18 ADMINISTRAȚIE ȘI MANAGEMENT PUBLIC  32/2019 The impact of the public sector on the quality of the business environment in the SME segment… [628205]

18 ADMINISTRAȚIE ȘI MANAGEMENT PUBLIC  32/2019

The impact of the public sector on the quality
of the business environment in the SME segment

Jaroslav BELAS1, Lubomir BELAS2, Martin CEPEL3, Zoltan ROZSA4

Abstract: Small and medium-sized enterprises (SMEs) are an essential part of every
country’s economic system. The quality of the business environment plays an important
role in this regard. The aim of the paper was to define and quantify important public sector
factors influencing the quality of the business environment in the SME segment and to compare the intensity of the defined factors between the Czech Republic (CR) and the
Slovak Republic (SR). In regards to the defined aim, a survey-based research was
conducted with enterprises operating in the SME segment. 312 enterprises in CR and 329 enterprises in SR were approached during this research. The scientific hypotheses were
verified using the methods of Pearson statistics. The evaluation of political factors is quite
negative in both countries. Only 15% of Czech and 20% of Slovak entrepreneurs positively evaluated the level of legislation in business. Both Czech and Slovak entrepreneurs see
state’s support of export quite positively. Only 12% of Czech and 22% of Slovak
entrepreneurs positively evaluated the administra tive burden on enterprises. Entrepreneurs
in both countries claim that the state is unable to provide qualified workforce for
businesses. Most significant differences between the two countries were found in the
evaluation of state bureaucracy which the Slovak entrepreneurs evaluated more positively than their Czech counterparts. The results of the research show the need to deal with
urgent issues, or create a better system of public factors influencing the business
environment.

Keywords : public sector, business environment, small and medium-sized enterprises,
quality of business environment

JEL: L26, H83, I25
DOI: 10.24818/amp/2019.32-02

1 Professor; PhD., Tomas Bata University in Zlin, Faculty of Mana gement and Economics;
Zlin; Czech Republic; e-mail: [anonimizat]
2 Professor PhD., University of Prešov in Prešov, Institute of P hilosophy, Faculty of Arts;
Slovakia; e-mail: [anonimizat]
3 A s s i s t a n t p r o f e s s o r ; P a n e u r o p e a n U n i v e r s i t y i n B r a t i s l a v a , F a c ulty of Economics and
Business; Slovakia; e-mail: [anonimizat]
4 Associate professor; Alexander Dubček University of Trenčín, F aculty of Social and
Economic Relations; Slovakia; e-mail: [anonimizat] Jaroslav Belas, Lubomir Belas, Martin Cepel, Zoltan Rozsa (2019 ) . T h e i m p a c t o f t h e
public sector on the quality of the business environment in the SME segment, Administratie
si Management Public , (32), pp. 18-31, DOI: 10.24818/amp/2019.32-02.

The impact of the public sector on the quality of the business environment in the SME segment

ADMINISTRAȚIE ȘI MANAGEMENT PUBLIC  32/2019 19 Introduction

Entrepreneurship is a significan t part of the economic system o f every
country, having important effects on the growth of the entire s ociety. Therefore,
many authors put emphasis on the role of small and medium-sized enterprises
(SMEs) in the effective functioning of an economic system (Dobe š et al., 2017;
Kozubíková et al., 2017; Virglerova et al., 2017; Czarniewski, 2016; Dubravska et
al., 2015).
This paper examines significant political factors of the qualit y of the
business environment and quantifie s their significance in the C zech Republic and
Slovakia. The originality of thi s research lies in the definiti on and quantification of
the public sector factors shaping the quality of the business e nvironment in the
SME sector, as well as the comparison of business conditions in b o t h c o u n t r i e s
based on entrepreneurs’ views.
The structure of the paper is the following: The theoretical pa rt presents the
research results on public sector’s influence on the quality of the business
environment. The second part defines the aim of the research, t he methodology,
and the descriptions of the data used. The third part presents the results of the
research and the discussion about the issue. The conclusion off ers a final summary
of the research.

