Three Essays on Firm Behavior and Entrepreneurship in Former Yugoslav Republics.

Abstract

This dissertation shows how the transformation of social ownership to private ownership affected the behavior of firms and entrepreneurship in selected former Yugoslav countries. The goal was to determine whether firms’ objective remains the maximization of income per worker and, on the other hand, whether the future growth of these economies can be based on privatized firms, entrepreneurship, and self-employment. The answers and insights provided by these three essays reveal that merely implementing the difficult and complex market-oriented and structural reforms that took place in all countries of the former Yugoslavia does not necessarily lead to changes in firms’ behavior, and that more self-employment does not necessarily mean more entrepreneurship and therefore cannot always serve as a basis for future growth. The first essay uses Macedonian firm-level data to examine whether the privatization of socially owned capital transformed the behavior of firms closer to profit maximization. It shows (a) that the behavior of the Macedonian firms from 1994 to 1999 is closer to the hypothesis of maximizing income per worker rather than maximization of profit, and (b) that firms that were privatized internally and firms that were privatized externally behave similarly, although the evidence indicates that the second group of firms mainly used strategic restructuring whereas the first group used defensive restructuring. The second essay seeks to determine whether the Slovenian apparel and footwear industries are an example of creative or plain destruction. The findings show limited support for the case of creative destruction. However, the last years of the analysis (1999–2001) reveal that the increase in productivity (albeit modest) was mainly due to surviving firms becoming more productive. The third essay focuses on entrepreneurship as the main source of future economic growth in Kosovo’s economy. The findings show that the highest potential for Kosovo’s economic growth lies in entrepreneurs with at least two employees. Self-employed persons are more constrained in their capabilities and opportunities and can therefore serve neither as a potential resource for the future development of entrepreneurship in Kosovo nor as a source of future economic growth.