Erste Group Research: Central Europe has strong entrepreneurial engine, but scaling up remains a challenge

Home to more than 7 million SMEs, Central Europe has developed one of Europe's most vibrant entrepreneurial ecosystems, with Poland accounting for nearly 2.8 million businesses and forming by far the region's largest market. According to Erste Group Research's new report “Entrepreneurial Spirit in Central Europe”, a combination of entrepreneurial ambition, skilled talent and increasing digitalisation has fostered a broad and resilient business base across the region.

SMEs account for 99% of all enterprises across the region. They employ more than 20 million people and generate between half and two-thirds of the economic value added in all of the region’s individual economies. On a per capita basis, the SME segment’s contribution to value added is highest in the Czech Republic and Slovenia. 

While much of Europe's competitiveness debate focuses on industrial policy and technology sovereignty, Erste Group Research points to a more fundamental source of economic strength: entrepreneurship.

"Central Europe's economic success over the past decades has been built by entrepreneurs creating businesses, jobs, and innovation. Even as the region produces more success stories, from Poland's AI unicorns to Croatia's electric vehicle innovators, its next economic challenge is helping more SMEs become "scalers" and emerging as global leaders," says Katarzyna Rzentarzewska, Chief CEE Macro Analyst at Erste Group.

A region of a dynamic entrepreneurship culture

The enterprise “birth rates” in most Central European markets exceed the EU average. Croatia, Serbia, and Romania are among the region's leaders, each recording annual business creation rates above 12% of active enterprises, compared with an EU average of approximately 10.5%. Poland and Slovakia follow closely behind.

Central Europe scores highly in market dynamics, reflecting fast-changing and growing domestic markets. At the same time, the region’s infrastructure quality, such as logistics, telecommunications, and digital services, generally compares favourably with broader European benchmarks.

At the same time administrative complexity, rapidly changing regulation and tax uncertainty remain among the biggest obstacles that businesses in Central Europe face, as Erste Group Research highlights by citing the Eurobarometer Report on businesses' attitudes towards corruption in the EU. Fear of failure also continues to discourage many potential entrepreneurs in the region from turning business ideas into companies, mirroring a broader global trend. 

Talent and digitalisation are accelerating growth across Central Europe

Central Europe’s human capital also remains a competitive strength. Students in Poland and Czechia achieve some of the highest educational outcomes in Europe, while the number of Information and Communication Technology (ICT) graduates continues to rise across the region, helping businesses adopt new technologies and remain competitive.

Digitalisation is further reducing barriers to growth. In 2025, AI adoption among companies in the region increased by around 20% compared with the previous year, with uptake rising across businesses of all sizes. Meanwhile, e-commerce continues to expand rapidly across Central Europe, enabling firms to access customers well beyond the limits of their domestic markets.

"Being strong in market dynamics and infrastructure, the region consistently creates new businesses, but relatively few of these manage to then grow into large international firms. One of the main reasons for this lies in the insufficient use of new technologies and innovations by such businesses in the region. The region’s R&D indicators, but also its level of AI usage remain below the EU average. Closing that gap would provide a significant boost to productivity, employment, and long-term economic convergence in the region," comments Katarzyna Rzentarzewska.

R&D spending in Central Europe is low in European comparison, but the region’s companies do undertake innovation activities by instituting new production processes or improving resource efficiency, as well as by creating new products or significantly improving existing ones. In fact, two thirds of the companies in Poland, Romania and Slovakia reported having made innovations. 

Banking remains key to growth

The “Entrepreneurial Spirit in Central Europe” report also underscores the importance of access to financing. While most SMEs in the region continue to fund investments internally, bank financing remains the dominant source of external funding. Compared to their peers in Western European countries, firms in Central Europe are far less likely to rely on capital markets (in the form of bond or share issuances) for their funding needs.

As Central Europe seeks to strengthen productivity, competitiveness and innovation, supporting high-growth companies will be increasingly important. The region has already demonstrated that it can create entrepreneurs. The next stage of its economic development will depend on creating more firms capable of scaling across borders and competing globally.