ࡱ> /2*+,-. NbjbjSS DZ11m<v v 8  $1^ܽ ܽ??? ~p? ??:,Jp7T 0ƥRZҧ ? ܽܽZ v :Drago engi, Ph.D. Institute of Social Sciences Ivo Pilar Zagreb, Croatia (drago.cengic@pilar.hr ; HYPERLINK "http://www.pilar.hr"www.pilar.hr) Croatian Elites, Enterprises and Economic Crisis: Searching For the New Growth Drivers 1. Introduction: Political Optimism, Strategy for Entrepreneurship Development and Economic Depression The recently promulgated Strategy for Development of Entrepreneurship in Croatia 2013-2020 (Minpo RH, 2013; abbreviation for the Ministry of Entrepreneurship and Crafts of the Republic of Croatia, further in the text referenced as MEC ) is one of key documents for shaping the action of the state in the area of promotion and development of entrepreneurship (small businesses) in the forthcoming medium-term period. Political audience had high expectations for the Strategy, while business audience received it with restrain and distrust, the same as, after all, so many other economic and fiscal measures introduced by the current government. The purpose of all measures outlined in the Strategy is to increase competetiveness of small economy of Croatia, as evidenced by five strategic goals intended to be achieved through implementation of the measures: from improvement of economic performance of small and medium-size enterprises, promotion of entrepreneurship, to creating a more business-friendly environment for entrepreneurs and international investors. Not only a new analytical background (at last!) is behind the Strategy (see ACE, MEC, 201; 2013) but, above all else, a firm belief of the state officials in the Ministry of Entrepreneurship and Crafts of the Republic of Croatia that small and medium-sized enterprises are one of the crucial factors for the country to exit current crisis (see: a)  HYPERLINK "http://daily.tportal.hr/190021/Enterprise-minister-SMEs-can-pull-Croatia-out-of-crisis,25/04/2012;b" http://daily.tportal.hr/190021/Enterprise-minister-SMEs-can-pull-Croatia-out-of-crisis,25/04/2012;b) HYPERLINK "http://www.tportal.hr/biznis/gospodarstvo/222681/Previse-potpora-malog-iznosa.html"http://www.tportal.hr/biznis/gospodarstvo/222681/Previse-potpora-malog-iznosa.html, 26.10. 2012.). Unfortunately, since the Strategy was made public to August 2014, all data for GDP (declining) trends and industrial production (not to mention other macro-economic indicators) were contrary to expectations held by the Government and MEC of the Republic of Croatia. This is not the first time that some Croatian government is promising an economic revival through development of small and medium-sized enterprises and that they nevertheless fail, in the developmental sense (through income and new job creation), to compensate for all economic and social deficits caused by deindustrialisation, bankruptcy of some large industrial enterprises and restructuring in certain industries, such as for instance shipbuilding industry (see O~ani, 2013; Aralica, 2014). Why is this so, and are the expectations of domestic entrepreneurs unrealistically high? Also, are the SMEs owners and managers the chief culprits responsible for overall decrease in domestic production and the declining GDP trend lasting for as long as six years now? Or, is the problem somewhere else, such as in exhausted current structures of business opportunities and in institutional inertia that prevents emergence of new models and sources of modern growth, as suggested by some economic analyses (see Biani, 2012)? Sociologically viewed, knowing that all economic practices are  embedded in particular social, institutional and value structures (Granovetter, 1985) it is also reasonable to ask to what extent are national political, economic and intellectual elites co-responsible for the current economic failure of the Croatian SMEs, taking into account their understanding of global economy and the economic role of the modern state, as well as their role in shaping preceding economic policies and party ruling model of public-owned enterprises over the past fifteen years whithin the Croatian version of the 'political' capitalism (see: Ivankovi, `onje, 2011; Frani evi, 2013)? As we assume, the proper question would be: can strengthening of overall competetiveness of the Croatian economy really bring about a new growth and new markets, at least a sustainable 'niche strategy' focused on the European market (reflecting the European idea of 'smart specialisation') without a completely new view of the relationship between politics and economy, that is, new relationship between political and economic elites in the Croatian society? Finally, does current medium-term Strategy take into account the true needs of the SME sector in order to achieve a long-term growth or is it only an inadequate bureaucratic response to visible deficits of this sector due to six-year long recession and key economic characteristics of the wider 'internal economic area' we are currently living in - the European Union? The basic aim of this paper is to warn about social, political and managerial disfunctions of the current type of government/state interventionism in the area of small and medium-sized entreprises in Croatia, that, through the existing measures to support entrepreneurs does not effectively help those enterprises that are capable of giving impetus to a new cycle of economic growth. Our working hypothesis is that causes of long-term economic depression lie in impotence of economically incompetent political elite to act developmentally and not only as the elite exercising political control at all main levels of socio-economic system. We shall try to prove this hypothesis by giving example of the Croatian SMEs development up to now, where development actually implies preceding unsuccessful, mainly populist attempts by the state to accelerate entrepreneurial development through various supports provided to the national SMEs. As we shall try to show in this paper, developmental potential of the Croatian SMEs under current political, economic and cultural conditions (and these determine the overall 'structure of economic ooportunities' in the country) has been seriously questionable for a long time. Their potential is additionally devastated by the ongoing economic crisis, which means that both the business owners/managers and agents of developmental policies/strategies should search for new models of economic conduct but also for a new type of state intervention in this sector of economy. In the text that follows, we shall introduce ideological and economic strongholds of the state support to the SME sector in the EU, we shall describe key characteristics of the Croatian SMEs and the impact of recent economic crisis to their developmental potential, and highlight their economic non-performance from an international perspective. In the end, we shall see whether the state measures to support development of entrepreneurship through SMEs establishment really affect their developmental needs and in the Discussion section make conclusions indicating that another type of state interventions in this sector of economic structure is required and on macro-variables that require new relationship between political and economic elite in the country. 