Institutional mismatch in a transition economy. The collapse of Swedmilk Macedonia

The purpose of this paper is to present theoretical explanations for the failure of the largest dairy processing firm in Former Yugoslav Republic of Macedonia (FYROM) after only about one year of operation.

The paper contains a case study on the establishment and failure of a new firm is presented. Data were collected through mass media reports and interviews with knowledgeable individuals in the dairy industry. The data were analyzed using neo-institutional theories, primarily agency theory.

The core of the explanation is that the various categories of institutions were not aligned. For example, poor contract enforcement created insurmountable agency costs for all parties involved.

As this paper is based on a case study it is uncertain to which extent the finding can be generalized.

Most case studies describe successes. This paper presents a case where the odds for success were poor, but the project was still initiated.