Smart Specialization in Croatia

Between 2003 and 2008, Croatia’s rapid growth was fueled by rising domestic consumption, growingdeficits, an increased dependence on international finance. Such growth is unlikely to resume in the nearfuture, imposing social and economic costs. In this context, exports are critically important for Croatia’sdevelopment and employment generation. However, the country’s trade performance has been lacklustersince the financial crisis. Export openness is lower than in countries with similar income levels, and thecountry’s per capita GDP has stagnated. Low export diversification, weak competitiveness, and reducedtechnological sophistication help to explain stagnant exports. The fundamental problem is the failure torenew and transform the manufacturing base, which is linked to low rates of firm entry and exit. Anothermarker of a sluggish economy is the inadequate level of business research and development expenditure by Croatian enterprises and the weak governance framework for research and innovation,which is impairing the impact of research and development spending.In this context, Smart Specialization in Croatia aims to provide insights to the country’s smart specializationstrategy (RIS3) by looking at the main constraints and opportunities that it faces in its economic progressalong three interrelated dimensions: trade, firm productivity, and research and development. The report also includes four casestudies to illustrate potential RIS3 approaches to spur research and innovation specialization at theregional level. The report’s ultimate objective is to help develop a strategy that fosters productivitygrowth, job creation, and a more diversified export structure.