The paper presents the results of research on innovation activities of manufacturing firms in Serbia. In order to
answer the question how innovation takes place in one transition country, key influencing factors were identify (i.e.,
firm’s size, age, ownership, industry sector, personnel qualifications and experience). Based on the analysis of a
sample comprising 73 firms, the study tried to highlight certain innovation barriers, which may have a negative
impact on the total efficiency of economic performance, and growth and development of manufacturing firms in
Serbia. Comparing overall innovation activities of Serbian firms to the other transition countries, it can be
concluded that majority of the firms had innovation performances below the level EU-27. This study draws out the
potential contributions to existing literature of managing innovation in Serbia.