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The book investigates the impact of institutions on entrepreneurship and SME growth in transitional economy of Kosova. The book follows institutional economics approach in order to explore empirically the impact of external business environment and mainly poorly functioning institutions on the growth of small businesses in Kosova. The book is based on an SME survey conducted by Riinvest in the end of 2002 which identified critical institutional barriers such as incomplete legal environment, administrative burden, financing difficulties, tax burden, and unfair competition. The econometric results suggest that the growth of the SMEs was reduced by the presence of barriers such as tax burden, unfair competition and external finance. These findings highlight the need for a more pro- active government policy towards the development of the SME sector and entrepreneurship in Kosova.