INTERNATIONALISATION OF ENTREPRENEURSHIP TRAINING THE CASE OF GEA COLLEGE

IntEnt 2000 International Entrepreneurship Education and Training Tampere University of Technology Industrial Management FIN-33101 Tampere Tampere, Finland 10-12 July, 2000 INTERNATIONALISATION OF ENTREPRENEURSHIP TRAINING THE CASE OF GEA COLLEGE Miroslav Glas University of Ljubljana Faculty of Economics Centre for Entrepreneurship Development Kardeljeva ploščad 17 SLO-1000, Ljubljana E-mail: miroslav.glas@uni-lj.si Viljem Pšeničny Andrej Poglajen GEA College PIC d.o.o. Dunajska 156 SLO-1000, Ljubljana E-mail: viljem.psenicny@gea-college.si andrej.poglajen@gea-college.si Ljubljana, June 2000

Introduction Studies have shown that small- and medium-sized enterprises (SMEs) active in international markets generally grow faster than SMEs that only operate in the domestic market (Globalisation and SMEs, 1997; 8). This is, of course, even truer of SMEs from small economies, like the Slovenian economy with its population of 2 million. SMEs grow fastest in niche markets and in new branches, however, such SMEs only account for a small share, while most SMEs in traditional branches grow by entering global markets in the form of exports. Is there a different situation as far as services are concerned, especially in the area of entrepreneurial training? In GEA College, entrepreneurship training centre, a long-term vision of expansion has existed since its very foundation on 16 February 1990, however, the path to the internationalisation was very long. Already in 1990, the centre immediately joined the Yugoslav project of entrepreneurial development with the concept of a franchise organisation of similar centres in other five Yugoslav republics. After Yugoslavia s disintegration, the disintegration of the market with over 20 million inhabitants, the centre followed the consolidation on the Slovenian market, but the idea of internationalisation has existed throughout the period. GEA College achieved its first major breakthrough in 1998 when, in co-operation with the Croatian organisation Croateh, it obtained a large project of educating and training teachers, advisers and facilitators of entrepreneurship in Croatia. The experience gained through this project is the basis for further steps towards internationalisation, therefore, they are analysed in this paper. 1. GEA College GEA College, currently the largest centre for entrepreneurial training in Slovenia, was initiated at the beginning of 1990 by a group of teaching staff at the Faculty of Economics and a group of entrepreneurs who also attracted government and some NGO s to become founding members. The centre was the response to the wave of entrepreneurship triggered by the Enterprise Law (1988), when large gaps in the business knowledge of new entrepreneurs became obvious. The founders assessed that this was a typical window of opportunity, as the demand for entrepreneurial training services was expected to grow fast and exceed the otherwise increasing supply by 1999 (Pšeničny, 1993). Upon its foundation, GEA College joined the Yugoslav programme of encouraging entrepreneurship, with the objective to transfer its knowledge and experience to five other centres around Yugoslavia. The latter was expected to be a long-term market for new entrepreneurial programmes; it was also supposed to enable the flow of experience and the preparation of training materials for a relatively large market. According to this programme, GEA College was to obtain the necessary technical equipment for modern audio-visual teaching. Following the disintegration of Yugoslavia, the programme soon fell to pieces and GEA College was faced with strategic choices between: focusing on the Slovenian market and later gradually entering other markets, attempting to succeed in other markets, especially in the Central and Eastern European countries (CEEC), and Glas, Pšeničny, Poglajen: University of Ljubljana, GEA College d.d., Ljubljana, June 2000 2

attempting to maintain the connections with the former Yugoslav markets and enter new countries with individual programmes. From the point of view of its founders, GEA College has always been an organisation with dual goals: it is to make business as a successful company and thus prove its business viability as well as the actual need for such "soft" services in Slovenia, and simultaneously be a laboratory for testing various projects for promoting entrepreneurship, a sort of a pilot organisation whose experience is to be used in similar organisations around Slovenia (Glas, 1996; 5). The main orientations of the training programme are given in Table 1. Table 1. Programme orientations of GEA College Main areas Development of entrepreneurial training for key target groups in SMEs Extension of entrepreneurial knowledge and skills to other groups Target groups / projects by areas New entrepreneurs (start-up) Owners-managers of existing companies Personnel in large companies following the programmes of internal entrepreneurship and entrepreneurship restructuring Teachers of entrepreneurship in the school system Entrepreneurship advisers in the support network Those responsible for entrepreneurship in non-market/nonprofit organisations (education, health care, sports, culture, state administration), in the public sector Development of various forms of promoting entrepreneurship Source: Pšeničny (1991; 5), Glas (1996) Enterprise forum (following the example of MIT Enterprise Forum) Publishing of entrepreneurial literature, acting as agent for foreign publishing houses Research in the area of entrepreneurship and SME development SME counselling For the founders, the strategic goals were defined as the development and implementation of top-quality programmes of entrepreneurial training in Slovenia based on domestic knowhow, involving the best lecturers in Slovenia and foreign experts who were to communicate the best experience gained in the world and creatively adjust it to suit the situation in Slovenia. GEA College was thus to concentrate on the most demanding forms of entrepreneurial training and thus follow the needs of growing Slovenian SMEs and the SME development policy. The forms of less demanding low-cost training targeted at a wider audience were to be left to local training organisations or the centre was to develop a franchise system by developing a programme, preparing the necessary materials and training the teachers. The latter were to prepare local adjustments to the programme and implement it in local or regional training organisations. In order to provide quality programmes and development, in 1993 GEA College bought premises for offices and lecture rooms in the World Trade Center in Ljubljana. For the investment amounting to DEM 2.5 million, the centre took out a bank loan of DEM 1.2 million and carried out an initial public offering on the Ljubljana Stock Exchange in the amount of DEM 1.3 million. The financial pressure of the investment, together with other unfavourable events, caused a company crisis in 1994, which was solved according to the traditional patterns of a turnaround (see Glas, 1996). One of the most important decisions was to develop new types of programmes, the Entrepreneurship Academy. In 1995, the Glas, Pšeničny, Poglajen: University of Ljubljana, GEA College d.d., Ljubljana, June 2000 3

