The competitiveness of small European countries : a focus on Montenegro

Abstract

Competitiveness is of particular importance in the countries of the European Union and in the countries that are on the way to becoming members, especially after the adoption of the new Lisbon Agenda. Small countries are as a rule highly vulnerable to external shocks, face limitations in their ability to exploit the benefits of economies of scale and have very limited diversification possibilities a small population usually means limited human resources for the development of administrative capacity and for the workforce in general. In addition, due to the indivisibility of overhead costs, small states, have limited resources for innovation and the application of advanced technologies. Because of these characteristics, one expects that a small economy will find it difficult to meet EU competitiveness standards. A small economy on the path to joining the European Union, such as Montenegro, therefore must develop an effective administrative setup and an efficient regulatory framework in order to foster entrepreneurship and innovation to meet the mentioned competitiveness challenges.