This article examines the process of SME development and regional development in the context of Slovakia. It argues that SME development is not resulting in capitalist development which mirrors that of the industrial district model. The argument is developed through considering the concrete experience of SME development and institutional innovation in two regions in central Slovakia, partly drawing upon the results of a survey of SMEs in the manufacturing sector. I argue that there has only been a limited development of SMEs and that they retain a marginal role in regional economic restructuring even though significant resources have been devoted to the construction of local industrial districts. I argue that we are witnessing the emergence of localized competition (rather than cooperation) between small firms, between small and large locally dominant companies, and between small productive capital and finance capital. This experience suggests that we need to reconsider the suitability of 'western' development discourses in the context of transformation in Central and Eastern Europe.
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