1. Theoretical part

Public sector’s influence on the quality of the business enviro nment can be
seen through political factors (legal environment, state regula tion and support of
entrepreneurship, state bureaucracy, and quality of education).
Countries’ political environments shape the behavior of entrepr eneurs. High quality
legal environment characterized by stability of the legal system and good
enforceability of the law motivates people to conduct business. Many authors are
interested in this topic.
Autio and Fu (2015) studied this relationship, using panel data consisting
of 67 countries across the world. Their analysis showed that th e quality of political
institutions fosters firms’ entry into formal entrepreneurship and discourage firms’
entry into informal entrepreneur ship. Moreover, this study exam ined the
moderation effect of political institutions on the relation bet ween economic
institutions and the population prevalence of entry into entrep reneurship. They
found evidence that the effect of this moderation is positive o n formal
entrepreneurship and negative ( but insignificant) on informal o ne. According Lim
et al. (2010), business start-up is driven by entrepreneurial c ognitions consisting of
venture arrangements, venture willingness, and venture ability, w h i l e
entrepreneurial cognition is predicted by institutional environ ment including legal,
financial, education, and trust systems. Among the institutiona l factors that
constitute a business system, the legal environment was found t o influence venture
arrangements and willingness.

The impact of the public sector on the quality of the business environment in the SME segment

20 ADMINISTRAȚIE ȘI MANAGEMENT PUBLIC  32/2019 The impact of government policies on firms’ entrepreneurial ori entation is
an issue that scholars have explored. In general, the domestic political condition
and the activity of the government is seen as a factor which af fect business
environment (Grosanu and Bota-Avr am, 2015; Kadocsa and Francsov ics, 2011).
Dai and Si (2018) examined this relationship and concluded by s upporting it. So,
the perceived effectiveness of new policies positively influenc es firms’
entrepreneurial orientation. Moreover, according to Economidou et al. (2018),
formal institution index positively impacts venture capital act ivity. In this research,
the formal institution index is a composite variable which is g enerated by
factorization from several indicators including governmental ef fectiveness, rule of
law, political stability, voice and accountability, regulatory quality, and control of
corruption. Thereby, business environment is associated with th e level of the
formal institutions in a country.
In European countries, policy fo rmation regarding SMEs administ rative
burden and the way of fostering start-up and entrepreneurial ac tivities are gaining
attention. Literature in this field suggests that improvement i n the quality of the
legal environment leads to improvement in the efficiency of the e c o n o m y
(Aristovnik and Obadic, 2015). Marinescu (2013) found that the low economic
performance among the European countries is due to the “excessi ve” production of
European legislation. Thus, the legal and regulatory framework and public
administration are important for both entrepreneurship and SME growth.
Government regulation is perceived by entrepreneurs as a major obstacle
to entry in the market (Lutz et al., 2010). The influences of r egulation on business
start-up and entrepreneurial activities are not always direct, predictable or
constraining (Mallett et al., 2018). Sambharya and Musteen (201 4) studied the
relationship between institutiona l environment and entrepreneur ship across
counties. Contrary to expectations, this research concluded tha t regulatory quality
was negatively associated with entrepreneurship. Further, accor ding to Valdez and
Richardson’s (2013) study, regulative institutional support for entrepreneurship is
positively associated with the level of opportunity-motivated e ntrepreneurial
activity and negatively related to the level of necessary entre preneurial activity at
the national level. So, concerning the regulatory effect, a dis tinction between
necessity- and opportunity-motivated entrepreneurship should be made. Levie and
Autio’s (2011) research shed light on the relationship of regulatory bu rden and
entrepreneurial activity. They concluded that the lighter the r egulatory burden, the
higher the relative prevalence of non- and strategic entreprene urial entry. This is
considered a good evidence to be noticed by policymakers who de sign policies
aimed at fostering entrepreneurship.
I t i s o f a p a r t i c u l a r i n t e r e s t f o r p o l i c y m a k e r s t o f i n d a w a y t o foster
entrepreneurial activity by taking into account variations on t he education,
regulation, and financial systems. However, Economidou et al. ( 2018) argue that
more fundamental reforms are required to improve the business s ystem. Peck et al.
(2018) studied the ways in which growth-oriented SMEs are affec ted by
regulations based on case studies from North-West England. Thei r analysis found
that regulatory burden shapes entrepreneurs’ behavior. Neverthe less, growth-
o r i e n t e d f i r m s a r e a w a r e o f t h e a d v a n t a g e s i n s e e k i n g r e g u l a t o r y knowledge.