2. Basic Ideological and Economic Strongholds for SMEs Support of the EU Since D. Birch published his subsequently very frequently cited book on the role of small enterprises in creating new jobs in the USA (Birch, 1987), discussions have been held either publicly or privately, on the true power/potential of SME to generate new jobs and innovative output, in other words - to cope with the transition in postcommunist countries and with challenges of globalisation. During the nineties of the previous century, Americans had shaped specific policies for SME support. With the fall of communism, in the framework of broad (and prompt) privatisation proposals SMEs and their 'new' entrepreneurs and managers were seen as those who would replace the former state-owned enterprises and socialist politocracy and become the main agents of modern economic development and employment. As R. McIntyre reminds (McIntyre, 2001), all relevant western institutions had formally expressed their initially great transition-related expectations from SME (EBRD, 1995). OECD documents of that time are good illustration of this new viewpoint toward entrepreneurs: Entrepreneurs, people who start businesses and make businesses grow, are essential agents of change who accelerate the generation, application and spread of innovative ideas. In doing so, they not only ensure that efficient use is made of resources, but also expand the boundaries of economic activity. (OECD, 1998). However, after the first occurrences of 'transition fatigue' and criticism of the rigid application of the Washington consensus basic principles in the post-communist countries, the enquieries started into the SME economic role and true economic potential not only for the process of transformation of the former 'real socialism''- countries but also in the West (see World Bank, 2002). For illustration of a 'subversive analysis' of this kind, we will only mention the arguments by R. Parker, published in her paper on the 'myth of the entrepreneurial economy' (Parker, 2001; see also Dannreuther, 2007). Parker's paper (based on ILO and OECD data, dating back to 1990) actually checks the thesis posed by Audretsch and Thurik on the transformation from a managed to an entrepreneurial economy, where economic success depends increasingly more on individual motivation, new ideas and risk taking, and increasingly less on unconditional stability of enterprises, control of enterprises and environment (Audretsch, Thurik, 1997). In the new economy state regulation was not as desirable as before, and national/economic policies had to shift toward the acceptance of challenges of entrepreneurial economy by generating initiatives and rewards for innovations and risk taking. The final Parker's conclusion is that small enterprises cannot be regarded as superior to large firms in any general sense. On average, employees in large firms have greater job security, higher pay, better training and higher levels of unionisation than employees in small firms. Further, most small firms are not innovative and do not contribute to net employment growth. (Parker, 2001, 10). According to Parker, superior economic outcomes are not associated with the size distribution of the enterprises in an economy. This is partly explained by the fact that the growth in employment in small enterprises is often attributable to 'push factors', such as using external resources (due to 'outsorcing' practice), decrease in volume of certain business activites/discontinuation of functions (downsizing) in large enterprises and the changes in sectoral composition of employment, and to a lesser degree to 'pull factors' - associated with the vigorous dynamism of small enterprises. Therefore, as emphasised by Parker, the growth of employment in SMEs is not necessarily associated with their (appropriate) responses to market needs or introducing a new product into the market, and available data do not justify adoption of various public policies designed to promote small enterprises as a specific 'generic class of enterprises'. If so, why is this being done after all? Parker's reply to this question suggests the world-view and ideological aspects of state interventionism in this sector of economy: Political support for small business and entrepreneurship, especially to the extent that it involves deregulatory policy measures, should therefore be understood as a component of the broader trend in advanced capitalist economies to encourage more individualistic economic and employment relations.The argument that economic success depends on risk, change, flexibility and small business entrepreneurialism has justified the introduction of a range of neo-liberal policy measures. Most of these measures are designed to liberalise economic relations including taxation reform, the removal of administrative impositions on the private sector and labour market deregulation. Policy recommendations designed to promote SMEs prioritise market principles in capitalist economies, which reward individual initiative and high-risk activities... The celebration of entrepreneurialism emerges more from an ideological concern with restrictions on individual and market freedom than an understanding of the factors contributing to employment generation and innovation in modern economies. (Parker, 2001, 11). Figure 1. Forms of individual SME activity in post-socialist countries Survival / Small trading + Proprietorship vs. Entrepreneurship <------------------------------------------------------------------------------------------------------------------------> * Law income * Maintenance orientation * Systemic entrepreneurship * Trading only * Niche entrepreneurship of * Economic entrepreneurship * No cumulative growth a generally transient type (classical) * Health damage * Surplus generated predomi- - Long-term goals nantly for personal consumption - Capital accumulation purposes - Personal austerity in order to buildbusiness Source: McIntyre, 2001., 17. This message from R. Parker coincides with the first serious critiques of entrepreneurship in the post-communist world that began publicly to differentiate those starting business to become self-employed from those with long-term aspirations toward entrepreneurship (see Scase, 1998; Mc Intyre, 2001). According to these critiques, majority of SMEs in the post-communist countries fall in the category of survival/small trading enterprises and proprietorship enterprises, and only a minority of SMEs transforms to classic entrepreneurship, characteristed by long-term goals, capital accummulation and personal commitment to business development (see Figure 1). In Croatia, the difference between proprietorship and entrepreneurship has been lately described as a typological difference between an entrepreneur of necessity and entrepreneur of opportunity (see engi, 2009; Singer et al., 2013). From a present-day perspective, Parker's and Scase's criticism seems exaggerated, but their thoughts are reflected in many recent texts investigating the capacity of rational public policies in the area of entrepreneurship as well as final reaches (democratic, economic and social) of transformation in the former socijalist countries (see Kovacs, Zentai, 2012). In the meantime, it seems that information capitalism (Castells, 2000) has strenghtened the economic role of SMEs in global economy, and this was considerably more than Parker expected based on her data from the early nineties of the former century. However, Scase's distrust toward actual developmental aspirations of the post-communist entrepreneurship remained relevant up to today. As the most recent research by J. M. P de Kok and G. de Wit shows, Parker and Dannreuther are not absolutely right, though (de Kok, de Wit, 2013). De Kok and de Wit estimated contribution by SMEs in new jobs creation in the EU-27 based on the method of so-called dynamic classification (using data from 2002 to 2008). The authors believe that their data comply with the analysis by Neumark and co-workers for the United States (Neumark, Wall, Zhang, 2011), and with earlier analyses by D. Audretsch and co-workers (see Audretsch, Van der Horst, Kwaak, Thurik, 2009) for Europe. Firstly, in both regions of economy (without a financial sector) in the periods 2002-2008 (EU-27) and 1992 2004 (USA) the data indicate the average net employment creation rate of 1.8% per year (see Table 1). Secondly, both analyses show lower net employment creation rate (measured as number of employees) in larger enterprises. Table 1. Average net job creation and employment in the non-financial business economy of the EU, by size class, based on dynamic classification (2002-2008) Size class (occupied persons) 0-10 10-50 50-250 250+ Total Average net job creation (x1000) 1,48 416 291 405 2,261 Average employment (x1000) 37,703 26,244 21,630 42,378 127,955 Average net job creation ratex 3,1% 1,6% 1,3% 1,0% 1,8% Source: de Kok, de Wit, 2013, 15. X: Calculated as the average across years of the ratio of net job creation to total employment. The tendency observed, however, does not erase certain differences between industry branches, which means that job creation varies significantly: from -2,7% in Mining and Quarrying to 5.9% in the sector of Real Estate, Renting and Business Activities (see Table 2). However, a dominating pattern