Paper short abstract:

The paper analyses the changes in views of the firm, as the basic organizational form of the market economy, as a basis for understanding the transition in Croatia during the 1990s and onwards. Some former socialist firms turned into 'empty shells', whereas others became rentier corporations.

Paper long abstract:

The paper analyses the changes in views of the firm, as the basic organizational form of the market economy, as a basis for understanding the transition in Croatia during the 1990s. The analytical framework focuses on the issues of ownership, management and relations among key stakeholders, identifying the following basic models of the firm: SME, corporation, empty shell and system integrator. Key features of socialist corporations and their behaviour during the crisis of the 1980s are subsequently analysed. During the 1990s, the former socialist corporations mostly follow two patterns. Some are disintegrated into 'empty shells'; turnover, assets and the number of employees are reduced, which is often followed by bankruptcy. Other former socialist corporations usually become 'rentier corporations' in which company owners follow a strategy based on defensive restructuring and exploitation of existing resources with reduced risk and competition and with limited investments into business development. Rentier behaviour included illegal actions, opportunistic business models, abuse of market power and inadequate consumer knowledge and limiting investments into new products and new markets. Due to insufficient resources and external conditions, alternative business associated with the Western varieties of capitalism were not feasible. Since rents are protected by entry barriers which block competition, the political elite often plays a complementary role in the promotion and protection of the rent-seeking business models. Its influence in late socialism and transition has been reflected in the management of privatization, institution-building, control of the financial sector and public enterprises, as well as in clientelism.