The impact of the public sector on the quality of the business environment in the SME segment

ADMINISTRAȚIE ȘI MANAGEMENT PUBLIC  32/2019 21 Bosma et al. (2018) found positive association between entrepre neurship and
regulation of credit, labor, and business. However, they did no t find enough
evidence to support the statistical significance of this relati onship. Kljucnikov et al.
(2016) found that only a part of the entrepreneurs positively e valuated the
applicable forms of state financial support. There is some ambi guity in empirical
studies on the linkage between public support and firm growth ( Ipinnaiye et al.,
2017). However, a more recent study conducted by Chowdhury et a l. (2018) found
empirical evidence that government programs aimed at stimulatin g
entrepreneurship have a positive impact on the quality and quan tity of
entrepreneurship. Based on the above discussion and evidence, i t is clear that
government regulation and its support toward entrepreneurship i nfluence the
quality of business environment.
Viturka et al. (2013) and Nicolescu and Nicolescu (2013) sugges t to use
public administration as a factor to assess the quality of the business environment.
The influence of the quality of governance on entrepreneurship was shown by Thai
and Turkina (2014). Aristovnik and Obadić (2015) investigated t he impact and
efficiency of bureaucracy (public administration) on fostering SMEs in EU
countries by employing data envelopment analysis. According to them, the main
goal for the large majority of EU member states remains a furth er reduction of
bureaucracy that could be useful for improving the regulatory e nvironment of
SMEs. There is an ambiguity in empirical studies on the link be tween public
support and firm growth (Ipinnaiye et al., 2017). However, a mo re recent study
conducted by Chowdhury et al. (2018) found empirical evidence t hat government
programs aimed at stimulating en trepreneurship have a positive impact on the
quality of entrepreneurship.
The impact of government on the rate of entrepreneurship is not o n l y
through legislation, but also through the educational system (Verheul et al., 2002).
The government can impact the quality of education through spen ding and
exposure to quality assessments. Educational system is importan t for stimulating
entrepreneurship for several reasons. First, education can give individuals a sense
of autonomy, independence, and self-confidence. These elements play crucial roles
when individuals want to engage in a business start-up process. Next, education
makes people aware of alternative career choices. In addition, education increases
the possibilities of individuals, thereby making people better prepared to perceive
opportunities; and finally, educated individuals have knowledge that can be used to
develop their new entrepreneur ial opportunities. Education coul d be an important
factor that might improve the quality of the business environme nt. Education
system influences the entrepreneurial cognition (venture abilit y component), which
in turn affects business start-up (Lim et al., 2010). Tertiary education positively
effects the perceived opportunity and knowledge-intensive busin ess sector activity
(Dilli & Westerhuis, 2018). Viturka et al. (2013) support its importance in this
relationship and included it as a factor to account for a new i ndex. Also, Mubarik et
al. (2017) suggest an index, invol ving education as a core dime nsion, and
acknowledge its importance. Uni versities could play a key role in the development
of a new business culture by increasing the quality of entrepre neurial training
(Grigore & Dragan, 2015). In a different point of view, Rostam- Afschar (2014)

The impact of the public sector on the quality of the business environment in the SME segment

22 ADMINISTRAȚIE ȘI MANAGEMENT PUBLIC  32/2019 studied the relationship between entry and entrepreneurship and concluded that the
exclusion of the educational entr y requirement has encouraged s elf-employment.
More recently, Dai and Si (2018) found evidence that education positively
influences entrepreneurial orien tation. Considering the above d iscussion, it can be
assumed that the quality of educat ion leads to the quality of b usiness environment.