is not subject to these variations: in six out of eight analysed branches of industry, job creation rates steadily decrease with the enterprise size. Deviation from this trend is seen in the two largest industries: a) in Trade (in the EU-27 accounts for 24% of total employment) new jobs offers steadily increase with the enterprise size, and b) in Manufacturing Industry (accounts for 27% of total employment) the smallest and the largest enterprises indicate the same new job creation rate. Table 2. Average net job creation rates in the non-financial business economy of the EU, by industry and size class, based on dynamic classification (2002-2008) Idustry Size class (occupied persons) 0-10 10-50 50-250 250+ Total Mining and quarrying 0,0% -0,7% -1,0% -3,5% -2,7% Manufacturing -1,0% -0,6% -0,6% -1,0% -0,8% Electricity, gas and water supply 6,3% 0.9% -0,3% -1,0% -0,7% Construction 3,5% 1,8% 1,8% 1,4% 2,5% Wholesale and retail trade 1,3% 1,8% 2,3% 2,8% 1,9% Hotels and restaurants 4,6% 3,6% 3,3% 1,8% 3,7% Transport, storage and communication 3,4% 3,2% 3,1% -0,5% 1,1% Real estate, renting and business activities 8,6% 4,1% 4,3% 5,2% 5,9% Total 3,1% 1,6% 1,3% 1,0% 1,8% Source: de Kok, de Wit, 2013, 16. Currently, no reliable answer can be provided to why manufacturing industry shows a different pattern in new jobs offer: is it because of high barriers to entry into the markets for manufacturing enterprises trading, or because they are relatively more capital intensive, or because of relatively high economy of scale that show the enterprises in this sector? De Kok and de Wit's concluding message is also of importanca for the Croatian policymakers in the SME sector. They remind us that Birch's theses from the eighties of the former century have been confirmed now, not only for the USA but also for the EU as a whole. This confirmation is not trivial, because obviously the observed regularity that small businesses create more jobs can be at most, a tendency rather than a strict law that always hold true. This is nicely illustrated by our finding that for (sometimes large) subsets of the European Union small businesses do not create more jobs. Therefore, if you want to be certain about the job creation of small firms in a specific country for a specific industry and for a specific time period, extra analyses will remain necessary. (de Kok, de Wit, 2013, 20). When applied to the area of Croatia, the true economic behaviour of the Croatian SMEs before and efter the crisis should be seriously investigated, before any other performance plans, and particularly in relation to the realised profit (a matter of investment capacity) and new jobs creation. However, when speaking of the European perspective, research by Wymenga and co-workers shows: a) that throughout the European Union, SMEs are still struggling to regain the levels of productivity, profit and employment as these were before the crisis eruption in 2008, and b) that their data, despite the crisis and threats of a double-deep recession, confirm Dannreuther's theses that the SME sector (currently including 20.7 million enterprises accounting for 98% of all enterprises in the EU) continues to be one of the crucial mainstays of the European economy. According to the authors SMEs accounted for 67% of total employment and 58% of gross value added (GVA). With more than 87 million person employed, the EUs SMEs continue to be the backbone of the EU economy (Wymenga et al., 2012). The lion's share of 92.2% of this number is represented by micro-enterprises with less than ten employees. 3. Croatian SME's and Impact of Crisis on the Sector Structure and Dynamics After the collapse of socialism, Croatia started to build a democratic order in accordance with the will of its voters and main political parties. The project of democratic renewal, although strongly influenced by the war due to disintegration of Yugoslavia and authoritarian tendencies in politics from 1991 to 1999, included also as its important part the privatisation of former social/public ownership as well as development of entrepreneurship. Moreover, since 1990 to the present, all main parliamentary political parties have been declaring themselves in public and political life to be entrepreneurship-friendly, which - regardless of the support actually provided to various types of entrepreneurs and great social expenses - led to creation of a new entreprenurial and managerial elite with concurrent building of non-formal and corruption networks as tools used to control important national economic resources (see engi, 2005). In 2008, classified by the number of persons employed, the average size for a small enterprise in Croatia was 5.2 employees; a medium-sized 125 employees and for a large enterprise 717 employees. According to the analysis performed by V. `onje (onje, 2010) : a) at that time, the structure of SMEs in Croatia corresponded to the structure of these enterprises in the EU; b) in terms of contribution to employment growth, Croatia followed the pattern of the new Europe: the highest contribution to employment growth was seen between the years 2002 and 2008, small enterprises ranked first, followed by medium-sized enterprises, and micro-enterprises ranked last among them (for comparison between Croatia and EU, see Table 3). In this period, in Croatia, likewise, large enterprises contributed little to overall employment. The lowest contribution of karge enterprises is not only relative but also absolute. Namely, during the last business cycle, from 2002 to 2008, the employment in the enterprise sector in Croatian increased by 189.276, of which 31.627 or 16.7% in micro-sector, 72.290 or 38,2% in the sector of small, and 46.885 or 24.8% in the sector of medium-size enterprises. This means that the SME sector in its entirety (micro + small + medium-size) increased employment by 150.802 or 79.7% of the total number. Of the number of jobs created in the enterprise sector, only every fifth job (net) was created un the sector of large enterprises (onje, 2010, 9). Therefore, in Croatia - similar to the EU great significance of SMEs results from their important structural characteristics that in the pre-crisis period they were main creators of new jobs in the country. Table 3. SMEs in Croatia and EU-27: basic comparison according to data for 2010 (Croatia) and 2011 (EU-27) Enterprise type Number Employment Value added (2009.) Croatia EU27 Croatia EU27 Croatia EU27 Number Share Share Number Share Share Mln. EUR Share Share Micro 156.848 92,1% 92,2% 338.258 31,5% 29,7% 4.191 20,3% 21,5% Small 11.137 6,5% 6,5% 208.090 19,4% 20,6% 4.037 19,6% 18,6% Medium-sized 1.929 1,1% 1,1% 197.276 18,4% 17,2% 3.940 19,1% 18,3% SMEs total 169.914 99,7% 99,8% 743.624 69,2% 67,5% 12.168 58,9% 58,4% Large 430 0,3% 0,2% 331.177 30,8% 32,5% 8.480 41,1% 41,6% Total 170.344 100% 100% 1.074.801 100 100% 20.648 100% 100% Source: EC, 2013., 1. Certain characteristics of the structure and dynamics of the Croatian SME sector in the first few post-crisis years could be illustrated by the recent data (see ACE, MEC, 2013; EC, 2013). According to these data SMEs continued to account for 99.7% of all the enterprises, but micro-enterprises dominated (90.7%). Today, the SME sector employs 64.2% of the total workforce and creates 54.6% of total added value. The structure of the SME sector by size was kept relatively stable in Croatia over the past few years. A proportion of micro-enterprises in the total number of enterprises decreased by 0.2% whereas the proportion of SME increased by 0.1%. As regards the total employment, the proportion of micro-enterprise sector decreased by 1%, the proportion of medium-sized enterprises sector increased by 0.4%, whereas the proportion of small-size enterprises marginally decreased (-0.1%) (see Table 4). Table 4. Total number of enterprises, total number of employed and value added by enterprise size in Croatia (2010 /2011) Enterprises Employment Value added (000) u HRK Size 2010. 2011. 2010. 2011. 2010. 