centre also decided to found the first private higher education organisation, the College of Entrepreneurship, with full-time and part-time programmes. In September 1996, the first generation enrolled in the school, and at the end of 1999 the first students successfully graduated. The extension of GEA College to new areas of education and training has, apart from covering the market, also other favourable synergetic effects: GEA College is developing a core of its own teaching staff, which is opening new career opportunities to its associates and simultaneously offering greater possibilities of performing the training with its own personnel; the graduates are forming a loyal pool of participants in the forms of further training; GEA College is developing education, research, advising and publishing that enables it to cover new market niches and to co-operate with governmental institutions, which are important commissioners of programmes; new opportunities of international co-operation are opening, as the centre is becoming a stronger international partner, especially for the organisations in the CEEC (Glas, 1996). These changes in activities have required additional investments, which have had to be provided by the centre itself, as it has not obtained large state aids for individual projects. GEA College has constantly reinvested all available funds in its development and also issued a new series of shares. The consequences of such a development financing were various. On one hand, new shareholders entered the company, with the dominant position being assumed by the privatisation investment company Kmečka družba, which introduced its preferences and goals with the stress on successful financial operation and not on the quality and the pilot role of the centre. The dominant owner has not been inclined to experimenting with new programmes. The financial requirements of developing the higher education institution, for which GEA College has not obtained strong sponsors at the government and local levels, have burdened the financial flows throughout the 1996-2000 period. The extension of the activities has considerably changed the structure of personnel in the centre: the original entrepreneurial group has somewhat decreased, while the new staff have not been so much oriented in entrepreneurship, but have rather had the culture of middle management. Consequently, the centre started to change from a real entrepreneurial school to a more formalised organisation. In order to keep the entrepreneurial enthusiasm and simultaneously ensure a firm school structure, the centre was divided into two organisations: the College and the Entrepreneurship Training Centre, with significantly different activity portfolios. 2. Internationalisation as an element of the development strategy By extending to new institutional forms of education, GEA College has spread its activities in the Slovenian market, however, it turned out again that in the environment with 2 million inhabitants and around 105,000 business entities (Glas, Drnovšek, 1999) the limited market restricts further growth as: a larger number of courses is only carried out in the same form at the start-up level of entrepreneurship, which has settled at a lower level than in the 1992-1994 period; entrepreneurs need specialised programmes that are a combination of training and advising, which requires large investments in development; and Slovenia does not have enough local experts with specialised knowledge, it is necessary to invest in the development of own staff abroad and include foreign experts. Glas, Pšeničny, Poglajen: University of Ljubljana, GEA College d.d., Ljubljana, June 2000 4