2. Aim, methodology and data

The aim of the paper was to define and quantify significant pol itical factors
that shape the quality of the bus iness environment in the SME s egment. A part of
this aim was a comparison of defined factors in the Czech and t he Slovak Republic.
I n r e g a r d s t o t h e d e f i n e d a i m , a s u r v e y – b a s e d r e s e a r c h w a s c o n d ucted with
enterprises operating in the SME segment. 312 enterprises in CR and 329
enterprises in SR were approached during this research. Data co llection took place
in 2018. The method of random choice using the “Randbetween“ ma thematical
function was used to select enterprises from the “Albertína“ d atabase comprising
enterprises in the Czech Republic. Slovak enterprises were rand omly selected from
the “Cribis” database containing the list of enterprises, organ izations, and
entrepreneurs. The enterprises were approached via email asking them to fill out
the online questionnaire. The questionnaire was intended for bu siness owners or
top management (hereinafter entrepreneurs).
The response rate in the Czech Republic was approximately 4 % ( out of
over 7800 enterprises). The number of approached enterprises i n the Slovak
Republic was more than 9400, and the response rate was approxim ately 3.5 %.
The structure of respondents within the Czech Republic (312 ent erprises) was the
following: Business area: services 109 enterprises, retail 73 e nterprises,
manufacturing 53 enterprises, construction 29 enterprises, agri culture 9 enterprises,
transportation 19 enterprises, other business area 23 enterpris es. Time period of
operating a business: 56 enterprises 1 – 5 years, 48 enterprise s 5 – 10 years, 208
enterprises more than 10 years. Size of business: 258 micro-ent erprises (up to 10
employees), 43 small enterprises (up to 50 employees), and 11 m edium-sized
enterprises (up to 250 employees). Highest attained education l evel of the
entrepreneur: 50 high school without diploma, 135 high school w ith diploma, and
127 college education. Gender of entrepreneurs: 236 men, 76 wom en.
The structure of respondents within the Slovak Republic (329 en terprises)
was the following: Business area: services 122 enterprises, ret ail 69 enterprises,
manufacturing 51 enterprises, construction 39 enterprises, agri culture 20
enterprises, transportation 11 enterprises, other business area 17 enterprises. Time
period of operating a business: 104 enterprises 1 – 5 years, 78 enterprises 5 – 10
years, and 147 enterprises more than 10 years. Size of business : 234 micro-
enterprises (up to 10 employees), 71 small enterprises (up to 5 0 employees), and 24
medium-sized enterprises (up to 250 employees). Highest attaine d education level
of the entrepreneur: 10 high school without diploma, 95 high sc hool with diploma,
and 224 college education. Gender of entrepreneurs: 251 men, 78 w o m e n . I n
accordance with the approach by Conorto et al. (2014), individu al constructs were
defined using the following statements:

The impact of the public sector on the quality of the business environment in the SME segment

ADMINISTRAȚIE ȘI MANAGEMENT PUBLIC  32/2019 23 Political factors: (PF)
PF1: Legal environment PF11: I positively rate the level of legislation in business.
PF12: The judicial system in the area of business law works wel l.
PF13: The enforceability of l aw in my country is good.
PF14: The legal environment in my country is stable.
PF2: State regulation and support of entrepreneurship
PF21: The state’s tax and levy policy supports entrepreneurship .
PF22: The state politics supports the export of our products an d services.
PF23: The state supports entr epreneurship financially.
PF24: The state has a positive i mpact on the quality of busines s environment.
PF3: State bureaucracy
PF31: The administrative burden on businesses is adequate.
PF32: The administrative burden o n entrepreneurs has decreased in the past five
years.
PF33: The state bureaucracy does not negatively i nfluence the b usiness
environment. PF34: The state bureaucracy does not influence entrepreneurship .
PF4: Quality of education
PF41: I view university education as that of a high quality. PF42: I view high school educat ion as that of a high quality.
PF43: The state is able to provid e a qualified workforce for bu sinesses.
PF44: Graduates hav e high quality knowledge and skills.
In developing this paper, four scientific hypotheses were estab lished:
H1: There are statistically significant differences in the eval uation of the legal
environment by Czech and Slovak enterprises. H2: There are statistically significant differences in the eval uation of the state
regulation and support of entrepr eneurship by Czech and Slovak enterprises.
H3: There are statistically significant differences in the eval uation of state
bureaucracy by Czech and Slovak enterprises.
H4: There are statistically significant differences in the eval uation of the quality of
education by Czech and Slovak enterprises.

To evaluate the defined scientific hypotheses, the method of de scriptive
statistics (percentage, means) and t h e Z s c o r e m e t h o d w e r e u s e d . Statistically
significant differences between positive answers of the designa ted social groups
were compared through Pearson statistics at the significance le v e l o f 5 % . I f t h e
calculated p-value was lower than 5%, the null hypothesis was r ejected, and the
alternative hypothesis was adopted. The calculations were made through the free
software available at http://www.socscistatistics.com/tests/zte st/Default2.aspx.

