ABSTRACT. The article is based on data of the study of 151
small companies in Slovenia by J. Pra
nikar and others. The
study is the first investigation of small firms in Slovenia with
a sufficiently large number of cases to enable conclusions
about the ways in which SMEs are managing to cope with new
opportunities and problems. The aim of this article is to
investigate a link between competitive advantage and human
resource management in SMEs in a transitional economy.
Results indicate that a link indeed exists in that human
resource efforts in SMEs to a certain degree contribute to the
competitive advantage of companies.
Following a brief war of secession in 1991,
Slovenia became an independent country and
today can be considered as a small open economy
in transition. In contrast to some former socialist
countries which have chosen a more revolutionary
approach, Slovenia decided on an evolutionary
path of transition characterized by a stabilization
policy under soft-budget constraints,
slow process of ownership transformation and
gradual legal changes to the market environment.
In spite of many problems with its implemen-
tation, the chosen path of transition shows
promising results so far. After a period of a
declining growth (1990–92), Slovenia achieved a
1.3% growth in the GDP in 1993 and a 4.9%
growth in 1994. The GDP growth in 1995 was
3.9%. However, inflation fell during period. While
retail prices increased in 1991 by 104.6%, the
price increases were 92.9%, 22.9%, 18.3% and
8.5% in 1992, 1993, 1994 and 1995, respectively.
This was accompanied by an increasing rate of
unemployment in the period 1990–94 in which the
rate rose from 2% in 1989 (33,796 registered by
the Labor Office in May 1989) to 14.5% in 1994
(137,142). In May 1995 the unemployment rate
decreased to 13.7% (116,349).
Part of these results can be attributed to the
development of the small business sector in this
period. However, it has to be noted that even
before independence there was substantial prior
experience with the development of the craft
sector and small social firms in Slovenia.
was followed by the development of an indepen-
dent private sector after many legal constraints
for establishing small private enterprises were
removed in 1989. In 1990, for example, there were
6,313 small private firms which employed 13,800
workers (21% of the employment in the economy).
Taking in account small socially owned firms up
to 50 employees, this number increased to 7.5%.
In addition, there were about 33,300 craft firms.
In 1994, the number of registered small private
firms increased to 48,435 firms with 78,000
employees (16% of the whole economy). How-
ever, these are not the final figures, since the
intended process of transformation of craft firms
into small private firms and sole proprietorships
has not been concluded.
In principle, the Slovenian government advo-
cates two kinds of policy development in favor of
small-scale enterprises. The general direction of
Competitive Advantage and
Human Resource Management in
SMEs in a Transitional Economy
Small Business Economics 9: 503–514, 1997.
1997 Kluwer Academic Publishers. Printed in the Netherlands.
Final version accepted on February 15, 1996
Faculty of Social Sciences
University of Ljubljana
nikar and Vesna Jordan
Faculty of Economics
University of Ljubljana
SLO-61109 Ljubljana, Slovenia