The state has not developed an integral system of entrepreneurial training and counselling; consequently, there has not been a stable programme that would combine public and private funds. Due to the problems arising from Slovenia s independence, which made the country temporarily drop out of certain international programmes, at the beginning of the nineties GEA College focused on the Slovenian market and only developed connections with foreign markets as smaller parallel projects. In the Slovenian market, the centre s approach has gradually been transformed: (1) In the first stage, the centre acted as a specialised supplier in the market niche of entrepreneurial training with clearly defined target groups of buyers, among which entrepreneurs were the most important, although their purchasing power was modest. In terms of finance, additional target groups were important: management in large companies who considered founding their own companies or spin-off units and expert staff in state bodies, chambers and other organisations who were acquiring knowledge on entrepreneurship, small business management and SME counselling. (2) The company soon assumed the role of a market leader, also by covering over 80 % of the market of functional entrepreneurial training, however, it later decided, due to the local competition and lack of resources that would enable it to cover the entire Slovenia by itself, to specialise in high-end programmes. With short local programmes, which were relatively profitable at the beginning, the large centre was not able to compete in terms of prices with local providers of such services, which had low costs and the personal preferences with the commissioners and participants. The centre oriented towards longer programmes, which extended the duration of seminars, which in turn made the issue of financing by the participants more sensitive and caused problems of organising groups at the regional level that would be large enough to exceed break-even point. (3) The strategy of developing standardised training products was a logical step in the realisation of the expertise of domestic and foreign staff gathered around GEA College. The company kept the role of a market leader and strengthened its position of the central organisation for entrepreneurial education and training. GEA College thus established itself as a centre for developing new programmes, for their pilot implementation, training of local education providers as well as monitoring the implementation and improving the programmes with new experience. Such programmes provide several advantages: they provide the centre a strategic leading role in the market, they stimulate the creativity of the expert staff and enable the transfer of foreign experience and, consequently, the development of the co-operation with foreign centres, they enable direct monitoring of market development and provide information about best trainers nationwide, which is the starting point for selecting new personnel, and they extend the centre s activities and publishing of standard materials, etc. Such activities of the centre enable the realisation of the ambitions of the academic staff, but do not enable the employment of a larger number of associates and are exposed to extensive cycles in the volume of work, which primarily requires co-operation with external experts. GEA College stayed close to the market of education and training, as in this way it maintained its direct contact with entrepreneurs and followed their changing needs, which is the basis for developing new programmes. Due to new competitors, it had to gradually reduce prices, despite improved quality and extra services. The market of entrepreneurial training, which was supported with state subsidies, followed the logic of low costs, which did not enable financial results desired by the owners. Glas, Pšeničny, Poglajen: University of Ljubljana, GEA College d.d., Ljubljana, June 2000 5

(4) By introducing the higher education programme, GEA College provided a new challenge to its workers and considerably extended the pool of quality associates. After the initial investments, the higher education programme is becoming a stable financial basis, simultaneously creating new links to companies through its graduates. However, for such a specialised school the number of potential students is limited, also in terms of their purchasing power. Slovenia is facing a substantial fall in the number of young people in the current generations, consequently, in future the competition among schools will be increasingly fierce it will be necessary to provide good study conditions, scholarships for a large part of students, etc. Such a development points to the indispensable integration of GEA College into the international framework: on one hand it has to develop an international network for collecting new knowledge, ideas and experts in the world, and transferring the best foreign experience to Slovenia; and on the other hand the centre must make itself capable of entering foreign markets in order to achieve economies of scale in carrying out the programmes and become less dependent on the cycles of training in the small Slovenian market. Internationalisation must thus involve both sides, and is possible in several forms: through one s own development of knowledge and experience, which ensures the proprietorial rights to programmes, but requires relatively large amounts of time and considerable investments in expert development, through obtaining foreign staff for the implementation of local and international projects, which provides appropriate experience, but the centre must, of course, develop a process of screening and selecting appropriate staff, and determine proper remuneration, and through forming strategic partnerships, possibly in the form of consortia or joint ventures, in order to jointly enter foreign markets. The experience has shown that large flexibility is needed in choosing the forms, it is necessary to adjust to current situations in markets, especially in order to overcome various risks related to the different environment. 3. Models of internationalising the activities According to Slovenian standards, GEA College is a small company, although a consolidated balance sheet would classify it among medium-sized companies. This is especially true if one takes into account the expert resources, external part-time associates who it can engage in individual projects. The company is weak in terms of financial strength, as the development, due to the investments in premises and programmes, has so far not created abundant cash. The centre must therefore achieve internationalisation through innovative combination of resources and not through the simple logic of financial input. For such companies, several internationalisation theses are valid. The first theory speaks about gradual internationalisation, when a company first develops activities in the domestic market and later evolves more complex international activities. Entrepreneurial education and training mostly concern services, which are only to a certain extent accompanied by goods (educational equipment, materials), part of which is available in any market. Companies can already start their internationalisation in the stage when they are relatively small (Kaynak, Ghauri, Olofsson-Bredenlow, 1987), with the process being gradual and relatively long (Boter, Holmquist, 1996). In such cases, appropriate experience Glas, Pšeničny, Poglajen: University of Ljubljana, GEA College d.d., Ljubljana, June 2000 6