The impact of the public sector on the quality of the business environment in the SME segment

24 ADMINISTRAȚIE ȘI MANAGEMENT PUBLIC  32/2019 3. Results and discussion

The research results are listed in the tables below.

Table 1. Evaluation of PF1: Legal environment
Factor Number of positive
answers CR/% out of the
total number of 312 Number of positive
answers SR/% out of the
total number of 329 Z-score:
p-value CR/SR
PF11 48/15.4 66/20.1 0.121
PF12 34/ 10.9 62/18.8 0.005
PF13 45/14.4 49/ 14.9 0.704
PF14 57/ 18.3 79/24.0 0.075
(Source: Authors results, 2019)

15.4% of Czech entrepreneurs gave the level of business legisl ation a
positive rating. In Slovakia, it was 20.1% of entrepreneurs.
The highest positive rating in Czech Republic was discovered i n factor
PF14 which is the stability of t he legal environment, while the lowest was achieved
in factor PF12: The judicial syste m in the area of business law works well.
In Slovakia, entrepreneurs gave the highest rating to the stab ility of the
legal environment (24%), while t he lowest satisfaction was achi eved in the
enforceability of the law (only 14.9% agreed with the statement on the
enforceability of the law).
The average value of positive ratings in the Czech Republic wa s 14.75%
and 19.45% in Slovakia.
The p-values (0.121; 0.704; 0.075) confirm that in the evaluat ion of 3
factors out of the total number of 4, there are no statisticall y significant differences
in respondents‘positive ratings in both countries. Statisticall y significant
differences were discovered in the evaluation of the quality of the judicial system
in the area of business law (Sl ovak entrepreneurs gave this fac tor a better rating).
H1 was not confirmed.

Table 2. Evaluation of PF2: State regulation and support of ent repreneurship
Factor Number of positive
answers CR/% out of
the total number of 312 Number of positive
answers SR/% out of the
total number of 329 Z-score:
p-value CR/SR
PF21 24/ 7.7 30/9.1 0.516
PF22 94/ 30.1 101/30.7 0.873
PF23 35/11.2 51/15.5 0.112
PF24 33/10.6 53/16.1 0.040
(Source: Authors results, 2019)

The impact of the public sector on the quality of the business environment in the SME segment

ADMINISTRAȚIE ȘI MANAGEMENT PUBLIC  32/2019 25 Entrepreneurs in both countries gave the most positive rating t o state’s
support of export. The state’s t ax and levy policy received the worst rating.
The average value of positive ratings in the Czech Republic was 15% and
18% in Slovakia.
Statistically significant differe nces were discovered in the ev aluation of
factor PF24.
Slovak entrepreneurs rated state‘s influence on the quality of the business
environment more positively.
H2 was not confirmed.

Table 3. Evaluation of PF3: State bureaucracy
Factor Number of positive
answers CR/% out of
the total number of 312 Number of positive
answers SR/% out of the
total number of 329 Z-score:
p-value CR/SR
PF31 37/11.9 73/22.2 <0.001
PF32 18/5.8 54/16.4 <0.001
PF33 65/ 20.8 70/21.3 <0.001
PF34 15/ 4.8 38/11.6 <0.001
(Source: Authors results, 2019)

Entrepreneurs in both countries rated PF33 (State bureaucracy d oes not
negatively influence the busin ess environment) most positively, while PF34 (State
bureaucracy does not influence entrepreneurship) received the w orst rating.
The average value of positive ratings in Czech Republic was 11% and 18%
in Slovakia.
The p-values (<0.001) confirm that there are statistically sign ificant
differences in respondents’ pos itive ratings in all defined fac tors. It can be said that
Slovak entrepreneurs view the i nfluence of state’s bureaucracy on entrepreneurship
more positively.
H3 was confirmed.

