International frameworks and initiatives for business conduct in fragile and conflict states "The role of Institutions and culture for fragile firms in Bosnia-Herzegovina"

In this paper we analyze the fragility at the firm level of Bosnia-Herzegovina. This Country is trying to grow after having faced four years of conflict (1992-1995) and previous series of sources of political instability. In our analysis we take into account the fact that there exist two different Institutions (Federation and Republic) inside the same Country and many ethnic groups even though each institutional entity has one or two main ethnic group/s. We study the micro level of industrialization over six recent years (2007-2012) through official data of registered firms (source: Orbis). We aggregate them according to the Institution to which they belong. First we do a simple descriptive statistical analysis to have a general view of the firm level situation. After that, we run a regression with panel data in order to study the industrialization level of all the firms. More precisely, we focus on the analysis of the difference in industrialization due to the different Institutions inside the same fragile Country. After that we compare the micro data with aggregate data to check for significant difference. Actually, the existence of the Institutions seem to affect the level of industrialization, but could this be correlated with ethnic groups according to which the Srpska Republic and the Federation of Bosnia-Herzegovina are divided instead? The Federation of Bosnia-Herzegovina, which also have a higher number of firms, shows a downward operating turnover trend, while the Srpska Republic is quite flat. As a conclusion, our study, which wants to put light on the level of industrialization and Institutions after the Dayton agreement in 1995, actually explains how culture can influence both of them.