What Drives Private Equity and Venture Capital in Central and Eastern Europe Countries: Focus on Serbia

Abstract

The paper examines the main drivers of Private Equity (PE) and Venture Capital (VC) capital into the Central and Easter European (CEE) market. In addition, we analysed the current trends in the industry. Although most of CEE economies remain far behind EU-15 countries in the amounts invested trough PE and VC industry, the region is becoming increasingly attractive. Poland, Hungary, Slovakia, Romania and Czech Republic currently attract the majority of PE/VC investors. Investment activities in CEE observed by sector, show that the largest total investments are made in the sector of consumer goods and services, in the sector of Information and communication technology and in life sciences.CEEprivate equity market remained dominant in buyouts, where VC as a proportion of total investment activity remained relatively low. Main drivers of the region are increased economic activity, favourable tax rates, tax incentives for investors and high quality of labour with low costs. According to SWOT analysis, Serbia has many advantages in terms of attracting PE/VC investments, with the most important natural factors such as geographical position and wealth in natural resources, but also the efforts made in recent years like reforms, improvement of fiscal discipline, and introduction of numerous incentives in order to attract investments.

Drivers of Private Equity Activity across Europe: An East-West Comparison

“…However, due to their limited scope, these studies do not allow us to draw generalizations about fundraising and investing activities in the CEE region. Ljumović et al (2020) examined the drivers of private equity (PE) investment in the CEE region. However, no quantitative methods were utilized to establish the link between the considered drivers and the investment activity.…”