Table 4. Evaluation of PF4: Quality of education
Factor Number of positive
answers CR/% out of the
total number of 312 Number of positive
answers SR/% out of the
total number of 329 Z-score:
p-value CR/SR
PF41 129/ 41.3 116/35.3 0.112
PF42 101/32.4 97/29.5 0.429
PF43 31/ 9.9 57/17.3 0.006
PF44 76/24.4 76/23.1 0.712
(Source: Authors results, 2019)

It was interesting to discover that entrepreneurs in both count ries view the
quality of college education as q uite positive (41.3% of entrep reneurs in Czech
Republic and 35.3% in Slovakia). Only 9.9% of entrepreneurs in Czech Republic

The impact of the public sector on the quality of the business environment in the SME segment

26 ADMINISTRAȚIE ȘI MANAGEMENT PUBLIC  32/2019 and 17.3% in Slovakia agreed with the statement that the state is able to provide a
qualified workforce for businesses.
The average value of positive ratings in Czech Republic was 27% and 26%
in Slovakia.
There were statistically significa nt differences in entrepreneu rs‘positive
answers in PF43.
H4 was not confirmed.

It was discovered in the researc h that the overall satisfaction rate with the influence
of the public sector in shaping the business environment is rel atively low, as on
average, only 17% of the Czech and 20% of the Slovak entreprene urs positively
rated this area.
In this context, Kadocsa and Francsovics (2011) bring interesti ng results
that emphasize the importance of political factors in shaping the quality of the
business environment. According to them, SMEs consider the dome stic political
situation (68.75%), the domestic economic environment (62.5%), and the activity
of the government (62.5%) as key factors affecting their busine ss activities. The
political factor, followed by domestic markets and social chang es were identified
as the most important reason for uncertainty in corporate opera tions.
State bureaucracy proved as the biggest area of dissatisfaction i n b o t h
countries. The quality of education, on the contrary, received the lowest
dissatisfaction rate in both countries.
State bureaucracy presents a problem not only in the Czech Repu blic and
Slovakia. Based on a research by Price Waterhouse Coopers (2018 ) conducted
in 2447 private companies in 31 European countries, this proble m is typical for the
entire continent of Europe. It was interesting to discover duri ng the research that
despite the general notion of regulative and bureaucratic actio ns of the European
Union suppressing entrepreneurs’ initiatives and complicating t heir lives, the
entrepreneurs did not share this opinion. 39% of the respondent s in the research
stated that the domestic bureaucracy represents a problem, comp ared to the 29% of
those who see the main problem in the European bureaucracy. Thi s result is
apparently unfavorable for the European Union, as there has bee n a rise in the
number of various protests and populist movements in many Europ ean countries.
One of the possible explanations of this effect is the existenc e of the “gold
plating effect” (EU member count ries exceed Brussel’s requireme nts when
implementing European guidelines into their national legislatio n). This problem is
m e n t i o n e d b y e . g . M a r i n e s c u ( 2 0 1 3 ) . A t y p i c a l e x a m p l e i s t h e G e neral data
protection regulation (GDPR) that puts a bureaucratic burden on Czech and Slovak
entrepreneurs. The GDPR started a “bureaucratic frenzy” in both countries. New
enterprises were established that prepare documentation for oth er enterprises and
institutions. People in companies, public institutions, and uni versities spend a large
amount of time performing various activities (document preparat ion, trainings,
etc.), while their contribution to the society is disputable (m any experts suggest that

The impact of the public sector on the quality of the business environment in the SME segment

