Studies factors of economic growth from the enterprise perspective to recommend policies that can enhance enterprise performance and growth, and to create a knowledge pool that will provide enterprises with specific solutions for some of their most acute problems.
This program develops knowledge that is of critical importance in nurturing entrepreneurship in Serbia, especially in securing that those ventures that have shown resilience over the past two decades are given the tools for further growth and success. Through it, CEVES will also raise the issue of some of the most prominent and persistent problems at the company level, calling attention of the broader public from the macro to the micro level, and creating constructive pressure for change.
In the words of the World Bank – “A striking feature of Serbia’s enterprise structure is its “missing middle”, the lack of dynamic middle-sized companies that would significantly contribute to the overall economy. Resources are heavily concentrated in a relatively small number of large companies, all with less than average productivity. There are also numerous small and micro companies that have not succeeded in growing to medium size and achieving the economies of scale necessary to become competitive exporters”.
Considering such a structure of Serbia’s enterprise sector, in particular the absence of medium-sized domestic companies and failure in implementing the necessary organizational changes for growth, a concerted effort is needed to support the graduation of the existing micro, small and medium-sized companies, each into the larger size category. Companies in Serbia have to answer questions of financing, strategy and risks, among others, on an everyday basis. In this regard, CEVES will look at several issues, which have significant impact on company success/failure.
- how companies in Serbia can improve their strategic frameworks and corporate governance to increase their efficiency,
- improve their access to capital,
- identifies and spreads their understanding of risk,
- creates company responsibility mechanisms that go beyond what is prescribed by the law.
As regards strategy, CEVES will focus on medium-sized companies that have the capacity to export and become regional players. CEVES will:
- examine the process of strategy formulation,
- try to determine who is responsible for the choice of strategic direction,
- find out if these companies have clear and comprehensive strategies,
- contain all important elements, and
- if they are communicated through the company.
As regards corporate governance issues, CEVES plans to perform a comprehensive survey of corporate governance practices in two types of Serbian companies: listed and family-owned. These surveys will explore all relevant aspects of corporate governance including: owners, strategic and monitoring level (board level), operational level (executives), control environment, transparency and disclosure. Whenever possible these studies will be related to the studies that have previously been conducted in the same area, as well as to similar studies performed in the region. Particular attention will be paid to risk, to raise awareness about the risks that appear at the company level, create risk registries, raise management capacity to recognize risks, evaluate their likelihood, the effects they might have, and identify options for their mitigation. The project focuses on risks in the real sector companies, since our previous research has indicated that real sector companies in Serbia do not have a structured risk management function. CEVES will also conduct research to answer how exactly have the few successful medium to large-sized local companies “made it”, i.e. how they became regional players and active exporters. This will allow CEVES to subsequently develop case studies to deduce policy recommendations and convey success stories. Finally, this subprogram also promotes corporate social responsibility (CSR). We consider CSR as an important concept which encourages individuals to think about the consequences of their decision-making and actions on the society as a whole. While companies in Serbia state they are socially responsible, primarily because they are occasionally involved in humanitarian or philanthropic activities, they do not have a clear understanding of the CSR concept. That is why we believe it is necessary to analyze how developed CSR is in Serbian companies, and to assess how supportive of CSR is the legal framework. Projects under this subprograms:
- How we use available financing opportunities, CFO decision-making
- Capital markets development in Serbia, Investors protection
- Beyond what is necessary by the law, be socially responsible
- Let’s acknowledge risks (Part 1), Macro and sector risks
- Let’s acknowledge risks (Part 2), Company level risks
- Access to Finance
Analyzes real sector financing options as framed by regulations, and articulated in available financial products to identify regulatory changes and procedural improvements that can increase company access to capital. CEVES’s analysis will have two important dimensions:
- Analyze the relevant legal framework, with the aim to assess the quality of investor protection in Serbia, address creditors and equity owners. The analysis will start with the assessment of the law on the books, which will be gauged against best practices. Furthermore, CEVES will determine usefulness and applicability of legal concepts that have been “transplanted” into the Serbian legal system in an attempt to harmonize it with the EU legal framework. However, the analysis will not stop there. It will go further to assess the quality of formal institutions (courts, the Securities and Exchange Commission and the National Bank of Serbia) that are relevant for the enforcement of the legal rules that define investor protection. It will also examine informal institutions (so-called mental models), which are relevant for voluntary compliance. Institutions will be examined to determine if they support, or undermine, the implementation of best practices.
- Screen & examine available financial products, with special focus on private equity financing showing plenty of opportunities, which is still underdeveloped relative to the comparable markets in the region. Besides, financial products will be evaluated from both the investors’ (adequately priced products, realistically reflecting risk) and the companies’ points of view (if products respond to Serbian enterprises development needs).
A particular focus of this program area is access to finance for SMEs. In the current unfavorable growth environment SMEs are an important potential source of employment growth. Weak access to finance is one of the biggest obstacles they face in the realization of this potential. It is critical to ensure that unnecessary obstacles are removed, and that the financial system becomes better able to identify those opportunities and niches that can be supported with relatively little risk. Projects under this subprograms:
- SMEs access to finance
- Human Capital.
