38 PERSPECTIVES ON BUSINESS AND ECONOMICS | VOL 44 | 2026 are medium- and high-technology products, trailing the EU average of 61.2%. One program backing research in the country is the Smart Specialization Strategy (S3) 2029. This strategy’s main objective is to enhance innovation performance and capacity while boosting competitiveness. The first S3 program was implemented from 2016 to 2020. S3 2029 builds on the original framework, intending to be more responsive to the needs of national stakeholders (OECD, 2024). The implementation of those revisions, however, continues to lag. The original S3 already faced initial administrative and operational challenges. The program is overseen by the National Innovation Council, whose primary goal is to increase the use of EU funding. But the Council was not created until 2018, two years after the S3 program began, which left the program without a governing body to direct S3’s early stages. And although the Council has discussed implementation reports and progress, there is no record of tangible actions or follow-through on recommendations. The lack of regular annual progress reporting on S3 hinders monitoring program outcomes (World Bank, 2021). Many of the obstacles in implementing the S3 program stem from a highly bureaucratic approach. Thematic Innovation Councils operate under the National Innovation Council and are tasked with bringing together stakeholders to develop frameworks that achieve the S3 program’s goals. However, the process of establishing of these councils, including the appointment of presidents and members, was highly rigid and bureaucratic, mirroring the procedures of governmental institutions and contradicting, according to the World Bank (2021), “the very idea of having bottom-up entrepreneurial discovery process structures with non-governmental stakeholders.” Additionally, unclear responsibilities between program managers slow innovation. Multiple managers may be assigned the same task, creating duplication and unnecessary complexity (World Bank, 2021). The rigidity of these councils and task complexity illustrate a broader pattern that even programs designed to improve performance are implemented through bureaucratic habits accumulated across Croatia’s transitions. Croatians’ perceptions of the entrepreneurial environment The unsupportive environment for startups and innovation has been noticed by Croatian citizens, who are frustrated by bureaucratic constraints. In a 2019 survey of 761 Croatian leaders, a majority rated the country’s conditions for entrepreneurial success as poor, citing government regulations that inhibit fair market competition, scientific research that neglects entrepreneurial needs, and insufficient cooperation between business and academia, among other factors. Almost half of participants, 46%, believed government regulations did not allow for a fair market, and 66% of them did not believe R&D institutions focused on entrepreneurial needs (Pureta & Pureta, 2019). Participants also responded that the country’s public administration has hindered competitiveness; one example is that 40% believe enterprises financed by public funds have distorted the market. Pureta and Pureta (2019) maintain that publicly financed enterprises “jeopardized the business operations of the companies that need to find their own source of funding.” Views of the entrepreneurship environment also diverged between state-owned enterprises and privately owned enterprises. The leaders of state-owned enterprises consistently ranked Croatia’s entrepreneurial conditions as better than did leaders of private, domestic organizations, suggesting that public administration is more tailored to state-owned organizations (Pureta & Pureta, 2019). Croatian attitudes toward the entrepreneurial environment also compare poorly with EU-wide sentiment. Among Croatians who own SMEs, 47% reported facing regulatory obstacles or administrative burdens, with payment delays and a lack of available financing the next two greatest challenges. Where the EU average is 35%, 41% of Croatians identified regulatory or administrative requirements as obstacles to the expansion of enterprises, while 51% cited difficulties in retaining or hiring skilled staff as barriers to growth (European Commission, 2022b). Croatians demonstrate lower than average enthusiasm for science and technology. Only 27% expressed strong interest in new scientific discoveries and technologies, compared to 33% in the EU overall. Additionally, Croatian public sentiment favors less government regulation of entrepreneurship and advancement: 56% believe science and technology should be allowed to operate freely in the marketplace like a business (European Commission, Directorate-General…, 2021). Croatians also show low interest in research and innovation as investment priorities. Only 16% identified research, innovation, and digital technology as priorities for investment, trailing the 27% figure for EU citizens overall (European Commission, 2025). These metrics indicate that poor performance in innovation and entrepreneurial activity is rooted in governing issues, not a lack of willingness to embrace the market. In contrast to neighboring countries that experienced sim-
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