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Relation of Entrepreneurship/ Innovation and Economic Growth in Albania

Relation of Entrepreneurship/ Innovation and Economic Growth in Albania

According to Endogenous Growth Theory the economic growth comes from internal factors such are human capital, knowledge and innovation. Based on T&T report Albania’s performance on Human Resource and Labor Market is 4.68 out of a scale from 1 to 7, which reflects uncovered potentials this market offers for Albania. Currently Albania is positioned last after Montenegro, Macedonia and Serbia. As for ICT index Albania is positioned 73rd compared with Croatia 38th, Macedonia 55th, Serbia 56th, and Montenegro 58th among 141 countries. Focusing of Entrepreneurial Intentions subindex Albania stands below Kosovo with 6.31% and Croatia 17% and Bosnia Hercegovina with 21% in 2015. 

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Based on Schumpeter’s definition for an entrepreneur, in the Albania the debate exists whether self-employed workers account themselves as entrepreneurs and how much international corporations based here occupy the country’s innovation. Albania’s capacity for technological absorption and research, development and innovation (RDI) is low. Key obstacles include low expenditure on research and development (about 0.4 % of GDP); weak links between the scientific and private sectors; as well as fragmentation of the national research and innovation system. As a result of this weak innovation policy infrastructure, almost all sectors of the economy mainly provide low-technology, labor-intensive and low-cost products and services. Most of enterprises are located mainly in Tirana and less in around cities due to above mentioned concern of infrastructure. 


Next step for the government is to promote FDI, economic zones and Private and Public Partnerships (PPP). By the next year the share of FDI to GDP is expected to be at the level of 9-10%. Important for the long term economic growth VET reform, creation of innovation centers and enrollment of students in these programs are crucial.

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