COMPARATIVE ECONOMIC STUDIES, XLIII, NO. 3 (FALL 2001), 35-68 A Comparison of Small and Medium-Size Enterprise Development in Central and Eastern Europe Georgine Fogel Salem International University Alina Zapalska Marshall University Transition from a centrally planned economy to a market economy has proved to be an enormous challenge. Differences exist between individual countries regarding the scale and efficiency of the reform process and the types and levels of socio-economic development for entrepreneurial ven- tures. The objective of this study is to examine differences and similarities in the environments of Small and Medium-Size Enterprises (SMEs) in two CEE transforming economies that have been in the fore-front of market reform implementation for many years. To evaluate and compare SME development relative to selected external environmental factors of entrepreneurial opera- tions, on-site surveys and personal interviews were conducted in Hungary and Poland. The two countries selected exemplify similarities as well as differences in their approach to market reforms. Data were analyzed based on Gnyawali and Fogel's (1994) model consisting offive external environ- mental factors and four core values of new venture creation. Policy implica- tions are made for assisting SME development in each country. Implementation of market reforms has been a lengthy process in the countries of Central and Eastern Europe (CEE). The problems and challenges of restructuring socialist economies to market economies are to some extent similar. All CEE countries are required to transform substantial parts of their economy to productive activities. Hungary and Poland introduced large-scale privatization of the production and service sectors early in the transition and have been quite successful in increasing overall economic stability by achiev- ing continued economic growth. Hungary's approach to the transition has been a gradual process of economic reformation that began with the so-called New Economic Mecha- nism (NEM) in 1968. The country's bureaucratic control was lifted by a series 35