The purpose of this study is to examine the impact of institutions in entrepreneurship activities for the small and medium enterprises (SME) sector in Kosovo. The survey refers to the long-term research experience in the role of institutions for small business development.A new dimension to the theory of entrepreneurship was offered recently by Baumol, who highlights the role of institutions in the allocation of the entrepreneur’s potential in productive and non-productive activities. In a transitional economy, entrepreneurs are faced with numerous difficulties such as the legal system, strengthening property rights, government regulation, the tax regime and corruption, and administrative burdens.The topic is developed based on a broad literature and practices in the SME development sector, and the great importance of analysing the role and importance of institutions for economic growth and firms’ wealth. During the preparation of this study, a range of methods were used to research and study institutional and non-institutional barriers for SME development in the era of globalization. Using a sample of Business Support Centre Kosovo (BSCK) research from 2011, the findings of this study indicate that the majority of CEOs agree that many barriers can be summarised as formal and nonformal that have a huge impact in SME development.These findings suggest that successful entrepreneurship and SME strategic development are conditioned by factors such as: formal institutions (the central and local government leadership, taxes, business legislation and regulation, access to finance, frequency of policy changes) and non-formal institutions (culture and society, corruption and informal ties with public officials, administrative burden and informal implementation of laws, mafia and racketeering).