of the management can contribute to internationalisation (Bloodgood, Sapienza, Almeida, 1997; Reuber, Fischer, 1997). GEA College considered employing an experienced foreign manager for international projects, however, in the CEE countries such a manager would not have many advantages over the College s own staff. The process of internationalisation is, of course, related to the nature of activities. An important stimulation is the possibility of achieving minimum efficiency, for which the local market is too small (Bonaccorsi, 1992). Certainly, one must take into account the characteristics of the entrepreneurial training market, limiting the possibilities of efficient and profitable internationalisation, but by all means the approach to exporting goods and services varies among activities (Moini, 1995). In service activities which, in order to adjust services to specific needs, require extensive mobility of people and good knowledge of the environment, its culture and problems, internationalisation is connected with geographical location. The vicinity of foreign (export) markets is important in terms of geographical distance, implying reasonable costs, and cultural distance (Madsen, 1989; Calof, Viviers, 1995). All these theories show that internationalisation is normally the result of strategic planning of companies, however, the specific moment also depends on the interplay of events, circumstances, chance (Globalisation and SMEs, 1997; 9). Of course, companies face many risks and obstacles connected to different (foreign) markets (Proctor, 1996). Nevertheless, in its development to date, GEA College has used practically all reasonable strategies of growth in the domestic market, where the most likely prospect is expert stagnation; consequently, opening to the global market has become an increasing necessity. Through many elements of internationalisation, the following developments have enabled preparations for the right moment: one-week modules abroad (Babson College, University of Stirling, Management Akademie Muenchen), also useful in the programmes in other countries, were included in the programmes of training entrepreneurship advisers; seminars for entrepreneurship teachers, BICEE (Babson International Colloquium for Entrepreneurship Educators), were organised in co-operation with the Babson College, first in the USA and later in Slovenia, with the participation of foreign and local teachers and participants from the CEE countries, through which connections with individuals from these countries have been established; through including distinguished foreign teachers in the seminars in Slovenia (H. Stevenson, W. Sahlman, L-J. Filion, A.W. Cohen, L. Charm, J. Timmons, etc.); through the participation of the College s own experts at conferences abroad; through the co-operation in the PHARE projects in Slovenia, in consortia with foreign consulting firms, which enabled the collection of knowledge, experience and references useful when entering foreign markets; through participating in the TEMPUS projects with foreign universities via the College of Entrepreneurship; and some part-time associates of GEA College co-operated in many international projects of the World Bank and the European Union in the CEE countries (Moldavia, Rumania, Georgia). Virtually all these programmes have not been financially profitable by themselves, however, they have enabled the development of the resource pool useful abroad. Throughout the decade, the centre has tried to obtain projects in certain CEE markets, however, three facts have become obvious: Glas, Pšeničny, Poglajen: University of Ljubljana, GEA College d.d., Ljubljana, June 2000 7

(1) To obtain large projects of training SME counsellors and entrepreneurs in other CEE countries, it is necessary to ensure certain funds of the state where the contractor comes from. Such financial support to programmes is an advantage over other tenderers, and it was the consulting and educational organisations from the EU member states that have always had the advantage of the various EU financial support programmes. (2) To enter the CEE countries, it is a must to co-operate with local partners. It is essential in getting familiar with the market and the problems of the target groups of entrepreneurs, to be able to adjust the programmes and materials to local situations, and also to get familiar with those who decide on the implementation of programmes. Local partners enable timely preparation for invitations to tender, lower costs of meeting all tender requirements and the later operations, which is important because of the poor infrastructure in these countries. They also enable lower risks and overcoming of any opposition to foreign contractors, as they can act in the eyes of the local public as the representatives of the interests of the local environment. (3) A direct breakthrough with commercial programmes requires large funds, co-operation with local partners or the foundation of one s own company, investments in the development of a network of associates and in the marketing to the target market. Therefore, it is reasonable to proceed with these programmes only in the second stage, following the initial breakthrough into the institutional market. Table 2. SWOT analysis of GEA College s capacity of entering CEE markets Strengths Established and tested programmes in Slovenia Established core staff supporting the programmes Relatively good knowledge of markets in certain CEE countries Low cultural distance to these markets Good knowledge of neighbouring countries languages International connections for modules abroad Functional administrative and technical support to demanding forms of training Quality premises for the module offered in Slovenia Opportunities Stability Pact in the SE Europe Slovenia s joining this Pact, thus being in need of good programmes to establish its important role Good economic performance of Slovenia Transfer of other forms of SME support into the CEE countries, supplied by GEA College Formation of Consortium 2000 Weaknesses Financial power does not allow starting with a non-profitable programme The implementation depends on the experts working under contract Uncertain support by the government Political risks (preference of western advisory organisations in the CEE countries) Image not yet established in the public of CEE countries Relatively high expenses for the Slovenian staff Low mobility of the Slovenian staff Threats Fierce competition of organisations from donor countries Political uncertainty in Slovenia and in the CEE countries (possible loss of government support) Risks of non-payment or discontinuation of programmes A distinct problem in the case of GEA College was the modest financial resources which required the very first project to be profitable by itself. As the result of founding the College of Entrepreneurship, a large part of the experienced staff was engaged at home. The variant Glas, Pšeničny, Poglajen: University of Ljubljana, GEA College d.d., Ljubljana, June 2000 8

