Factors that influence the competitiveness of Czech rural SMEs

Abstract

The paper focuses on determining the key factors that influence the competitiveness of rural small and medium enterprises (SMEs) in the Czech Republic. Rural SMEs play an important part in sustainable rural development, post-transformation processes, as well as in the integrated development of formal and informal rural institutions in the Czech economy. The research design is based on a questionnaire survey conducted with a sample of 1144 randomly selected Czech rural SMEs. There was applied a one-way error model expressed either by the fixed effects (FE) model and the random effect (RE) model with the error term consisting of two components: a time-invariant component and a remainder component that is assumed to be uncorrelated over time. It was also attempted to rule out the individual location effects in the econometric model by using the location variables (location dummies).The results also show that the success of the rural SMEs in the Czech Republic is mostly related to its manager and enterprise characteristics. The most significant determinants of rural enterprise's competitiveness are location within a region with competitive situation, the enterprise size, the enterprise age, and the fact whether the enterprise has some form of innovation. The results might have significant implications for both academics and stakeholders and can be used as a basis for the targeted rural enterprise policies in the Czech Republic and in the post-transitional Eastern and Central Europe.

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