulting and promotional network on the
growth of enterprises. The highest motivation for the dynamic entrepreneurs is the
wish for growth - the vision of the corporate image in the future, as most
entrepreneurs find this the most important - or a highly relevant motive for running
their enterprise. In the second place we find the wish for building up a business and
heading a reputable enterprise; high value is also placed on the wish for development
of employees, internal entrepreneurial motives, and expected rich harvesting.

CONCLUSIONS AND RECOMMENDATIONS

The research among Slovenian dynamic entrepreneurs on the impact of

environment on their operations reveals a virtual enigma: in the nineties, the
development of SMEs in Slovenia achieved good results in general terms and from
the viewpoint of dynamic entrepreneurs (Glas, Drnovsek, 2000), in spite of its
considerable lagging behind the achievements in the EU countries (BEST Report,
2001). The dynamic enterprises are defined as the key target group in both
development strategies concerning entrepreneurship and SMEs in Slovenia (1996 and
2001). The government has developed numerous initiatives supporting
entrepreneurship, such as programs, projects and institutions (networks). However,
entrepreneurs find the environment offer little incentive for the growth, and their
assessment that the situation has significantly deteriorated is critical.

Where do we find the answer to this seeming controversy? If we compare the

business environment in Slovenia with the advanced countries (research by
GrowthPlus and GEM), Slovenia would rank among entrepreneurially less friendly
countries: that reflects in a substantial drop of new start-ups (even in a falling
number of trade licenses issued), and numerous bureaucratic and administrative
obstacles that discourage entrepreneurs from expansion and higher growth. Tough
competition has reduced the space for profitable entrepreneurial opportunities, and
the government has not opened new possibilities by developing entrepreneurial
culture, business literacy, education and improved entrepreneurship infrastructure.
That is why the great - unfulfilled - expectations of entrepreneurs for the proclaimed
governmental support have led to disappointment and a very adverse mark for the
activity by the state.

The entrepreneurs by their nature are not explicitly growth oriented. Growth as
their motive is primarily to gain independence, the possibility to realize their own
business ideas. They are hindered by a relatively low level education and professional
skills, the lack of trust in co-workers (at the same time they face increasing
difficulties in getting excellent co-workers), and by other difficulties in the
environment that can be specified as:
 numerous bureaucratic obstacles in entering the business (no longer relevant for
them), and while expanding operations, looking for new locations, inexpensive
infrastructure,
 underdeveloped financial environment, in particular financial market for the
forms of equity investments (venture capital), and the forms of growth financing
in early stages of development (seed capital),
 inadequate development of business infrastructure (enterprise zones, incubators
and technology parks, innovation centers and technology transfer centers) to
encourage higher forms of cooperation among SMEs,
 low level of technological innovation and lack of ambition in high-tech sphere,
faced with the modest investment incentives and limited cooperation of
universities and R&D organizations with SMEs,
 the school system does not provide adequate knowledge for advanced
technologies and international business operations, or sufficient entrepreneurial
orientation in young people,
 national market opportunities are scarce; exports require greater knowledge and
skills of entrepreneurs, or support to enter foreign markets.

An explicit fall in the dynamic entrepreneurs satisfaction with the business

environment in Slovenia calls for a more balanced and long-term supporting policy,
for which the organizational framework has been set (Small Business Development
Center, regional development agencies, local entrepreneurial centers), however this
framework needs a vision of integral support and commitment of the government to
such vision, competent staff, critical volume of financing and tolerant providing of
support services in the long run, adopting the approach of partnership among public
and private parties. Therefore, an entrepreneur-friendly environment in Slovenia
largely depends on:
 the implementation of anti-bureaucratic program,
 providing the public with more extensive information on the achievements of
Slovenian entrepreneurship and in-depth analysis;
 improved promotion of entrepreneurship and changing the attitude of the public
and civil servants and the public economic sector towards entrepreneurs;
 creating and stabilizing the financing system and financial environment for the
growth of enterprises;
 more adequate educational and training system oriented to the requirements of
dynamic entrepreneurship, and
 more successful and frequent associating of entrepreneurs, enterprises in their
growth stages (with the R&D activity, and also in joint entering the supplying and
selling markets on the national level and worldwide.

CONTACT: Viljem Pšeničny, GEA College of Entrepreneurship, 6320 Portorož, Slovenia;

(T) +386-5-671-02-40; (F) +386-5-671-02-50 viljem.psenicny@guest.arnes.si;
Miroslav Glas, University of Ljubljana, Faculty of Economics, 1000 Ljubljana, Slovenia;
(T) +386-1-561-51-30; (F) + 386-1-561-51-35; miroslav.glas@uni-lj.si

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Zizek, J., H. von Lichtenstein (1994) Venture Capital and Entrepreneurship in
Central and Eastern Europe, 750 CEE Dynamic Entrepreneurs Database
Survey. Amsterdam: EFER.
Table 1: Overview of Slovenian dynamic enterprises surveys in 1993, 1999, 2000 and 2001
Dynamic Dynamic Dynamic Dynamic
Entrepreneurs Entrepreneurs Entrepreneurs Entrepreneurs
(1989-1993) (1994-1998) (1994-1999) (1995-2000)
Zizek 1994 Psenicny 1999 Psenicny 2000 Psenicny 2001
Years of operation 7,1 8 9,2 9
Age of entrepreneurs 43 42,8 43,2 41
Average turnove(TO) in mln EUR 2,2 4,52 4,3 6,4
Turnover growth % 105 430 386
No. of employees in last year 26 55 111 98
TO per emply.in last year ( 000 EUR) 84,6 82,2 176,3 131,5
Employment rate % 64,6 170 172

Number of Interviews 150 94 101 134

Table 2: Elements of governmental economic policy in Slovenia impeding or

stimulating exports in 2001 (in %)
Stimulate Neutral Impend No
Grade Rank
5 4 3 2 1 answ
Value addaed tax rate 18 17 32 8 8 17 3,35 1
Ecological policy 5 12 41 15 5 22 2,96 2
Company law (legislation) 2 11 45 13 5 24 2,89 3
Tax regulations 6 15 28 20 15 16 2,73 4
Personal taxes 3 10 39 19 13 16 2,65 5
Taxation of firms profit 5 8 33 27 10 17 2,65 5
Labor law 5 8 37 17 18 15 2,59 6
Social, helth and pension ins. 2 7 29 31 16 15 2,39 7
Bureaucracy 2 7 12 27 41 11 1,90 8

Table 3: Growth motivation among dynamic entrepreneurs in 2001 (in %)

Important Neutral Not imp. No

Grade Rank
5 4 3 2 1 answ
Growth is part of the vision 60 23 5 0 2 10 4,54 1
Wish for an internal growth 46 30 5 3 2 14 4,34 2
Nature and desire of the entrepreneur 48 24 14 1 1 12 4,33 3
To enable employees development 29 45 8 4 2 12 4,08 4
Internal (corporate) entrepreneurship 26 40 13 3 1 17 4,05 5
Education 17 24 27 12 6 14 3,40 6
Social acknowledgment 12 26 24 10 14 14 3,14 7
Business advisers, consultants 7 6 35 23 16 13 2,60 8
State support, climate for entr. 7 12 26 19 24 12 2,53 9