of directly entering the commercial market was virtually impossible. Nevertheless, GEA College planned to enter foreign markets, but it focused on nearby markets, which is typical of small companies, especially European ones (Globalisation and SMEs, 1997; 44). Modest resources did not enable aggressive entry, consequently, GEA College decided for the strategy of a gradual breakthrough: 1. Entering an important foreign market (of the same size or larger than the Slovenian market) through a large institutional (national or international) project, in co-operation with a local partner. 2. In the second stage, the use of the resources and network created in order to enter the commercial market of entrepreneurial training. The form can be a partnership with a local organisation, a franchise organisation or the foundation of one s own company in the foreign country. 3. Use of resources and experience in order to further entry to other markets in the CEE countries. 4. Institutional project in the Republic of Croatia GEA College focused on the markets of Croatia and Bosnia and Herzegovina, which are relatively strong markets, with a huge need for developing entrepreneurship (SME sector) and, consequently, for training advisors, facilitators and entrepreneurs. Both markets are culturally close, there are still personal contacts from the period of former Yugoslavia, an important factor is the language knowledge, enabling a relatively unproblematic teaching in the Croatian or Serb languages. Several years of co-operation with individuals from both countries developed through the BICEE programmes, which was followed by many discussions that paved the way. In 1998, GEA College responded to the invitation to tender of the Croatian government regarding the national programme of training 450 people: 50 entrepreneurship teachers, 150 advisers and 250 facilitators in local bodies. (1) Dimensions of the Croatian market As one of the former Yugoslav republics, Croatia has practically 70 years of common tradition with Slovenia. Prior to that, they both used to be part of the Austro-Hungarian monarchy, although Croatia was more connected with Hungary. Ethic values are similar, part of the tradition of European Christianity, the attitude to work and business is also similar as well as the psycho-social obstacles to the development of entrepreneurship. Croatia is perhaps even more cosmopolitan, as its expatriate community is very strong in terms of size and economy, and Zagreb has always been very open to Europe, more than Ljubljana which was for a long period shadowed by Trieste as the economic centre of the Slovenian territory. At first sight, the Slovenian market is incomparably smaller, as in 1998 it had 102,421 business units, while Croatia already had 147,193 units in 1996 (Slovenia had 51 business entities per 1,000 inhabitants, while Croatia only had 33 entities). The problems of the Croatian market were: much lower purchasing power (see figures for GDP per capita), large liquidity (and non-payment) problems of the Croatian economy, high taxes on all income, Glas, Pšeničny, Poglajen: University of Ljubljana, GEA College d.d., Ljubljana, June 2000 9

Table 3. The main information on the size of the entrepreneurial markets in Croatia and Slovenia, 1996 Economic and social indicator Croatia Slovenia Area (in km 2 ) 56,538 20,256 Population (in thousand) 4,501 1,991 - annual rate of population growth 1990-96 (in %) -1.0* -0.1 Life expectancy at birth (men / women) (in years) 67.1 / 75.7 68.2 / 77.3 Number of telephones per 1,000 inhabitants 309 333 Number of employees (activities A-K) (in thousand) 735.5 580.1 Number of unemployed (in thousand) 261 70** Number of (active) incorporated companies 62,281 37,576*** - small 60,251 35,935 - medium 1,502 1,293 - large 528 348 Share of employment in small firms / SMEs (in %) 28.7 % / 51.9 % 24.5 % / 52.4 % Number of craftsmen/sole proprietors (1997) 84,912 64,845**** - employed with craftsmen/sole proprietors 100,856 56,654 Notes: * Decrease due to war and the fleeing of Serb inhabitants, ** According to the ILO criteria (according to the Slovenian criteria around 13%) *** For Slovenia, information for 1998, **** In Slovenia, being a craftsman no longer provides a special status, craftsmen have mostly the status of sole proprietors (in 1997, 5,269 incorporated companies and 46,100 sole proprietors had craft licences). Sources: Žanić (1999), Statistical Yearbook, UN (1999), World Economic Outlook, IMF (May 1999) until 1998, non-existence of a systematic programme of education and training for entrepreneurs and no state subsidies, complicated war conditions in the first half of the nineties, then a period of renovation (special target group of war veterans), and distinct geographical dispersion, requiring the localisation of the forms of entrepreneurial training and, consequently, organisational efforts and higher logistic expenses. Year Table 4. Changes in certain economic indicators in Croatia and Slovenia, 1988-99 GDP per capita (in USD) GDP growth rate (in %) Industrial production Index Number of unemployed (in thousand) Unemployment level (in %) Cro Slo Cro Slo Cro Slo Cro Slo Cro Slo 1988 3,419 5,682-0.9-1.7 135 21 6.9 2.2 1989 4,364 6,359-1.5-1.8 140 28 7.2 2.9 1990 5,401 9,062-7.1-4.5 100 100 161 45 8.2 4.7 1991 4,595 6,594-21.6-8.9 71.5 87.6 254 75 14.9 8.2 1992 2,201 6,509-11.7-5.5 61.1 76.0 267 103 17.2 11.5 1993 2,591 6,583-0.9 2.8 57.4 73.9 251 119 16.8 14.4 1994 3,155 7,444 0.6 5.3 55.9 78.7 243 127 14,4 1995 4,014 9,652 1.7 3.9 56.1 80.2 241 70* 14.5 7.4* 1996 4,236 9,716 4.3 3.1 57.8 81.0 261 69* 16.4 7.3* 1997 4,398 9,163 6.5 3.8 61.7 17.5 7.4* 1998 4,833 9,878 2.4 3.9 64.0 17.2 7.9* 1999 4,376 10,078 63.1 20.8 Note: * Calculated according to the ILO criteria Source: World Economic Outlook, IMF, May 1999 Glas, Pšeničny, Poglajen: University of Ljubljana, GEA College d.d., Ljubljana, June 2000 10