2011. Number % Number % Number % Number % Number % Number % Micro 175.556 90,9 166.897 90,7 379.220 25,3 356.807 24,3 27.007.270 17,3 26.057.864 17,1 Small 13.645 7,1 13.242 7,2 270.552 18,1 264.650 18 28.062.519 17,9 27.208.996 17,9 Medium- sized 3.311 1,7 3.304 1,8 320.252 21,4 320.368 21,8 30.611.249 19,6 29.783.431 19,6 SMEs 192.512 99,7 183.443 99,7 970.024 64,8 941.825 64,2 85.681.038 54,7 83.050.291 54,6 Large 589 0,3 594 0,3 527.765 35,2 525.011 35,8 70.846.453 45,3 69.143.543 45,4 Total 193.101 100 184.037 100 1.497.789 100 1.466.836 100 156.527.491 100 152.193.834 100 Source: ACE, Minpo RH, 2013., 8. Average added value per employee in the entire SME sector amounted to 11.861 EUR in 2011, which represents a certain decrease when compared to 2010 (12.122,7 EUR). The highest average added value per employee was seen in small enterprises (13.829 EUR), and the lowest in micro-enterprises (9.823 EUR). As available dana suggest, the SME sector has been heavily affected by the difficult economic situation which Croatia has experienced in recent years. The total number of active SMEs has fallen from 192,512 units in 2010, to 183,443 units at the end of 2011, a reduction of around 4.7%. The Croatian SME sector lost 28,199 jobs 2010 to 2011, a decrease of 2.9%, so that at the end of 2011, the Croatian SME sector employed 941,825 persons, 64.2% of the total number of employed in the country. Overall, in the past two years, average added value per employee has decreased in SMEs but slightly increased in micro-enterprises (see Table 5). Table 5. Average number employed and value added by size of enterprises, 2010 and i 2011 Enterprise type Average number employed Value added per employee (EUR) 2010. 2011. 2010. 2011. Micro 2,1 2,1 9.774,3 9.823,7 Small 19,8 19,9 14.235,5 13.829,5 Medium sized 96,7 96,9 13.118,6 12.505,21 SMEs 5,0 5,1 12.122,7 11.861,41 Large 896,0 883,8 18.423,61 17.715,31 Total 7,7 8 14.342,9 13.956,64 Source: ACE, Minpo RH, 2013., 8. Compared to 2008, the average number of employees in medium-sized enterprises decreased from 125 to 97, and in large enterprises it increased from 717 to 884 employees. The average number of employees and average added value per employee are low which is partly a consequence of incapability of micro-enterprises to use economies of scale in a production process. Still, in total, micro-enterprises considerably contribute to employment, regardless of low added value (ACE, MEC, 2013, 9). These data suggest the following thesis: Croatian SMEs may continue to employ certain number of new employees in the time of crisis as well, but they still do not have enough capital and profits for an accelerated growth, that is, for new development. With respect to actual economic activity, a sector with the highest number of SMEs is the wholesale and retail trade sector accounting for 22.7% of the total number of SMEs, followed by manufacturing industry 12.1%, construction 11.9%, professional, scientific and technical activities 10.6% and accommodation and food service activities 10%. These five sectors make up 67.3% of all SMEs in Croatia. With regard to employment and overall economic activity of all enterprises, the available data indicate that in 2011 in Croatia, the manufacturing industry maintained to be the economic activity creating the highest employment (273.481 workplaces), accounting for 18.6% of all workplaces. The wholesale and retail trade is the second most important activity (240.180 workplaces), which accounts for 16.4% of overall employment. The construction industry ranks third with the contribution of 8.2% of total employment (120.758 workplaces). Table 6. Enterprise closure and survival rates, number of enterprises and employment, 2002 - 2012 Enterpriset type Number of enterprises Employment Closed % % (Survived) Closed % % (Survived) Micro 21.946 41,7% 58,3% 50.111 43,5% 56,5% Small 710 12,2% 87,8% -19.053 -16,0% 116,0% Medium-sized 1.215 54,7% 45,3% 35.169 22,9% 77,1% Large 430 60,0% 40,0% 113.766 32,5% 67,5% SMEs total 23.871 39,3% 60,7% 179.993 24,4% 75,6% Total 24.301 39,6% 60,4% 179.993 24,4% 75,6% Coops 312 52,2% 47,8% 1.645 47,8% 52,2% Crafts 849 55,3% 44,7% 5.244 42,2% 57,8% Total 25.462 40,1% 59,9% 186.882 24,8% 75,2% Source: ACE, Minpo RH, 2013.,18 Available data show the important changes relating to employment in the SME population over the ten-year period, from 2002 to 2012. First, the total number of medium-sized enterprises employed less in 2012 than in 2002. Second, small enterprises, overall, increased number of employees since 2005 to 2006. Although some of these employments were lost during the crisis after 2008, small enterprises ended up the period by 2012 with 16% more people employed than in 2002. Third, employment also decreased in the total number of micro-enterprises in this period, despite a significant increase in the years 2005 and 2006. In the period of high growth, since 2005 to 2008, the total number of small enterprises managed to create 81,200 new jobs, which corresponds to the increase of 76.6%. Small enterprises managed to grow in the good years, and there were more workplaces kept during recession than it was seen among other SME sizes. It is not clear why small enterprises experienced better situation, but it seems that they can be more flexible and simultaneously use the economy of scale. The rate of survival for the entire SME group was 60.7%. Nevertheless, the rate of survival for the medium-sized enterprises was as low as 45.3%, and for micro-enterprises 58.3%. In the period from 2002 to 2012, the rate of survival for small enterprises was 87.8% (see Table 6.; ACE, MEC, 2013., 17-18). 4. SME, Economic (Non)Performance and Innovations The data collected by now contradict to basic theses by R. Parker also in the Croatian example; namely, SMEs created a significant number of new employments in the country as well. However, as Parker's analysis puts to doubt both economic and innovation results of SMEs, we shall provide some data on economic performance of the Croatain SMEs between 2008 and 2012 (the first four years of economic crisis in the country). Table 7. SME's sales revenue enterprises by size of enterprises (%-ages), 2012 Enterprise type Total < 500.000 EUR 500.0001 mil. EUR 12 mil. EUR 25 mil EUR < 5 mil. EUR Micro 78.819 94,8% 3,10% 1,4% 0,57% 0,16% Small 8.223 29,7% 23,35% 22,2% 18,9% 5,83% Medium-sized 1.268 0,9% 1,10% 3,6% 20,27 74,13% SMEs 88.310 87,4% 4,96% 3,3% 2,56% 1,75% Large 340 0,6% 1,76% 97,65% Total 88.650 87,1% 4,94% 3,3% 2,55% 2,11% Source: ACE, Minpo RH, 2013.,14. When speaking about the structure of the SME sector by income from sale in 2012 (see Table 7), the data show the following: majority of the Croatian SMEs, 87.4%, have total annual sales revenue of 500.000 EUR; in the total number of SMEs 4.96% of enterprises have total sales revenue between 500.000 EUR and 1 million EUR, 3.3% have total sales revenue between 1 and 2 million EUR; for 2.6% of enterprises the turnover ranges between 2 and 5 million EUR, and only 1.75% of them have turnover exceeding 5 million EUR. It is important to note that small enterprises show more evenly distributed sales revenue: 29.7% of enterprises have sales revenue below 500.000 EUR, 23.35% between 500.000 EUR and 1 million EUR, 22.2% from 1 to 2 million EUR, 18.9% between 2 and 5 million EUR, and 5.83% more than 5 million EUR. Medium-sized enterprises are, on the contrary, grouped in the higher revenue range: 20.27% of enterprises have turnover from 2 to 5 million EUR and 74.13% higher than 5million EUR (ACE, MEC, 2013, 13). Small enterprises (10 to 49 employees) had better results according the analysis of profitability than micro-enterprises and medium-sized enterprises and achieved the best results during the past five years (see Table 8). In 2012, 78.5% of small enterprises were profitable and only 53.9% of micro-enterprises achieved a profit in 2012; in the same year, 69% of medium-sized enterprises were profitable. Unfortunately, there are no sociological relevant data on the social and professional profile of the owners and managers of the businesses that managed to retain certain developmental potential even during the crisis. Table 8. Profitable SMEs (% of totals), 20082012 Enterprise/ Years 2008 2010 2012 Profit Loss Total Profit Loss Total Profit Loss Total Micro 60,4 39,6 100,0 53,3 46,7 100,0 53,9 46,1 100,0 Small 85,0 15,0 100,0 77,3 22,7 100,0 78,5 21,5 100,0 Medium- sized 80,1 19,9 100,0 68,1 31,9 100,0 69,0 31,0 100,0 SMEs 63,6 36,4 100,0 55,9 44,1 100,0 56,4 43,6 100,0 