At present is limited to the study of human capital and the skill shortage in the Serbian managerial market, with a longer-term commitment to tackle the gap between education profiles generated by Serbia’s schools, and its development needs. This program will focus on some key functions that CEVES deems crucial for sustainable growth and success of companies. In that respect, CEVES will start from its previous research which pointed out that CFOs in Serbia are de facto Chief Controllers, and that in many companies in Serbia a Finance Sector is reduced to an Accounting Department. Although companies often complain about finance options available in the market, a question to be asked is: do right finance competences exist in real sector companies, and do finance providers in Serbia have knowledgeable partners in real sector firms? Next, CEVES will try to determine who sits on Serbian boards, and if Serbian companies engage in evaluation of Board performance. The adequate Board evaluation is essential to ensure that at any point in time the most capable candidates lead and monitor Serbian companies. Finally, CEVES will look at practices of defining Serbian executives’ compensation packages, as to determine if Serbian companies know how to attract, motivate and retain talent.
- Global Entrepreneurship Monitor (GEM) with Serbia Specific Module
- Institutional Design for Growth, or how to strengthen Serbia’s democratic governance articulation and the resulting regulations to create an institutional environment that supports equitable and sustainable economic growth.
This program covers a broad range of issues, regarding the institutional framework necessary to insure much greater stability of government policies, their design in support of growth, legal security, competitiveness, transparency and social participation. It pays attention not only to regulations and organizational structures but also to what people understand institutions to be – how they interpret and apply them. CEVES considers of outmost importance to tackle early on two fundamental institutional problems: 1) Absence of adequate government planning/accountability systems, which significantly reduces Serbia’s capacity to deliver adequate support to economy. In great measure responsible for extreme policy instability which directly hurts its economic growth; 2) Incomplete transition from “social” to private property which results in serious regulatory inconsistences, blocks implementation of regulatory change and leads to a decentralized obstructive bureaucratic behavior towards private undertakings and enterprises. CEVES will seek to conduct smaller projects targeted at specific issues, as the opportunity might arise, through which it can build its understanding of these issues, and argumentation of the need, to tackle them.
- A comparative study of Serbia’s Government Coordination, Planning and Accountability Practices
- Drafting a Government Performance and Accountability Act and Advocacy
- Business Enabling Environment
Studies regulations, institutions that implement them and how this is understood to propose how this can be changed to transform Serbia’s business environment from an obstructive to a supportive one. Over the past decade Serbia had adopted much regulatory change, mainly directed at approximation with the acquis communautaire along with efforts at regulatory simplification and liberalization. A permanent Office for Regulatory Reform and Impact Assessment was established and more than one “regulatory guillotine” was performed. However, there remains clash between the understanding of the “market” inherited from self-management times, and that necessary today, which to this date has not been targeted by reform efforts. The conceptual confusion is not only producing regulatory and legislative inconsistencies, but also blocking implementation, introducing arbitrariness in judiciary interpretation of the law. Consequently, this has created legal insecurity and fertile ground for corruption. For example, given the essence of social property – that it was not truly owned by the state, i.e. it was dealt with in a fully decentralized manner – the legal/bureaucratic system was constructed to protect property from reckless (or just risky) disposing, i.e. full of administrative (also decentralized) second-guessing of the “owners’” decision-making. Many administrators today still do not understand that it is not their duty to protect private property from the proprietors’ decision-making, rather only to protect contracts. It is telling that Serbia is the only former-Yugoslav country that still recognizes social property in its constitution, although there is evidence that the others also suffer from similar problems. CEVES will also look for opportunities to study more specifically the difficulties companies’ face when entering and exiting the market, as well as the role of the legal framework for property relations law and its implementation in practice, focusing on bankruptcy procedures, enforcement, and the protection of parties in a contract from being misled and abused. In particular, this third issue — the possibility for an individual to serially establish business ventures that fail to honor their commitments and cause damage to clients and partners– is greatly hurting the business environment, especially by damaging the trust that is so necessary for a healthy market economy. Projects under this subprograms:
- Survey: Attitudes to Private Property and Entrepreneurship
- New Ethics
CEVES will partner with philosophers and other social scientists to: a) map the ethical issues relevant to the strengthening of the rule of law and market behavior, b) promote an informed public dialogue on these issues, and c) develop accessible case studies on what is and is not ethical, as well as what is and is not corruption. The incomplete conceptual transition, described above, has created an ethical confusion whereby the public is often not able to distinguish between the legitimate acquisition of wealth and corruption. True corrupt behavior is harder to stigmatize if almost any normal market behavior is considered unethical. At the same time this program area will seek to rely on, and contribute to, the rich field of study of entrepreneurship to throw light on the nature of entrepreneurship in Serbia, and how institutional change can contribute to its constructive spirit.