Challenges Confronting Small and Medium-Sized Enterprises: An Examination of the Western Balkans Context

Small and medium-sized enterprises (SMEs) constitute a substantial segment of the private sector, driving job creation and economic growth. The study utilizes data from the World Bank’s Enterprise Performance Survey to examine the challenges facing SMEs, as perceived by enterprise managers, and their impact on growth in the Western Balkan countries (WBCs). This study draws on contingency theory and adopts a resource-based perspective. The empirical analysis employs a probit regression. Firm growth is used as the dependent variable, measured by sales growth, while firm characteristics and external business environment obstacles serve as explanatory variables. The research findings indicate that barriers constraining firm growth in WBCs include informal-sector competition, electricity shortages, access to finance, tax rates, tax administration, business licensing and permits, political instability, inefficient courts, and crime, theft, and disorder. Internal firm characteristics, such as having a written business strategy, are positively associated with firm growth, whereas firm size is negatively associated. This research contributes to both policy-making and practical applications.