Large 76,7 23,3 100,0 64,3 35,7 100,0 69,1 30,9 100,0 Total 63,7 36,3 100,0 55,9 44,1 100,0 56,5 43,5 100,0 Source: ACE, Minpo RH, 2013.,23. In relation to the export, as one of the indicators for business internationalisation, it should be emphasised that SMEs increased their share in the total export from 40% to 44% in the past five years. The best results were seen in the small enterprises which experienced an increase of 18.3%, whereas the export of medium-sized enterprises increased by 14%, and of micro-enterprises by 9.5% (see Table 9). Looking from the perspective of their activity, the manufacturing industry is the most important for the Croatian export: the export of the manufacturing enterprises accounted for 58.4% of the total export in 2012. Table 9. Export revenue (M HRK), 2008 2012. Enterprise/ Years 2008 % 2009 % 2010 % 2011 % 2012 % Micro 6.847 7 5.698 7 6.407 7 7.835 8 7.502 8 Small 10.922 12 9.806 12 10.711 12 12.802 13 12.918 13 Medium-sized 19.251 21 16.376 20 18.867 21 19.697 21 21.961 23 SMEs total 37.019 40 31.879 40 35.985 40 40.334 42 42.381 44 Large 55.089 60 48.269 60 53.085 60 55.748 58 54.701 56 Total 92.108 100 80.148 100 89.070 100 96.082 100 97.082 100 Source: ACE. Minpo RH, 2013., 29. The next group dominating by export performance is in the wholesale and retail trade sector (12% total value), transport and warehousing (share of 8.2%), accommodation and food service activities (4.7%) and professional, scientific and technical activities (4%). These five economic sectors account for 87.3% of the total export value. As regards the role of SMEs in the export, it should be mentioned that manufacturing industry also dominates in the SME sector, accounting for 43.4% of the overall SMEs export. The share of micro-enterprises in the total export of the manufacturing industry within SMEs was as low as 5.8%, but it was high in the sector of wholesale and retail trade, where it accounts for 34.4%; large enterprises account for 39.3% of the export. Previous as well as recent research data confirm the thesis of low internationalisation of the Croatian SMEs suggesting that this is one of their structural characteristics (see engi, 2006; Singer et al, 2013). According to recent data, new entrepreneurs tend to avoid markets where the one same product is offered by all, and tend to position themselves in markets with less competition. Consequently, over the ten-year period the 50 : 50% ratio seen in 2002 (50% enterprises in the markets with many suppliers and 50% of enterprises in markets where the same product is offered by a few enterprises or none at all) shifted to the 40 : 60% in 2011. Identical trend is seen with old established enterprises: from 78 : 22% in 2002 to 59 : 41% in 2011. However, it seems that old established enterprises still push more in the markets with numerous competitors. This is because those businesses are less technologically equipped, but also because of a significantly larger number of businesses with products that are new to no one (as much as 79% in 2011). Additionally, there are indications that certain changes are taking place in the structure of internationalisation; consequently, new businesses (TEA) have increased their internationalisation: from the 75 (without or low) vs 25% (internationalisation) ratio in 2003 to the 60 vs. 40% ratio in 2011; old established businesses have decreased their internalisation: from the 76 (without or low) vs. 24% (internalisation) in 2003 to the 80 vs. 20% ratio in 2011 (Singer et al., 2013, 37). Generally low level of innovation in the Croatian enterprises is also confirmed in the overview of Innovative acitivities in the Croatian enterprises in the period 2008 to 2010 of the Croatian Bureau of Statistics from 2012 (DZS). It shows that 79% large enterprises recorded certain innovations whereas only one third of small enterprises introduced innovations in the investigated period (Croatian Bureau of Statistics, 2012). These data confirm Parker's thesis that the Croatian SMEs have not only small-scale development but also small innovation potential. New data gathered by the GEM project support this thesis as well. Namely, according to comparative data for the countries included in the GEM project (see Singer et al., 2013, 33 and further), in the ten-year period from 2002 to 2011, Croatia had siginificantly greater number of enterprises (both start-up and established) that invested into the latest technologies than is the average for the countries with efficiency-driven economies. Concurrently, Croatia had significantly less number of enterprises whose products are recognised as novelty to all customers. According to researchers, this opens a question of efficiency of investment into technology but also a question of the achieved level of innovation within an enterprise. Although it is expected that new entrepreneurial ventures (TEA business ventures started within less than three months) more frequently use latest technology, it is worrying that in 2011 in Croatia, as many as 77.48% of established enterprises (active more than 42 months) had technology older than 5 years, which means that they are actually without new technologies. Taking into consideration that Croatia has a small number of old established enterprises, out-of-datedness of their existing technology even more reduces their capacity to contribute in creating competetiveness, and consequently, new values. During the observed period an asymmetric change occurs, which decreases the technological level of businesses in Croatia: investment in the latest technologies is decreasing and the number of businesses without new technologies is increasing: a) in start-up businesses (TEA): investment in the latest technologies decreases from 30.11% in 2005 to 16.48% in 2011, and the number of businesses without new technologies increases from 43.42% in 2005 to 59.75% in 2011; b) in old established businesses: investment in the latest technologies decreases from 23.04% in 2005 to 6.97% in 2011, and the number of businesses without new technologies increases from 48.62% in 2005 to 77.48% in 2011. Although businesses in Croatia are better equipped technologically than those in the comparison group of countries whose economies are based on efficiency, it is the opposite by product innovation. (see Singer et al., 2013, 33). 6. Croatian Entrepreneurship in International Perspective What is the meaning of presented data when seen from an international perspective? For the time being, the data collected in serious researches are limited and cannot provide a suitable response to this question. To some extent we can find compensation in periodic international measurements of key dimensions and context of entrepreneurship, conducted mainly for the purposes of the agents of public policies in the area of entrepreneurship. This approach is well illustrated by the recent publications of the European Commission showing the measures for entrepreneurship status in the member countries using (ten) selected indicators (see EC, 2012; EC, 2013). As most indicators show, Croatia is lagging, that is (in view of internationalisation of business) it vigorously staggers behind the EU-27 average. In the area of entrepreneurship, some findings are particularly prominent: a) in Croatia greater number of people compared to the EU express their entrepreneurial intentions, yet there is significantly lower number of those who consider them realistically feasible; b) entrepreneurs in Croatia, generally enjoy less social respect than in an average EU-27 country. According to the GEM project data for 2013, only 43% inhabitanst of Croatia at the age of majority declared that entreprenerus enjoy a high social status in the country, which makes Croatia more comparable to the Czech Republic (48%) and Spain (52%) than to countries where entrepreneurs are highly respected (Finland: 86%, Ireland: 81%, Germany: 75%) (see Singer et al., 2014). These data confirm what we have been aware of for a longer period of time: a) that great percentage of individuals in Croatia consider a business setting-up mainly as an option to end their unemployment and not as a way for starting business and building an entreprenurial career, b) that Croatian society mainly does not look upon