The rise of entrepreneurship in Central, Eastern, and Southeastern Europe

Explore the dynamic entrepreneurial landscape in Central, Eastern and Southeastern Europe, highlighting innovation and growth amidst challenges.

In brief:

• The report reveals a strong commitment to innovation among entrepreneurs, with a focus on product, process, and organizational improvements.
• Investment strategies are critical, with businesses planning IT upgrades despite economic volatility and funding shortages.
• Government initiatives are crucial in fostering a conducive environment for growth and addressing regulatory hurdles and talent challenges

In the dynamic landscape of Central, Eastern, and Southeastern Europe (“the Region”), entrepreneurship is emerging as a powerful force for economic transformation, driven by a collective ambition to innovate and grow. However, beneath this momentum lies a complex interplay of opportunities and challenges, as revealed by a recent entrepreneurship survey across the Region. The findings paint a vivid picture of businesses striving for progress amid economic uncertainties, regulatory hurdles, and talent shortages, while pro-entrepreneurship government policies fuel their aspirations. By combining the survey’s key insights with information on the Region’s supportive policy frameworks, we have uncovered a narrative of resilience, adaptation, and untapped potential that holds lessons for entrepreneurs and policymakers alike.

Conducted through an anonymous online questionnaire between mid-February and mid-March 2025, the survey gathered insights from 1,031 entrepreneurs, including owners of family businesses, startups, and other private enterprises across 16 countries: Bulgaria, Croatia, Cyprus, Czech Republic, Estonia, Greece, Hungary, Latvia, Lithuania, Malta, Poland, Romania, Serbia, Slovakia, Slovenia, and Türkiye.

The businesses surveyed were well-established, with 52% founded more than 20 years ago and 23% between 11 and 20 years old, though younger firms make up 25%. Most respondents (41%) co-founded their businesses with partners, while 34% began solo, and 16% inherited family enterprises, reflecting the Region’s strong family business tradition, with 54% identifying as family enterprises. The industry profile is diverse, led by Industrials & Energy (26%), Consumer & Health (23%), and Technology, Media, and Telecom (TMT) (15%), followed by Government & Infrastructure (11%), Financial Services (4%), Private Equity (1%), and other sectors (19%).

Financially, the majority (55%) reported revenues under US$10 million last fiscal year, while those of the next higher band of 28% were between US$10 million and US$49 million, indicating the dominance of small-to-medium enterprises (SMEs). Revenue growth was positive for most, with 41% achieving between 6% and 20% growth and 18% exceeding 20% growth, although 17% faced declines. Optimism persists, with 65% expecting between 6% and 20% growth next year. Headcount data further underscores the SME focus, with 47% employing up to 49 workers and 33% employing between 50 and 249. Only 13% of businesses are publicly listed, while 69% have no plans to go public, emphasizing a preference for private ownership. This diverse profile — spanning established family firms, growing SMEs, and a mix of revenue trajectories — grounds the survey’s findings in a rich, representative sample of the Region’s entrepreneurial fabric.

Innovation at the heart of the Region’s entrepreneurial spirit

The enterprising spirit in the Region is unmistakably vibrant, with innovation at its core. Over half of the surveyed businesses prioritize product innovation, signaling a commitment to delivering new or enhanced offerings to meet evolving consumer demands. Countries like the Czech Republic lead the charge, with 73% of respondents focusing on product development, a stark contrast to Hungary, where 20% report no plans for innovation. Process and organizational innovation also command significant attention, with 46% and 45% of respondents, respectively, seeking to streamline operations and restructure internally. This multifaceted approach to innovation reflects a strategic mindset, as businesses aim to bolster efficiency while staying competitive. Strategic and marketing innovation, prioritized by 38%, further underscores an initiative-taking stance toward capturing new markets and adapting to shifting consumer preferences. Regional policies support these efforts, including tax incentives for research and development in Poland and Slovakia, which encourage businesses to invest in innovative solutions.

Digital transformation: embracing technology

Digital transformation is another cornerstone of the Region’s entrepreneurial evolution, with businesses embracing technologies to enhance operations and customer engagement. Artificial intelligence (AI) adoption has surged, with 61% of respondents reporting increased usage, particularly in data analytics (55%) and marketing (43%). The Baltics, Czech Republic, and Türkiye lead in AI integration, with adoption rates as high as 76%. Customer relationship management (CRM) systems have also seen a 52% uptick, highlighting a focus on building stronger customer connections. Slovakia and Türkiye report 74% increases in website enhancements, while Cyprus excels in video conferencing adoption at 66%. However, augmented and virtual reality lag at 21%, suggesting these technologies remain nascent. Government initiatives, such as Slovenia’s digital transformation grants and Bulgaria’s subsidies for tech adoption, are instrumental in accelerating this shift. Yet, concerns about data privacy (48%) and unclear AI regulations (38%) persist, underscoring the need for robust governance frameworks to sustain trust and momentum.