If one compares Croatia and Slovenia in the period after 1988, there have been major differences in economic trends, influencing the needs of companies and their ability to pay for education. The great transformation depression in Croatia, which was aggravated by war and the problematic concept of privatisation, certainly made the sales of entrepreneurial training more difficult. On the other hand, through the foundation of new ventures and their growth as well as the restructuring of large companies, entrepreneurship is the key opportunity for the renovation of the Croatian economy, which the government had to admit and thus supported the training programme. In the first half of the nineties, Croatia did not develop various forms of entrepreneurship infrastructure and the process of entrepreneurial training, although it had the resources necessary for that: several faculties of economics and strong craft tradition. The Zagreb Faculty of Economics was distinctly oriented towards large companies and government institutions, while other faculties were not able to cover the Croatian territory. The difference between the needs for developing SMEs and the supply of entrepreneurial training opened a large window of opportunity, like at the beginning of the nineties in Slovenia. It was the time advantage that provided GEA College a competitive advantage when the Croatian government put out to tender two large programmes in 1998: entrepreneurial training and entrepreneurship promotion. (2) GEA College and the Croatian national programme In 1998, the Croatian government published an international invitation to tender regarding the project of entrepreneurial training which was to include three target groups. Table 5. Target groups of the national programme for entrepreneurial training in Croatia Target group Number of participants Number of groups Duration (weeks) Locations of modules (each week is a special module) Entrepreneurship teachers 50 2 5+A Zagreb, Ljubljana, the Netherlands SME counsellors 150 6 4+A 5 centres in Croatia, Ljubljana Entrepreneurship facilitators 250 10 3+A 5 centres in Croatia A: Presentation of final papers (business plans): 1-2 days In 1998, GEA College was in a good shape for such a tender as: in Slovenia, it had been performing a programme for SME counsellors for several years, including two programme groups for local/regional advisers, therefore an appropriate basic programme was ready; through the participation of Croatian experts at the BICEE conferences and several years of personal contacts with certain entrepreneurship centres, the College was known in Croatia, also in connection with the results of entrepreneurship promotion in Slovenia; and it established a connection with a Croatian partner, the advisory organisation Croateh, d.o.o., Zagreb, which co-ordinated the Croatian Network of Entrepreneurship Advisers. The essential element of succeeding in the invitation to tender was the fact that Croatia was excluded from the EU multilateral aid programmes due to political reasons, consequently, the potential European tenderers which were not able to count on the financial support by their governments did not respond to the invitation to tender. Compared to other Croatian tenderers, the tender of the consortium GEA College Croateh was superior in terms of Glas, Pšeničny, Poglajen: University of Ljubljana, GEA College d.d., Ljubljana, June 2000 11

expertise. Of course, without the Croatian partner, it would not have been possible for GEA College to succeed because of the then political disagreements between the Croatian (Tuđman) and Slovenian (Drnovšek) governments. The question why a Slovenian partner was chosen was politically sensitive throughout the period and required good public relations. The Croatian Ministry of Economic Affairs was politically brave enough for such a decision, but of course it attentively supervised the implementation of the project in accordance with its timetable, the quality and the financial aspects. On the Croatian side, many candidates applied for both groups of entrepreneurship teachers, the Ministry therefore carried out a thorough selection. The participating students excelled in terms of their expertise, as such an education had not been available prior to that and many ambitious individuals exploited this opportunity. Table 6 presents the information on these two groups, consisting of 57 persons. Table 6. Characteristics of the group of entrepreneurship teachers Men Women Total % Number of participants 44 13 57 100 Average age (in years) 45 40 43.9 Prior education Type of education Region Higher education Master s degree Doctor s degree Technical, natural sciences Social sciences Zagreb Split Varaždin Osijek Rijeka In comparison with the Slovenian experience with similar groups, the following can be mentioned: the participation of women was modest (in Slovenia, their share in entrepreneurs is over 20 % (Glas, Drnovšek, 1999), there are also many women in the support network), nevertheless, they were very important in the group as far as leading social activities was concerned, which was useful during the modules in the Netherlands and Slovenia and provided the homogeneity of the group as well as good work results; the level of education was very high, which is partly the result of the difficulties in finding employment and the attractiveness of teaching entrepreneurship as a new career opportunity; the age level was relatively high, however, this meant distinct experience in doing business (also managerial work), advising and teaching; the high share of participants with education in technical and natural sciences was positive for the development of high-tech companies and manufacturing in general, although this meant a certain lack of expert business know-how, especially in preparing business plans, which the relatively short programme was not able to compensate for by itself; and Zagreb is a dominant area in Croatia, also because of the concentration of the governmental, financial, consulting and other organisations; some regions were not as well represented. Glas, Pšeničny, Poglajen: University of Ljubljana, GEA College d.d., Ljubljana, June 2000 12 27 10 7 26 18 24 6 2 4 8 8 4 1 5 8 8 1 2 2-35 14 8 31 26 32 7 4 6 8 61 25 14 54 46 56 12 7 11 14

