Title: The impact of institutions on SMEs' innovation in transition economies

Authors: Albulena Kadriu; Besnik A. Krasniqi; Cristina Boari

Addresses: Department of Management and Informatics, University of Prishtina, Agim Ramadani St., p.n., Prishtina, 10000, Kosovo ' Department of Management and Informatics, University of Prishtina, Agim Ramadani St., p.n., Prishtina, 10000, Kosovo ' Department of Management, University of Bologna, Via Capo di Lucca 34, 40126 Bologna, Italy

Abstract: This study aims to investigate the institutional impact on innovation of firms across 30 transition economies in Central Asia and Eastern Europe. Building on the institutional theory literature, we hypothesise on the direct influence of formal and informal institutions on innovation, also taking into consideration the interaction effects between them, where the latter plays the role of moderator variable, and third, we examine the European Union (EU) membership as control variable. The study uses structural equation modelling (SEM) and data from Business Environment and Enterprise Performance Surveys (BEEPSs) conducted by the World Bank/European Bank for Reconstruction and Development (EBRD) in 2012-2014 to understand the impact of institutional factors on innovation of SMEs in transition economies. Findings suggest that the perceived institutional obstacles to innovation are overcome by the use of bribery to compensate for government ineffectiveness, bureaucracy and inflexible legislation that inhibits smooth economic activities.

Keywords: structural equation modelling; SMEs; BEEPS; bribes; corruption; political instability; courts; informal sector; tax administration; tax rates; business license; customs.

DOI: 10.1504/IJEIM.2019.100804

International Journal of Entrepreneurship and Innovation Management, 2019 Vol.23 No.4, pp.399 - 424

Received: 13 Nov 2017
Accepted: 12 Feb 2018
Published online: 18 Jul 2019 *

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