"Perhaps even more important are Horvat’s contributions to the theory of the labour-managed firm. After the pioneering work of Benjamin Ward (1958) on the firm in Illyria, and later, the appearance of Jaroslav Vanek’s General Theory of Labor-managed Market Economy (1971), the theoretical literature on the labour-managed firm blossomed, producing a whole new school of thought. Horvat has made a number of important contributions to this literature, proposing how to correct the alleged inefficiency and perverse behavior of the labour-managed firm. He showed that the theory, as developed by Ward, Vanek, Domar and other scholars, is not applicable to the real world labour-managed firm, since the basic assumptions of Ward’s model do not correspond to its actual behaviour. The observed practice in Yugoslavia led him to suggest that instead of maximizing income per worker, the Yugoslav firm sets the total wage fund ex ante, and the actual wages distributed to the workers at the end of the period depend directly on obtained results."