36 PERSPECTIVES ON BUSINESS AND ECONOMICS | VOL 44 | 2026 Independence and the Homeland War On June 25, 1991, Croatia formally declared independence from the central government of Yugoslavia, setting in motion the country’s move to a freer market economy. That process, however, came with challenges. A rapid increase in entrepreneurship and the number of privately owned companies signaled broad public embrace of liberalization and privatization. Over the course of the 1990s, the private sector’s share of the country’s GDP increased from 30% to 80%. Yet, as Bičanić and Franičević (2003) argue, the economic framework still “preserved the institution of social ownership” by disproportionately benefitting the political elite. Ownership of profitable companies was often transferred to those with close ties to the government who lacked the knowledge to transform them into efficient, competitive businesses (Stojčić, 2012). Privatization of the economy came in waves, with initial confusion as to who owned what because of the abrupt dismantling of the old system. After the collapse of the socialist economic framework, the population lacked entrepreneurial experience and resources to start and grow businesses. The sudden shift to private ownership removed the familiar structures of self-managing socialism, leaving would-be entrepreneurs in uncharted territory. Through the Homeland War and into the early 2000s, they had to start from scratch with little tradition of fully free markets to guide them (Švarc & Dabić, 2019). When the Homeland War started in 1991, the transition to private ownership was rushed, accelerating cronyism and a lack of transparency of ownership. The war caused a downturn in economic activity, notably devastating the tourism industry and inhibiting foreign direct investment. However, the economy during the Homeland War was unusual. The country ran a trade surplus because the depreciating currency increased exports, which, in turn, weakened domestic demand; hence, many consider the Homeland War a secondary factor in Croatia’s overall economic development compared to the more significant impacts of the migration to private ownership (Schönfelder, 2005). Rebuilding and the path to EU accession Following the Homeland War’s end in 1995, Croatia began to stabilize, becoming part of European and multinational institutions that advanced its departure from the former Yugoslav socialist state. By 1996, the country entered the Council of Europe, establishing free economic and trade cooperation with EU countries and marking the first step toward EU membership. Croatia’s next step was joining the World Trade Organization in 2000, further integrating into the world’s markets and improving economic growth and living standards (Vizjak & Vizjak, 2015). By 2000, the economy was experiencing steady growth for the first time after years of change and tumult (Stojčić, 2012). Formal negotiations toward EU accession began in the early 2000s, with Croatia becoming the twenty-eighth member state on July 1, 2013 (OECD, 2019). To become part of the EU, the country had to enact policies required of all its states, securing a free market economy by meeting criteria of intellectual property protection and competition policy (OECD, 2019). During the access process, entrepreneurship was developing along two tracks. One was the continuation of former political elites retaining state-owned enterprises, which had started in the early 1990s. The other track was through small and medium enterprises (SMEs), supported by the programs the country set up to align its policies more closely with those of EU members, including basic legal frameworks for SMEs and programs to build business capacity. However, many of these policies were poorly implemented, especially contrasted to other post-socialist countries (Švarc & Dabić, 2019). Countries such as Poland, Hungary, and Slovenia had joined the EU earlier, allowing them to integrate into European techno-economic networks, thereby fostering free markets and innovation. But R&D and innovation were not at the forefront of the Croatian government’s agenda, despite the need for private initiatives and entrepreneurial activities. Croatia instead had to focus on rebuilding after the Homeland War. The government expected research and technology development to occur naturally from privatization, stabilization, and trade liberalization, considered “the holy trinity of transition” (Švarc & Dabić, 2019). However, the country needed more internal initiatives and entrepreneurial activity to achieve the desired level of R&D, investments that ultimately were neglected and overlooked during the period after war (Švarc & Dabić, 2019). By the time Croatia began aligning with EU requirements, it was not building regulatory systems from scratch but grafting new European frameworks, a third bureaucratic layer, onto structures inherited from socialism and wartime. Privatization was meant to benefit the Croatian economy through improving job distribution, stable management, and equitable sharing of formerly state-owned enterprises. Yet, many citizens viewed
RkJQdWJsaXNoZXIy MTA0OTQ5OA==