Investment and financial strategies

Investment plans illustrate the Region’s growth-oriented mindset, with 58% of businesses targeting IT systems and equipment upgrades. Slovakia stands out, with 72% prioritizing IT investments, while 62% of Greek businesses are focusing on machinery upgrades. However, economic risks (58%), financial constraints (41%), and regulatory uncertainties (37%) pose significant barriers. Romania is particularly concerned with economic volatility (75%), while Hungary grapples with funding shortages (57%). Despite these challenges, a reliance on reinvested profits (two-thirds of respondents) over external funding such as government grants (7%) or loans (20%) reflects a cautious yet self-reliant approach. Hungary, Poland, and Greece lead in reinvesting profits, a trend supported by policies like Serbia’s simplified tax regimes for SMEs, which allow businesses to retain more earnings for reinvestment.

Hiring trends and talent challenges

Hiring trends reveal an ambitious yet cautious outlook. While businesses plan to expand their full-time workforce, with Croatia (69%) and Greece (67%) at the forefront, signaling confidence in future growth, challenges in attracting skilled talent (46%) and managing labor costs (44%) are widespread. The competitive talent market, coupled with 23% struggling to source local candidates, suggests a need for innovative solutions such as remote hiring or upskilling programs. Government-backed initiatives, such as Croatia’s vocational training subsidies and Poland’s talent development grants, are helping bridge this gap by equipping workers with in-demand skills. Yet, aligning workforce capabilities with evolving business strategies remains a concern for 24% of respondents, highlighting the need for continuous learning.

Financial security and cost pressures

Financial security remains a pressing concern, with 85% anticipating negative impacts from rising operating and labor costs, particularly in Hungary, the Czech Republic, Slovakia, and Türkiye. Geopolitical instability and inflationary pressures are exacerbating these worries, while 60% expect lower consumer spending to strain revenues. Labor costs, cited by 56% as a primary driver of increased expenses, are acute in Croatia (73%) and Serbia (67%). In response, businesses are leaning on cost management strategies, supported by policies like Romania’s tax relief for high-cost industries and Türkiye’s incentives for operational efficiency. Supply chain issues, though less concerning at 35%, indicate improved resilience, bolstered by regional efforts to diversify supply chains post-disruption.

Succession planning in family businesses

Succession planning, particularly for family businesses — which make up 54% of the respondents — reveals critical gaps. A striking 62% of family businesses lack formal succession plans, relying on informal discussions, especially in the Baltics (100%) and Slovenia (79%). Interestingly, while 42% of respondents consider family inheritance as a legacy planning option, only 23% have structured plans, and just 28% focus on financial education for heirs as a strategy to preserve family wealth and ensure long-term financial sustainability of the family business. Government programs, such as Malta’s family business support schemes and Serbia’s succession planning workshops, are addressing these challenges, offering resources to formalize transitions and ensure sustainability.

Navigating an unfavorable environment

Despite forward-looking strategies, the entrepreneurial environment in the Region is challenging. Most respondents view business conditions as unfavorable, with bureaucracy and regulatory complexity cited by 62% as the top barrier. Slovenia (96%) and Croatia (82%) report the highest frustration with red tape, while Hungary (69%) and Slovakia (74%) perceive the overall climate as particularly difficult. Only 6% find local regulations supportive, though Greece, Malta, and Poland (around 40%) are more optimistic. The lack of skilled talent (44%) and political instability (40%) further complicate the landscape. Governments are responding with reforms: Hungary’s streamlined business registration, the Czech Republic’s regulatory sandbox for startups, and Greece’s incentives for new ventures are fostering a more conducive environment.

Region at a crossroads

The interplay between these survey findings and pro-entrepreneurship policies reveals the Region at a crossroads. From small family firms to growing SMEs, entrepreneurs are embracing innovation, digital tools, and workforce expansion, but they face economic volatility, regulatory complexity, and talent shortages. Government policies, including tax incentives and digital transformation grants, are pivotal in bridging these gaps. However, persistent bureaucratic hurdles and gaps in succession planning suggest the need for more targeted interventions. Expanding AI governance frameworks could alleviate concerns about data privacy, while enhanced upskilling support could help address talent shortages.

As entrepreneurs navigate this complex terrain, their resilience and adaptability shine through. The commitment to innovation, bolstered by supportive policies, positions the area as a hub of untapped potential. Unlocking this potential requires simplified regulations, fostering talent development, and promoting sustainable financial strategies. By aligning policy frameworks with the evolving needs of businesses, stakeholders can transform challenges into opportunities, paving the way for a new era of entrepreneurial success that reverberates beyond borders.