Do social conditions matter for emergence of innovative firms? The case of Kosovo

The theory of innovative enterprise emphasises the importance of social conditions in the capabilities of firms to innovate. Firms operate in a particular social context characterised by national economic institutions that influence the social conditions of innovative activities. Governance institutions influence strategic control, employment institutions influence organisational integration, and investment institutions influence financial commitment. This paper examines whether these social factors matter for the emergence of innovative firms in the context of low-income economies, with evidence from Kosovo firms. The findings suggest that Kosovo's economy provides little incentives for firms to innovate. While the country has established an institutional framework which to a great extent is comparable to developed countries, the major challenge remains its enforcement. The number of business entities endowed with innovative capabilities is low, and this is an outcome of macro as well as micro social context.