This paper investigates the relationship between organizational structure, process formalization, and innovative behavior in small and medium-sized enterprises in Bosnia and Herzegovina. Drawing on the theoretical foundations of institutional economics and organizational innovation, this research tests four hypotheses using logistic regression, multiple linear regression, and Pearson correlation analysis. The study employed a quantitative approach using data collected during 2023 from a sample of 304 SMEs operating in the manufacturing, trade, services, and ICT sectors in Bosnia and Herzegovina. The analysis applied logistic regression, multiple linear regression, and Pearson correlation to test four hypotheses. The results show that formalized career paths do not have a significant impact on innovativeness, while mentoring and training show a partial, but statistically significant effect. Also, a positive correlation was confirmed between the intensity of communication with customers and the level of organizational innovation, indicating the importance of external feedback serving to shape internal changes. Process formalization showed a partial impact on the overall level of innovation. The results obtained contribute to a better understanding of the factors shaping the innovation capacity of SMEs in transition economies and emphasize the need for a comprehensive approach that combines human capital development, flexible organizational structures, and active involvement of the external environment.
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