Petra Koudelková

Corruption and System Change in the Czech Republic: Firm-Level Evidence

Abstract Corruption is a widespread phenomenon in all countries undergoing market transition. However, the Czech Republic stands apart, with its incredible entanglement of corruption, politics and business. Although corruption on the firm level in the Czech Republic is heavily criticized, the results of our in-depth interviews conducted with Czech SMEs showed that almost every firm has encountered some form of corruption and even used corruption to either increase sales, help negotiations, or increase production. Most of our respondents admitted that corruption was useful for day-to-day business. This article aims to obtain information about the state of corruption in enterprises in the Czech Republic and map the behaviour of entrepreneurs in companies. Our results offer ways to fight corruption: apart from highlighting the negative traits of corruption, emphasis should be made on determining to what extent corruption would be acceptable for firms and their clients. This could be useful for designing various state policies that might influence system change and market development in CEECs and both directly and indirectly influence the volume of corruption.

Innovation in Small and Medium Enterprises in the Czech Republic

Business growth of SMEs has become a subject of many economic studies. Extensive research of growth in SMEs goes back to the 90s when the business growth of various SMEs was analysed by case studies. The scientists responded to a niche in the scientiÞ c Þ eld and created a theoretical model of growth and expansion of SMEs (Barringer and Greening, 1989; Strielkowski, 2012b). In the Czech Republic, the „boom“ in the establishment of SMEs began after 1989 (Cahlíková and Strielkowski, 2013, Dasan, 2013); however, in Western countries, SMEs started to expand 15 to 20 years earlier (please refer to Dobbs and Hamilton, 2006; Headdy and Kirchhoff, 2009; Strielkowski, 2013). Successful long-term business growth is usually a top goal for the majority of SMEs and it is often praised in the media (Brush et al., 2009). There are many factors that inß uence business growth and there are also various ways how to improve growth in SMEs (Dobbs and Hamilton, 2006; Strielkowski, 2012a; Janda et al., 2013). According to existing research, it can be argued that the entrepreneurs‘ main goal or perhaps even obligation is to accumulate capital and increase business growth (see Carland et al., 1984). A successful entrepreneur should also introduce new innovations to the market in order to create suitable conditions for healthy competition. On one hand, innovation puts under pressure small companies that cannot be competitive. However, on the other side, innovation creates a strong foundation for business growth of bigger and more competitive enterprises (Hashi and Krasniqi, 2010). Different conditions in business environment affect the formation and existence of many types of companies (Begley et al., 2005; Mlinari et al., 2012; Strielkowski, 2013). Businesses could adopt either „casual management” or the „necessity-driven“ approach as Estrin et al. (2006) or Talik et al. (2012) point out in their studies. These two approaches have a different impact on business growth. Although the business growth is not the priority of the company, the necessity-driven approach contributes signiÞ cantly to its growth. However, it should be noted that some authors do not agree with this business classiÞ cation (Hashi and Krasniqi, 2010). In 1982, Nelson and Winter (1982) highlighted that the success and growth of SMEs is closely linked to business innovation. According to GofÞ n and Mitchell (2005), the economic theory identiÞ es that there is a relationship between innovation and economic growth. It is, therefore, necessary that Governments take steps to stimulate technological development and innovation in their countries. According to the World Economic Forum, an innovative organization contributes to the sustainable business growth, both in the medium and longer term (Bondareva, 2012). INNOVATION IN SMALL AND MEDIUM ENTERPRISES IN THE CZECH REPUBLIC