ADMINISTRAȚIE ȘI MANAGEMENT PUBLIC  32/2019 27 this regulation has its limitations). In Slovakia, it increases the administrative
burden on entrepreneurs by 16 hours a year (Beracka, 2018).
The current status of bureaucracy in the Czech and the Slovak R epublic is
perceived as a serious problem and experts are urging governmen ts to start acting
resolutely. The bureaucratic index of the Institute of Economic and Social Studies
indicates that a Slovak entrepreneur has to perform 64 bureaucr atic tasks annually,
requiring 222 hours, i.e. 28 workdays (data from 2017). The sit uation in the Czech
Republic is even worse (233 hours per year), but far better tha n in Ukraine where
an entrepreneur spends 469 hours a year doing bureaucratic work , which represents
59 workdays (Hrušovská, 2018). It is obvious that the current s tate of bureaucracy
can present a serious threat in case the macroeconomic environm ent in Europe
deteriorates. One of the negative effects of today’s bureaucrat ic burden on
entrepreneurs is restricted busi ness development and decrease i n young people’s
propensity for entrepreneurship (EURO, 2017). Duvanova (2012) a lso draws
attention to the fact that heavy regulatory burden leads to mor e corruption.
It may be said that these findings are highly compatible with c onclusions
b y V i t u r k a e t a l . ( 2 0 1 3 ) , N i c o l e s cu a n d N i c o l e s c u ( 2 0 1 3 ) , a n d T hai and Turkina
(2014). In this context, Aristovnik and Obadić (2015) also ment ion positive
examples of this issue. According to the authors, the empirical results show that
Luxembourg, Malta and, in particular, Sweden serve as a good be nchmark for the
efficient transformation of pub lic administration excellence in to the growth of
SMEs’ outputs.
One of the much discussed questions in the Czech and Slovak Rep ublic’s
business environment is the quality of the education system in regards to
enterprises’ business needs. According to the results of this r esearch, the quality of
college education had the largest satisfaction rate, as 41% of the Czech and 35% of
the Slovak entrepreneurs confirmed. The entrepreneurs claim tha t the state is
unable to provide a qualified workforce for businesses (10% of the Czech and 17%
of the Slovak entrepreneurs positively rated this factor).
Lack of qualified workforce is considered one of the major obst acles of
entrepreneurship’s development in Czech Republic (ParlamentníLi sty.cz, 2017)
and Slovakia, therefore, experts urge the governments of both c ountries to simplify
and accelerate the process of granting work permits to internat ional workers. This
approach is considered a short-term solution. Entrepreneurs in both countries
expect governments to bring education reforms on all levels in order for graduates
to be able to fulfil job market requirements.
Dallago (2011) views human resour ces as the most significant ba rriers of
SMEs’ development. Many authors (e.g. Bergh et al., 2011; Barre neche García,
2014; Sirbu et al., 2015; and Garcia-Perez-de-Lema et al., 2017) emphasize the
importance of close cooperation be tween entrepreneurs and educa tional
institutions. Castano et al. (2016) also highlights the need to increase public
education spending.
The legal environment in both countries received a negative rat ing. The
average value of positive ratings (PF11, PF12, PF13, and PF14) in Czech Republic

The impact of the public sector on the quality of the business environment in the SME segment

28 ADMINISTRAȚIE ȘI MANAGEMENT PUBLIC  32/2019 was 14.75% and 19.45% in Slovakia. It is apparent that building a better legal
environment is an important task for the governments of both co untries. It should
be noted that this problem is significant in all of Europe. Yas ar et al. (2011) offer
interesting conclusions in this matter. They claim that there a re positive
associations between firm performance (productivity profits) an d the perceived
quality of the legal system. Better property right institutions a r e i m p o r t a n t f o r
firms’ performance and compe titiveness. High quality institutio ns create an
environment in which firms can o rganize their activities more e fficiently and invest
more confidently.
The evaluation of state regulation and support of entrepreneurs hip via
factors PF21, PF22, PF23, and PF24 was quite negative which was a p p a r e n t
mainly in factor PF21, as only 8% of Czech and 9% of Slovak ent repreneurs
agreed with the statement that th e state’s tax and levy policy supports
entrepreneurship. The evaluation of other factors was also nega tive.
These findings are compatible with results of other studies, e. g. Levie and
Autio (2011) , Economidou et al. (2018), Bosma et al. (2018), and Chowdhury et al.
(2018).

4. Conclusions

The aim of the paper was to define and quantify important polit ical factors
shaping the quality of the business environment in the SME segm ent and to
compare the defined factors between the Czech and the Slovak Re public.
The evaluation of political factors is relatively negative in b oth countries.
Only 15% of Czech and 20% of Slo vak entrepreneurs positively ev aluated the level
of legislation in business. Entrepreneurs in both countries gav e the state’s support
of export a quite positive rating. Only 12% of Czech and 22% of Slovak
entrepreneurs positively evaluat ed the administrative burden on enterprises. Both
Czech and Slovak entrepreneurs claim that the state is unable t o provide a qualified
workforce for businesses. The most significant differences betw een the two
evaluated countries were found in the area of state bureaucracy . Slovak
entrepreneurs evaluated the current situation more positively t han their Czech
counterparts. The research results indicate that there is need to deal with urgent
issues, or create a better system of public factors influencing t h e b u s i n e s s
environment.The research has its limitations, but also brought interesting findings
and a potential inspiration for further research on the quality of the business
environment in the SME segment.

The impact of the public sector on the quality of the business environment in the SME segment

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