entrepreneuship and entrepreneurs positively. What are the reasons of this legitimacy deficit is a matter for an in-depth discussion which should take into consideration not only social assumptions of entrepreneurship, transformation of system of values over the past thirty years but also the effects of privatisation practice on the public opinion and recent attitudes of people related to entrepreneursip (see Ruef, Lounsbury, 2007; Sekuli, 2012). Exactly these are the attitudes stated in the last European Commission research report on the perception of entrepreneurship in the EU and the world (European Commission, 2012). The report reiterates the finding about the prevailing negative attitude toward entrepreneurs in Croatia, documenting it with the data that 70% of the Croatian respondents agree with the statements that entrepreneurs exploit the work of other people and that they only act in their own financial interest. It is possible that positive legitimacy of entrepreneurship in the Croatian circumstances is not undermined by negative stereotypes on the SME owners only, but also by the perception of Croatia as socially and politically over-complex, administratively complicated and by corruption over-networked country. Environment where agents of political, economic and administrative power very easily produce barriers to prevent normal bussines performance to others, in the form of quasi-rents (following the logic of toll stations) undoubtedly cannot be stimulative for realisation of entreprenurial projects (see `oai, 2012). This is also what regular reports of the World Bank suggest formulated in their own words. Table 10. Croatia in  Doing business evaluations (2010  2013) Business dimensions 2013 2012 2011 2010 Starting a business 80. 67. 56. 101. Dealing with construction permits 143. 143. 132. 144. Getting electricity 56. 56. - - Registering property 104. 102. 110. 109. Getting credit 40. 48. 65. 61. Protecting investors 139. 133. 132. 132. Paying taxes 42. 32. 42. 39. Trading across borders 105. 100. 98. 96. Enforcing contracts 52. 48. 47. 45. Resolving insolvency 97. 94. 89. 82. General assessment 84. 80. 84. 103. Source: Doing Business, World Bank, 20102013. For example, the tenth report of the World Bank Doing Business records results for 185 countries relating to the number of administrative limitations; on this scale Croatia has progressed since 2010, but the general opinion is that this is a very slow progress and inadequate for entrepreneurial needs (see Table 10). Despite the overall progress, Croatia gave up in 2012, mainly because of drops on the scale due to starting businesses, protection of investors, tax payment and over-border trade. However, for the future of the Croatian SME sector as possible participants/agents in development, the perception of national environment as an environment without true business opportunities is of crucial importance. GEM project data speak in favour of this thesis. First, in 2011, less number of people noticed business opportunity (18.25% vs 44.18% in 2008), and more people were afraid of business failures (45.72% vs 38.14% in 2008). Second, while Croatia recorded a sharp decline in noticing new opportunities, this was not observed in the reference group of countries despite global crisis. Although intensity of starting business ventures (measured by TEA index) grows by 2006, it is below average of the reference countries every year (Singer et al, 2013, 28 and further). Third, according to motivation coefficient measurement, from 2002 to 2011 Croatia is behind all countries included in the GEM research. For illustration, in 2011 motivation coefficient for Croatia was 1.78 and for Norway 20, which means that in Norway, 20 times more entrepreneurs started a business venture due to recognised business opportunity rather than because of necessity, whereas in Croatia the number of these entrepreneurs was higher only 1.78 times (Singer et al, 2013, 28). Finally, business activity in the Croatian economy contributes less than expected to the economic power of the country, because with 7.3 TEA (number of new business ventures per 100 adult inhabitans) it realises 18.339 USD gross domestic product per inhabitant (according to purchasing power parity), whereas Ireland, having 7.2 TEA realises 39.508 USD. Overall, after 20 years of investment of the state and politics into business ventures, Croatian entrepreneurship is characterised with a markedly weak dynamism of entrepreneural structure: small number of domestic entrepreneurs started new business ventures that are large by the size of investment, there is low motivational coefficient relating to the young people entering into entrepreneurship, low number of established enterprises with the prospect of stable growth, low level of renewal of entrepreneurial structure, and what is the worst low number of growing businesses (so called gazelles). To what extent these findings result as a logical consequence of a chain collapse of the series of economic activities due to the crisis, and to what extent due to incapability of the part of the SME owners to exit from the framework of the national market still remains unclear. For now, it is only beyond doubt that after the ten-year period from 2002 to 2011, we have a status quo in the sense of entrepreneurship Low percentage of renewal of business ventures indicates a status quo, where economic structure to a significant extent is a hostage of ventures which have been started out of necessity (they do not have a long-term perspective, are not based on a perceived opportunity, and without good preparedness of those who have started such a venture) and are surviving without any significant contribution to creation of new value or new employment. Old established businesses without new products, with low internationalisation and low expectation of new employment are even more decreasing the development capacity of the economy. This results in the loss of proactive capacity of the economy, and raises the issue of the efficiency of the existing policy and investments in support of small and medium businesses in Croatia. (Singer et al. 2013, 98). 7. Discussion Regardless of how its content is defined, the entrepreneurship is, as seen from the holistic perspective, a complex pattern of behaviour, a pattern that is shaped in interaction of an individual and his environment through different types of businesses as institutional tools to realise profitable business projects. Starting from a hypothesis that under the current political, economic and cultural assumptions, development potential of the Croatian small and medium-sized enterprises have been experiencing a prolonged crisis, this paper described (based on new analyses) economic trends relevant for the SME sector from an analytical and international perspective. When focusing on the state-driven measures to encourage the SME development, the example of Croatia, generally confirms one of the key theses by R. Parker: that political support for small business and entrepreneurship, which Western countries (USA and EU) have been developing in the form of special policies since the nineties, is more a component of institutionally supported individualistic economic and employment relations (within the framework of new philosophy of deregulation and free market), than well designed responses to actual or non-existent contribution of SMEs to economic growth. Although in the economic conjuncture SMEs created a significant number of new workplaces in Croatia as well, their development and economic potential is very modest when compared internationally. Additionally, the state investments in the SME development over the past twenty years were created more from a populist intention toward entrepreneurship development, as a constituent part of overall democratic legitimacy of the rulling parties and hidden rewards for supportive SME owners, and less from the strategic analysis over the sources and agents of economic development in global economy. Althoug the latest analyses (for USA and EU) contradict Parker's thesis that SMEs do not create new workplaces and do not play a major role in the economic growth, they are, nevertheless, followed with great caution with respect to long-term conclusions on the