Analysis of market forces and the productivity of companies in Croatia

In Croatian public domain we can often hear that Croatian economy is neoliberal and that neoliberalism is one of the main causes of social issues that this country faces. Neo-liberalism in this context is often related to the over-exposure of households to the market and market forces and the creation of negative role of private companies in the society. However, public opinion on market and market forces doesn't have empirical grounds, and according to previous research conducted for Croatia, market forces in economy are relaitvely weak and thus the economy countinually stagnates. Market forces are measured as the rate of entry and exit of companies on the market. The dynamics of entry and exit of companies on the market points to degree of flexibility of entrepreneurs to adapt their businesses to the current macro-economic climate. The analysis of market forces, more specifically, determening the rate of entry and exit on the market, would enable us to see wherther the market in Croatia functions on optimal level in the sense that it eliminates unproductive companies from the market and keeps the innovative, dynamic and productive companies.  

Within the analysis, it is necessary to create an overview of sectors in order to explore the productivity of companies. For that cause, we must analyze the microeconomic data on the level of companies. In order to recognize the patterns of decrease and increase of productivity growth, as well as of entry and exit from the market, we will analyze the microeconomic data of companies from 1993-2015. A long period of analysis providing over 20 years of data will enable the discovery of influences of external schocks (i.e financial crisis) on the companies' producitvity. The data will be analyzed on regional level in order to gain the insight into regional differences, but also on industrial level in order to empirically discover which industries are most vulnerable to the particular shock. 

The project objective is to offer policy makers and entrepreneurs reliable empirical data on basis of which it is possible to bring optimal decisions on business on macro, and regional level, as well as on the level of a company itself. Project will identify factors that influence the companies' productivity, single out the most productive industries and determine which industries are most resistant in the conditions of economic uncertainty.   

The proposed empirical research will provide managers, company owners and policy makers with scientifically determined information on specific characteristics and successes of most productive companies in Croatia. The results will enable the comparison of relevant indicators of productivity through regions and industries and thus identify the leading branches of economy, as well as those to which more attention must be given. On the basis of the reserch results, a discussion can be initiated on the improvements of industrial policy in Croatia in the sense of the increase of competetiveness of Croatian companies in both domestic and foreign markets. 

Commissioned by: EIZ Club
Project duration: 2017 
Project leaderBruno Škrinjarić
CollaboratorsVedran RecherEdo Rajh, PhD