Abstract
Drawing on concepts from earlier theories of firm growth (Gibrat’s Law -GL, Jovanovic’s Learning Theory- JLT, Resource Based View-RBV, and Institutional Theory-IT) this paper empirically tests the large sets of variables as predictors of small firm growth that accounts for wide range of factors affecting small firm growth in Kosova (human capital, institutional quality, and managerial capacities). Using data from a sample of 1606 entrepreneurs based on three pooled SME surveys this study controls for potential biases in other studies in transition economies (TEs) that overlooked internal factors compared to institutional factors. Findings based on Probit and Tobit models show that growth aspirations, managerial capacities and training are among the most significant variables associated with growth. Among the institutional quality variables, only corruption appears to be significant and negatively associated with growth. Other important factors for explaining a small firm growth are firm size and age, and export involvement. This study contributes to literature on small firms growth in TEs and highlights several managerial and policy implications to foster a small firm growth.
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