SMEs actual contribution to the economic recovery in Western countries. Specifically, recovery seen in the EU-27 industrial activities is weak, as measured by realised levels of gross value added and also, by lower rates of new employment. This means that in this (post)crisis period, latent economic recovery of the European industrial SMEs is to a significant extent accompanied with jobless growth. Yet, the European agents of public policies in the area of entrepreneurship look also at the encouraging trends in the hi-tech and knowledge-based sectors, that is on the companies that are currently seen as accelerators of new growth. Nevertheless, it is not yet clear what public/operating measures, if any, would be appropriate as a form of support for a more vigorous growth for this type of enterprises.The tendency of jobless growth, on the other side, is also important for the Croatian models for overcoming the crisis, because in Croatia, the process of de-industrialisation significantly decreased industrial capacities and generated unemployment of epic proportions. When describing situation in Croatia, introduction of any strategic policy measures should be preceded by serious empirical investigation of the Croatian SMEs true behaviour during the crisis, in particular regarding a realised profit (resulting from development/investment capacities) and creation of new jobs. This has been partly completed, and not so long ago, as evidenced by recent analytical studies conducted under indirect pressure of pre-accession negotiations with the EU (ACE, MEC, 2012; 2013). However, as considerable part of this analysis is based on statistical and financial reports, sociologically viewed it does not cover empirically the business and managerial situation in the enterprises. Thus, in compliance with the Dannreuther's question from 2007, still remains unsure whether we know what the SME sector really thinks developmentally and how to preserve its motivational and developmental potential using regulatory-administrative measures? A research conducted in 2011 in the companies of metal-working and wood industry (n=371), showed that their owners and managers developed several distinctive anti-crisis strategies ( engi, 2011). In response to the crisis, a significant number of companies developed customer-oriented strategy (based on sensitivity to the price and quality of a product); the measures undertaken by some companies included also certain acquisition strategies, with plans for overtaking other companies in the country, foreign companies, employment of new managers and a possible change of ownership structure of a company. One of the anti-crisis strategies seen in these two industries was also stabilisation of business activities in enterprises based on the idea for development of strategy of market leadership while retaining previous markets (increase in sales through market leadership, retaining existing part of the market share and increase in production). In addition to acquisition strategy, a strategy of acquiring international markets and forming new business alliances was identified (increased foreign market penetration, entering into business alliances with international companies, introduction of new technologies and equipment in order to boost both national and international competitiveness). Finally, some of enterprises planned to use strategy for business stabilisation through the state support/subvention, which is associated with the first attempts to get funding from the EU budget. This strategy has not been extensively used (included business goals were not priorities to enterprises in 2010), but it is nonetheless present in a part of the enterprises. In any case, anti-crisis strategies identified at the level of enterprises have been shaped mainly as autonomous measures of the enterprise owners and managers in the analysed industries. Government anti-crisis measures either have not proved to be helpful or were entirely insignificant for them. Only 8.1% of owners and managers declared that these measures helped them to some extent in creating measures and strategies to exit crisis. Finally, 20.0% of enterprises from these industries have not managed to stabilise their businesses in 2010/2011. The reasons were a few but specific: a) they did not manage to get payment for overdue invoices from their business partners/state/public enterprises (8.4%), b) they do not have new products or new markets (8,4%), or they c) lost their previous markets because of lost or broken connections with their previous business partners (2.2%). All this lead to further implosion of business activities in these enterprises, which means that for a significant part of enterprises in these two industries, recovery will be very slow. According to various macro-indicators at the level of overall economy, the crisis produced devastating waves in the SME sector: the total number of active SMEs fell from 192.512 enterprises in 2010 to 183.443 enterprises at the end of 2011, which is the fall of about 4.7%; in 2011, the loss of jobs accounted for 28.199 workplaces compared to 2010, which is the fall of 2.9%. This means that toward the end of 2011, the SME sector in Croatia employs 941.825 persons, 64.2% of the total number of employed in the country. As regards employment and total economic activities in all enterprises, available data indicate that in 2011 in Croatia, manufacturing industry is still the economic activity that creates the highest employment (273.481 workplaces), which accounts for 18.6% in the total number of workplaces. This means that any sensible public policy should particularly take into account what is going on in this sector, how to stimulate its growth and hold back the tide of de-industrialisation strongly manifested in this sector (see Aralica, 2014). With respect to export, one of the indicators of business internationalisation, it should be emphasised that SMEs increased their share in the total export from 40% to 44% over the past five years. Small enterprises are at the top position again: their recorded increase in export of products was 18.3%, whereas medium-sized enterprises increased their export by 14%, and micro-enterprises by 9.5%. Recent data confirm tendencies already known: a) that manufacturing industry is the most important in the Croatian export: it accounts for 58.4% of the total export in 2012; b) that in the SME sector dominates manufacturing industry with 43.4% of the total SME export. These data bring to attention one important policy dilemma: taking into account a possible role of the state in stimulating export, what enterprises are to be considered as seriously growing through the export medium-sized or large enterprises? It seems that export of both small and medium-sized enterprises, although it has been slowly cutting into the share of large enterprises since 2008, is still too slow to compensate exceedingly needed level of internationalisation of the national enterprises, and incomes gained from foreign markets. On the other hand, it remains to be identified what prevents large enterprises from becoming, by their volume and revenues, larger exporters than they are now. When describing the government policies toward entrepreneurship in general, we can analytically distinguish the government policies for the identification of priorities and supports to entrepreneurship and the government policies aimed to simplify regulatory framework for entrepreneurial action. According to the report by S. Singer and co-workers (2013), in the entire observed period (2002 2011), both groups of governmental policies were graded lower than average for all countries included in this project, and also, their grading was the lowest when compared to other components of the entrepreneurial environment in Croatia. Particularly low grades are obtained for the governmental policies toward the regulatory framework and these are significantly lower than average for all GEM countries. Within the ten lowest graded statements related to components of entrepreneurial environment in 2011, as many as four with the lowest grades relate to government policies (inability to obtain all the necessary permits and certificates within a week, grade 1.6; it is difficult for new and growing