39 MARTINDALE CENTER FOR THE STUDY OF PRIVATE ENTERPRISE ilar economic trajectories, Croatia has assembled overcomplicated systems that hinder innovation and citizens’ entrepreneurial performance. Comparison to Slovenia Croatia’s limited technological innovation, entrepreneurial activity, and use of EU funding is striking in comparison to other post-socialist countries that have built free market economies more successfully. Slovenia stands out as a thriving country with a political history similar to Croatia’s. Both were part of the Austro-Hungarian Empire until World War I and later were integrated into Yugoslavia. However, the two countries’ paths diverged in the early 1990s, when Croatia fought its four-year Homeland War while Slovenia won independence from Yugoslavia at far lower cost in its Ten-Day War (Babić & Lučev, 2019). In 1993, amid the Homeland War that would destroy roughly a quarter of the economy, Croatia’s GDP per capita was 61.5% of Slovenia’s. By 2017, the gap had narrowed to 75.2% of Slovenia’s, suggesting gradual recovery (Babić & Lučev, 2019). But by 2024, Croatia had slipped back to 70.2%; deeper structural challenges have been stalling progress (World Bank Group, 2024a, 2024b). Much of the productivity gap traces to how differently the two countries addressed their post-Yugoslav transitions. Slovenia managed a more gradual conversion than Croatia in changing economic policies and the overarching system (Babić & Lučev, 2019). Privatization in Slovenia was decentralized “as opposed to a massive, centralized, and distributive privatization” in Croatia (Babić & Lučev, 2019). Importantly, for fostering innovation and entrepreneurship, Slovenia had more transparent rules of ownership after the dissolution of the Yugoslav state. A decentralized, commercial approach to privatization allowed workers to initiate privatization at their own pace (Nikolic & Horacek, 2023). By 2005, the country’s entire economy had been reformed. All enterprises that had been property of the government were privatized, and the procedures of withdrawal from even the largest state-owned enterprises were very strictly defined (Nikolic & Horacek, 2023). Slovenia’s economic success could, alternatively, be traced to its smaller size, making policy reform more manageable. Additionally, in the years where Croatia was war ridden and forced to finance reconstruction, Slovenia was able to increase social benefits that raised total household income and rely on its strong trade union network, giving the country an early leg up in what could be considered a race to recover after Yugoslavia’s fall (Babić & Lučev, 2019). Slovenia’s early reformation in comparison to Croatia can also be attributed to its earlier acceptance to the EU in 2004. From 2007 to 2013, Slovenia bested Croatia in registrations of new businesses per 1000 people ages 15–64. This metric changed in 2013 when Croatia was admitted to the EU and began to have more new business registrations. As of 2022, the most recently available data, Croatia was averaging 6.2 new business registrations per 1000 residents, while Slovenia had leveled out with an average of 2.8 (World Bank Group, 2024c). Differences in social policies during the two transitions help explain why those Croatian businesses have been less durable. In 2024, Slovenia had 234,446 registered active businesses according to its Statistical Office (2025), while the Croatian Bureau of Statistics (2025) reported around 178,000 active businesses in the country that same year. This difference is striking, given Croatia’s 3.87 million inhabitants in 2024 versus Slovenia’s 2.13 million, which translates to roughly 110 businesses per 1000 Slovenians and 46 businesses per 1000 Croatians (World Bank Group, 2024d). Furthermore, Croatians and Slovenians have different values in terms of how they view their countries since EU membership. A study tracking changes in the personal values of Croatian and Slovenian citizens through EU accession showed Slovenians consistently placing a higher emphasis on individualism whereas Croatians maintain a more collectivist mindset. The value of self-transcendence, referring to the willingness to promote others’ well-being, increased with Croatia joining the EU but decreased for Slovenia. On the other hand, the value of self-enhancement, or how much one wants to promote self-interest, was consistently ranked higher in Slovenia than in Croatia. For Slovenia, these attitudes are indicative of a more competitive entrepreneurial environment and a need for high-quality products in the economy, especially because many Slovenian organizations are suppliers for other Western economies. Slovenia places a strong emphasis on individualism, but Croatia is more focused on what Dabić and colleagues (2023) call a “collective EU-mind.” Some of this difference may reflect Croatia’s more recent admittance. Slovenia’s skepticism has built up over time. Ultimately, Slovenia’s emphasis on individualism is reflected in an economy that more readily embraces the competition, while Croatia’s economic environment still leans toward collectivism (Dabić et al., 2023). This collectivist orientation may reduce political pressure to dismantle bureaucracy.
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