The Role of Public Policy in Entrepreneurship Development in Post-socialist Countries: A Comparison of Albania and Estonia

Research on entrepreneurship development in transition economies has acknowledged the important role that the external environment plays in inducing entrepreneurial behaviour. Research has also shown that entrepreneurship in these contexts can emerge spontaneously and develop despite the absence of formal institutions due to the use of trust and social institutions or repeated behaviours within a small circle of business contacts (Smallbone and Welter, 2001a; McMillan and Woodroff, 2002). However, the experience in some of these countries has also shown that entrepreneurship in these contexts remains fragile and its contributions to economic development rather small. In this respect, government is one of the main actors in establishing the necessary institutional arrangements for durable development or productive entrepreneurship in post communist economies. Moreover, variations between countries in government policies and actions contribute to heterogeneous external conditions and variations in patterns of entrepreneurial behaviour and outcomes. Based on institutional theories, we explore the comparative roles of the Estonian and Albanian governments in shaping paths of entrepreneurial development in these two post communist economies. Using a combination of documentary and survey data we show that government can be both an enabling and constraining influence through the establishment of regulatory environments, the increased legitimacy of their policies and also through the role that is placed on entrepreneurship in societies where entrepreneurship has had a short history.