businesses to cope with bureaucracy, legal and regulatory requirements, grade 1.65; state does nothing to change the unfavourable position of new businesses when participating in public procurement, grade 1.7; tax burden for new and growing businesses, 1.74). (Singer et al., 2013, 79-80). Concerning strategic priorities, the finding that draws attention is that the Croatian Government and competent ministries still have not found the best policy/supportive measures for the growing enterprises. The analysis made by V. `oai and co-workers showed that  Croatian gazelles (and they are seen in all economic activities) occur prevailingly autonomously among enterprises, thanks above all to smart business ideas of their owners and managers rather than to measures of support by the state (see `oai, 2012). Neither this latest  Strategy for Development of Entrepreneurship in Croatia 2013-2020 does not point, particularly, to any need for their identification and, consequently, for sensible stimulation of further growth of this type of enterprises. Instead analysing barriers to modern economic growth in Croatia and critical discussion on European policies for entrepreneurship development (see Biani, 2012), This strategy provides investment of scarce financial means into very diffuse and varied objectives. For illustration, within the framework of only one general objective of the state measures for entrepreneurship development, such as increase in competitiveness of small economy several sub-objectives are hidden, e.g.: improvement of economic performance, improved access to financing, promotion of entrepreneurship, improvement of entrepreneurial skills and improvement of business environment. Concurrently, improvement of economic performance is meant to be achieved through investment into production, business internationalisation but also through women entrepreneurship development From a critical perspective, in a country with a pronounced deficit in economic growth, financial supports, as scarce as they are, should not be provided to the SME sector on the basis of diffuse and populist-formed objectives, but on basis of reliable data about the true agents of economic development in the actual economic structure, and evaluation of previous types/measures of the state interventionism in this area. The more so because a research from 2012, on non-returnable funds used to support entrepreneurs (conducted on the sample of 600 enterprises) revealed that: a) only 30% of entrepreneurs reported that the support had a very strong effect to their businesses (craftsmen more than legal entities), and, b) as many as 44% of entrepreneurs estimated that the supports obtained had no significant positive effect to their business activity. When asked how to make non-returnable supports more efficient, 72% subjects responded that the amounts of granted supports should be increased (see ACE, MEC, 2012). This was partly realised through measures of support in 2013, but their effect is still questionable due to devastating effects of crisis into the SME sector. It is interesting to note that none of the previous Croatian governments, including the current one as well, was seriously interested in the development of analytical-information system for empiric/realistic follow-up of economic performance of SMEs and for periodical (programme-based) evaluation of costs and benefits of already decades-long investment into the SMEs support. How to explain this? As analysis of public administration and public policies showed, such practice results from the simple fact that there is no strategic policy planning in Croatia, and consequently no government capacity for strategic actions in this sector (Petak, 2014). As for myself, I am personally more likely to accept another thesis: absence of strategic planning in different sectors of regulation is a product of long-year populism of the local political elite, preoccupied with the reproduction of own political careers and separated from both the voters and economic elite. This elite is primarily engaged in simulating reforms rather than in management of sector reforms applying in public policies clearly defined and coherent objectives. The result is that they increase x-inefficiency within the whole socio-economic system, at the same time producing dependent groups and clientelism (small entrepreneurs, certain number of citizens, war veterans, etc.) around them. Finally, it seems that Scase's general scepticism toward the small and medium-sized entrepreneurship applies for the Croatian circumstances as well. When considering the development of Croatia over the last twenty years, with all the processes brought about by the war, political capitalism and growth stimulated by the state, we could say that the Croatian entrepreneurship is in many characteristics more similar to  entrepreneurship of merchants and proprietors than to  entrepreneurship of the missionary or Faustian type (Rogi, 2006). This only reflects newly-established entrepreneurial structures where self-employment and entrepreneurship of necessity dominate over opportunity entrepreneurs. According to all available data, despite certain economic vitality of the part of small enterprises, the Croatian SME sector is still deeply in the crisis, and does not have a development potential to change the current trends. Internal reasons of devastation of development potential have already been identified: these are incompetent leadership and management and low growth aspirations ( engi, 2011; `oai, 2012). For the economic future of Croatian managerial and entrepreneurial elite (and consequently of the entire society) it is of crucial importance to understand where is the origin of individual and collective agreeing to the  perspective of limited good and low aspiration for growth: is it a cultural matrix of the society or rules of game and structure of economic circumstances established by political system and their actors, which in the end result in perception of national environment as an environment without proper business opportunities. It is, of course, possible that these both factors act intertwiningly leading to a long-term crisis of the Croatian entrepreneurship. The topic of culture seen in a broader, macro-level analysis brings us back to the question of value and to a contradiction, present for a long time, between traditionalism and modernism in the Croatian society (Sekuli, 2012). Acceptance of economic freedoms is very often tied to traditionalism and authoritarian political and economic culture, and not with individualisation and innovative character of business conduct. This value code, along with the important effect of education as a mediating variable, can thus explain not only low levels of innovation in the entrepreneurial companies but also emergence of authoritarian organisational culture in which workers and managers are not rewarded for their contribution to the enterprise performance and which does not stimulate their commitment to the enterprise. On the contrary, it frequently emphasises the power of owner-proprietor and ownership as a possibility for mainly excessive personal spending. Moreover, this culture contributes to de-legitimatisation of the entire entrepreneurship project, now at the micro-level of the economic system (let us remember those not paying employees their earned salaries and social security contributions for years). Taking all in account, to get rid of low aspirations from the enterprise development, if they culturally determined, requires a larger period of time, investment in education of entrepreneurs and hope that, over time, a generation shift would occur in understanding the world, business opportunities and aspiration for growth. On the other hand, if low aspirations for growth are prevailingly determined by the factors of political and institutional environment, it is in principle possible to modify them toward higher developmental goals in a relatively shorter time. This is only in principle possible, because in this case, certain self-evaluation of the actual purpose of the political system of the society, self-evaluation of its effect on economic system and its development capacity are required. 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