GEM Research: Due to Too Few ‘Mature’ Companies, Croatia Cannot Generate Enough New Value

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– Compared to 2002 and 2012, there has been a shift in entrepreneurship in Croatia; we have improved in many categories, but I believe it is far too slow. I am surprised that young people accept this slowness, as I do not accept it. However, young people have much more time ahead of them to show that by not accepting the current state, they want better for this country – emphasized Prof. Dr. Slavica Singer, Emeritus Professor at the Josip Juraj Strossmayer University in Osijek, presenting the results of the latest GEM research on the perception of the state of entrepreneurship in Croatia.

The 2022 research showed that there is a high level of perception of opportunities for entrepreneurial ventures (from 47.2% in 2020 to 60% in 2022), which is above the EU average. 63% of respondents consider being an entrepreneur a good career choice, which aligns with the fact that Croatia is among the top EU countries in terms of expressed intentions to start a business.

Additionally, the number of newly established entrepreneurial ventures has reached the EU average (in twenty years it has increased fourfold), but the social status of entrepreneurs remains low, and the still low motivational index is concerning – the ratio between those who have spotted an opportunity and entered entrepreneurship versus those who entered entrepreneurship out of necessity. Likewise, a small number of newly established companies (that pay salaries) manage to grow into ‘mature’ ones, meaning they survive longer than three and a half years in business, which indicates that we have a very thin base for generating new value.

The research also confirmed that the entrepreneurial environment in Croatia still acts more restrictively than stimulatively on entrepreneurial activity. Singer, the head of the research, sees the problem in education, government policies, low levels of research transfer to the business sector, cultural and social norms and values, and barriers to market entry. When asked why we are where we are, Singer states that due to the low density of ‘mature’ business ventures, we have a poor entrepreneurial structure. She holds individuals and institutions responsible.

Reasons for Optimism

However, Singer highlighted some positive shifts at today’s presentation of the research at the Journalists’ House in Zagreb. For example, the ratio of men to women in nascent and mature entrepreneurial ventures has balanced out over the past 20 years. Also, Croatia is above the EU average in terms of perceived innovativeness. Singer believes that all small countries in Europe, including Croatia, have a small domestic market and therefore have no choice but to be export-oriented.

Interestingly, according to the GEM research results, the lowest intensity of entrepreneurial activities in recent years has been observed in Croatian regions with a higher risk of poverty – in Lika, Banovina, Slavonia, Baranja, and northern Croatia. However, in 2022, one difference was noted – in Lika and Banovina, the intensity of entrepreneurial activities was for the first time at the level of the City of Zagreb.

Singer cited the positive example of the Technical School in Sisak, which has launched programs in robotics and video game development, as well as numerous projects in the field of education for young people for future professions.

– Initial resources do not determine our destiny. If you have vision, commitment, perseverance, and knowledge, anything is possible, and they are a true example for all of us – said Singer.

Steps Forward

The presentation of the GEM research results was also attended by Hrvoje Bujanović, State Secretary in the Ministry of Economy and Sustainable Development, who emphasized that entrepreneurship is the ‘backbone of the economy’, but also the foundation of social development. The key challenge is not just financing, as sources exist, such as EU funds, but the lack of workforce, i.e., experts. Bujanović emphasizes the need to grow and work in the domain of competitiveness and innovation and on skill development, especially in the STEM area.

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Hrvoje Bujanović

photo Ratko Mavar

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Tamara Perko, Director of the Croatian Banking Association, pointed out that Croatian innovators are on par with European ones in terms of the number of patents, but in terms of the usability of those patents and ‘transfer’ to the real sector, we are at the bottom. This has prompted the HUB, noted Perko, to work on a pre-seed capital fund, i.e., to finance those connected with educational institutions, as most promising projects ‘get stuck’ at this stage and need initial capital to develop prototypes. She also commented on the possible entry of Croatia into the Organisation for Economic Co-operation and Development (OECD).

– The OECD framework, a club of the most developed countries in the world, requires further improvement of regulations, reforms, development of capital markets, and better management of state-owned enterprises. When everything is summed up, in the coming years we have the opportunity to further improve the competitive position of domestic companies and thus open new space for investment and employment. We are entering the club of the best and strongest, but that does not mean we can rest; rather, challenges lie ahead – said Perko.

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Tamara Perko

photo Ratko Mavar

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Among the reasons for exiting entrepreneurial activity, tax burdens in the GEM research are highlighted twice as often in Croatia as in the EU. Irena Weber, Director General of the Croatian Employers’ Association, reiterated what HUP has long advocated for entrepreneurship, namely the need for tax, health, and educational reform to create a fair tax system in Croatia. She noted that the educational system needs to be aligned with the labor market’s needs and explained how the unencouraging environment of a ‘rentier mentality’ negatively affects the entrepreneurial situation in Croatia, as shown by the GEM research.

– Mass tourism of low added value allows people to have guaranteed income, not educate themselves, and not participate in the labor market. This creates a problem at the national level where we have a labor shortage – said Weber.

Reflecting on the low social status of entrepreneurs in Croatia, Hrvoje Balen, founder and co-owner of Algebra, explained that negative connotations about entrepreneurs are often unjustifiably created in the media, which society remembers for years. He noted that not every entrepreneurial venture is the same and that regional differences in the entrepreneurial ‘mindset’ exist in Croatia because regions are favored and penalized differently; for example, renting apartments on the coast is taxed less than some entrepreneurial ventures.

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Velimir Šonje, Hrvoje Balen, Tamara Perko, Slavica Singer, and Irena Weber

photo Ratko Mavar

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A Strong Basis for Shaping Policies

The Global Entrepreneurship Monitor is, in fact, the largest global entrepreneurship research initiative launched in 1999, involving the ten most developed countries that wanted to determine what influences entrepreneurial activity in a country, why differences exist among countries, and what governments can do to build an entrepreneurial environment that acts stimulatively rather than restrictively on individual entrepreneurial activity. In 2022, 51 countries participated in the research, 22 in Europe, and 18 in the European Union.

The Croatian research team, as in previous years, consists of a group of researchers from the Josip Juraj Strossmayer University in Osijek, led by Prof. Dr. Slavica Singer, along with team members Prof. Dr. Nataša Šarlija, Prof. Dr. Sanja Pfeifer, and Prof. Dr. Sunčica Oberman Peterka.

– After 21 years of participation in the world’s largest entrepreneurship research, Croatia has a strong informational basis for shaping policies, programs, and various interventions in all components of the entrepreneurial environment. This includes government policies and programs towards entrepreneurship, which can be shaped based on facts rather than assumptions, changes in the educational sector to empower youth for entrepreneurial thinking and competencies, not only in the narrow sense of starting a business venture but also proactive, innovative, and responsible action in contributing to the achievement of UN sustainable development goals. We can no longer say we did not know, as after 21 years, trends, patterns of entrepreneurial activity, and reasons for the slow elimination of barriers are now known. The international visibility of Croatia through GEM research is an important added value, especially now when processes for joining the OECD are opening up, as the OECD uses numerous GEM indicators as metrics in analyzing the entrepreneurial capacity of a country – concluded Singer.

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photo Ratko Mavar

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