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This thesis presents a new approach to the theory of the labor-managed firm, based on the case of the Yugoslavian labor-managed economy. Instead of income per worker maximization, we suggest that a labor-managed firm in a certain environment and given institutional setting maximizes revenue, while under uncertainty another approach is taken, namely that of social welfare maximization. / Inefficient allocation may result in a labor-managed firm whose workers have no transferable property rights. We explore creation of an internal shares market as the means to acquire efficiency. Internal market for shares is also seen as a possible form of transition of the labor-managed firm, given the path of transformation of the institutional setting in former Yugoslavia, through a kind of industrial democracy with private (transferable) property rights.