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Abstract
Institutional problems and the corruptive use of social capital give ground for misuse of
institutional gaps and cause intentional failures for financial benefits. Based on social
capital theory and transaction cost economics (TCE) this paper describes how the
institutional environment in the Former Yugoslav Republic of Macedonia (FYROM),
affects success or failure of business endeavors, such as the Swedmilk case. Foreign
Direct Investments (FDI’s) are expected to be the drivers of positive economic
development for economies in transition. Hence, the major question addressed in this
paper is: How does a Greenfield foreign direct investment of 25 million Euros, manage to
collapse in such a short period? The paper also describes the “official” plans and actual
outcomes of the dairy, as well as the situation in the dairy sector before and after the
Swedmilk failure. The financial problems occurred in October 2008, so the case of
Swedmilk is quite recent and has not been included in any kind of research. Being a
recent case the real implications on the dairy farming and sector are yet to be explored.