Abstract
Background: Embedded systems are evolving in their use based on the increased trend of merging software with hardware appliances. The market for the embedded systems development is rapidly increasing and this is one of the possible new markets for software firms striving for new competitive advantage. Objectives: The goal of the paper is to explore embedded systems development practices of Croatian firms and compare them with the practices of the firms from South Eastern European (SEE) countries. Methods/Approach: The survey was conducted using the sample of SME software firms and the data on embedded systems development practices have been analysed. Practices of Croatian firms were compared with practices of other firms from SEE countries. Results: Results of the survey revealed that in comparison to their counterparts from SEE countries, Croatian firms involved in embedded systems development utilise cutting-edge technology and processes to a lower extent. Conclusions: Cutting-edge technology and processes are prerequisites for attaining the level of productivity in software production that is sufficient to ensure maintaining cost competency. However, SMEs are yet to fulfill their market potentials