Productivity, Firm Size and the Process of Transition

The importance of different sized firms in the process of development is significantly determined by different firm types. In order to detect the changes in industry character the author assumes that the differences in productivity among different sized firms indicate the very character of the industry. Small Croatian firms have been positioned predominantly in the service sector. Limited domestic market size and the so called structural changes, continuously limit the ability of small firms to generate large employment. Thus, in order to reduce the growing unemployment and for expansion of export, Croatian economic policy will have to rely more on the larger firms.