The successful establishment and subsequent development of new firms have long been a source of interest for researchers. However, there is still limited evidence with regard to causes of both start-up size and firm growth in transitional contexts characterised by extreme conditions such as Kosova. In this study we examine entrepreneurial and institutional factors influencing initial size and subsequent growth by using data collected by structured interviews with 555 firm founders. Results show that entrepreneurs' intentions to grow the business have a strong positive influence on both variables, whereas their formal education is negatively related to initial size and growth. Our findings also suggest that, in the absence of a strong institutional framework, informal barriers have emerged and tend to hinder firm growth in this particular context. © 2010 Taylor & Francis.