This target group was very important for GEA College, as it was to co-operate in the further training of the other two groups in the programme, it was to organise and perform the training of entrepreneurs in all regions and get involved in the teaching of entrepreneurship in secondary and higher education schools. In the first period of educating teachers (January - June 1999), the role of the Croatian partner had several aspects: the field organisation of the training process (Stubičke Toplice near Zagreb), the co-operation in the selection of participants from among the applicants (in terms of expertise), the organisation of the module in the Netherlands through the bilateral aid programme, the implementation of the module on business plans (according to the Croatian standard manual), support in terms of contents and technical support in preparing the materials (translations, inclusion of the Croatian legislation and practice, examples), and advisory support to the participants in preparing seminar papers. GEA College engaged the prominent associates in the programme, which ensured quality. Due to the long distance (it is around 140 kilometres from Ljubljana to Zagreb, taking somewhat less than three hours by car) and to make the programme financially viable, the College had to arrange for each educator to cover 2-3 subjects (ideally the whole day of the programme), i.e. including subjects not one s speciality (the participation of 3-4 individuals in the same day would have made the programme substantially more expensive and would have increased the risk of complications with logistics). For the Slovenian associates, the programme primarily meant welcome experience and getting familiar with the Croatian reality, therefore, the payment was not the primary motive. The motives of the Slovenian educators can be ranked as: 1 Meeting a very experienced and well-informed Croatian group 2 Obtaining international references for similar projects abroad 3 Preparation and publication of expert materials 4 Earnings The very important elements were the intensive dynamics of the programme, quality of implementation and relevancy of the programme, supported by suitable background materials. The programme was integrated by a system of evaluating the knowledge, especially individual and group seminar papers required as well as by exams.. Chart 1. The programme of the training of teachers of entrepreneurship Module/ Basic contents hours 1 (52) Entrepreneurship and strategy, SME development policy 2 (45) Entrepreneurship process and the methods of entrepreneurship teaching (visiting an enterprise zone, local business centre) Location and performer Zagreb GEA College Ljubljana GEA College Students assignments and evaluation Preparation of a development strategy for a Croatian region or a project concerning entrepreneurship infrastructure Survey of a Croatian entrepreneur and the preparation of a case study Glas, Pšeničny, Poglajen: University of Ljubljana, GEA College d.d., Ljubljana, June 2000 13

3 (45) Preparation of a business plan Zagreb Croateh 4 (40) Development of SMEs and the Netherlands experience in entrepreneurship in a developed European country 5 (38) Counselling methods and Zagreb techniques GEA College and Croateh A (16) Presentation of business plans Zagreb Business plans Beginning of a group work on a business plan Work on a business plan In-class exam (written) Take-home exam (developing solution to an advisory problem) The teachers of entrepreneurship demanded relevant literature, therefore, GEA College provided each participant with several textbooks on entrepreneurship (Timmons, Bygrave), a collection of papers covering most of the subjects, especially on the policy of supporting entrepreneurship development, and the manual on business plans published by the Croatian Ministry. The extensive literature was of the major importance for the participants to prepare for the teaching of the chosen subjects in the programme of entrepreneurship advisers as well as the other forms of entrepreneurial training following later. Those responsible for particular subjects also received additional literature for those areas. Chart 2. The main factors of a successful implementation of the programme abroad Area Factor Educators expert theoretical and practical know-how in the relevant area non-financial motivation for quality performance knowledge of Croatian entrepreneurship (and wider cultural) environment availability for discussion via electronic mail Contents and implementation relevant contents (in terms of the situation in Croatia) use of case studies and openness to discussion with the participants module abroad to provide for a kind of benchmarking Literature comprehensiveness and relevancy with regard to conducting the policy of SME development Comfort combination of expert work and social activities refreshments available during sessions acceptable relation between the price and the quality of accomodation IT use of information technology in preparing the programme modern AV technology in performing the training Participants suitable selection of motivated participants of good quality in terms of their education and expertise reasonable combination with regard to their age, education, activities 5. Commercial market for training entrepreneurs The development of SMEs in Croatia created the needs for training entrepreneurs and employees. In the survey of growing companies, which was the majority group among the 54 entrepreneurs surveyed by the participants, the education was extremely high, especially compared to the Slovenian data. This Croatian group, which is of course much better educated than average entrepreneurs, only lags behind the American sample in terms of education, and proves that part of the Croatian entrepreneurs is actually very well trained in terms of their expertise: almost 55% of them used to perform managerial work in large Glas, Pšeničny, Poglajen: University of Ljubljana, GEA College d.d., Ljubljana, June 2000 14

organisations. Nevertheless, they assessed that business training was useful for them, more precisely: managerial knowledge (25.6%), marketing (24.8%), finance (17.1%), while fewer of them (7-10%) decided for technology, law, performance of export-import activities and accounting. Table 7. The structure of different groups of entrepreneurs according to education (in %) Level of education Croatian entrepreneurs Slovenia, dynamic entrepreneurs Slovenia, entrepreneurs Slovenia, managers of SMEs Slovenia, selfemployed USA, Ohio entrepreneurs 1999 1994 1997-98 1999 1997 1997 Vocational school - 3 19.5 4.3 35.1 - Secondary school 30.2 38 47.0 39.3 40.5 9 College 22.6 36 19.0 20.9 12.1 27 University 30.2 27 14.1 35.6 12.1 29 Post-graduate studies 15.1 5 n.a. n.a. - 34 Sample size 54 150 221 328 205 165 Sources: surveys of Croatian entrepreneurs, Glas & Drnovšek (2000) This group of Croatian entrepreneurs was very self-confident and did not consider lack of business know-how a major problem: among ten problems in founding companies, they classified lack of knowledge among less important problems, they did not consider knowledge about market a major problem in marketing, but they believed lack of good salespersons was a major problem in this area, and they considered the knowledge of the employees in the area of R&D and production satisfactory, with a somewhat greater problem, but not of the major importance, being the lack of technical experts. These findings show that in the Croatian situation independent companies were most frequently established by individuals who were relatively well prepared. Thus, only top-level and, consequently, useful forms of training are acceptable to them. Certainly, there is also another aspect: in the difficult business circumstances in Croatia, when SMEs must struggle through the acute problems of non-performing payments, frequent irregular or illegal acquisition of business and fights with the administration at the local levels, the current problems are far from being easily solved by further education. Entrepreneurs thus nurture a relatively cynical attitude towards knowledge which, in the non-regulated and unstable markets, is not a major competitive advantage. It is true that in the long-term knowledge is a significant development factor, but sometimes the current survival is more important. In such circumstances, the state s support through subsidising training or allowing expenses to be tax deductible under the heading investing in human resources would be very important in order to regulate the market of training. A preliminary market analysis was carried out with the participants of the programme for entrepreneurship teachers, showing that, according to their assessments, there is a certain market of entrepreneurial training, of various volumes by region, of course. According to this assessment, there are some promising regions in Croatia. Participants are to come from agriculture (the fewest), with the stress on the development of supplementary activities, from manufacturing and mostly from service activities (also in various social services that have not yet been available in the market, with a combination of public and private providers, for Glas, Pšeničny, Poglajen: University of Ljubljana, GEA College d.d., Ljubljana, June 2000 15

instance in health care, education and culture, which need an efficient approach to the market). Table 8. Assessment of the volume of the entrepreneurial training market in regions which the entrepreneurship teachers came from according to the number of the interested companies and participants (responses by 43 teachers) Potential number of companies Potential number of participants Less than 10 companies 2 Less than 25 participants - Between 10 and 25 companies 6 25-75 participants 10 Between 25 and 50 companies 18 75-250 participants 17 More than 50 companies 17 More than 250 participants 15 Table 9. The most efficient forms of accessing potential participants Rank Form of communication Number Share (%) 1 Direct contact visit or telephone conversation 30 70 2 Through municipalities or counties 28 65 3 Advertising in the media 22 51 4 Through the chambers of commerce 19 44 5-6 Through the chamber of craft 14 33 5-6 Via the Ministry of Economic Affairs 14 33 7 Mailing 11 26 8 Via the Internet and electronic mail 4 9 9 Through other ministries 3 7 Responded by 43 100 In the training market, there are two ways to access participants, implying different expenses and differences in the nature of contact, which also enables greater adjustment to the needs of companies. One is the traditional marketing approach (direct contact, advertising, mailing), which is chiefly possible when contacting large companies or other companies that have already expressed interest in training. The second way is an institutional way, which can involve local governments, chambers, business associations or ministries, and is usually taken especially with the subsidised programmes. Eventually, a combination of both ways is a logical choice: in 2-3 strongest business centres, it is reasonable to follow the traditional concept: in connection with entrepreneurship teachers who know the local entrepreneurs and can use their personal reputation to persuade participants, because of the direct contacts with the participants who by their nature mistrust various (state) agents and do not expect them to provide quality forms of training, and because it is possible in this way to identify problems and needs of potential participants, and thus flexibly adjust the programme. In using the institutional way, it is expected to involve a Croatian partner or one s own company in Croatia, which helps to overcome the political risk. This way can be useful for small regions where, due to the small number of potential participants, direct contact means high costs of the programme and risks of cancelling the programme when missing the breakeven.. It was interesting to see the teachers assessments of the organisational aspects of training. Their opinion was that the participants would also be ready to attend training outside their Glas, Pšeničny, Poglajen: University of Ljubljana, GEA College d.d., Ljubljana, June 2000 16