In the research the authors investigate the relationship between ethnic tensions, institutional and economic performance in Bosnia and Herzegovina (BiH), including a qualitative analysis of this issue for BiH and Macedonia. The research is conducted by a mixed methods approach, in which questionnaire surveys of the household and business sectors in BiH are supplemented by semi-structured interviews. We find that the both individual economic performance and individual ethnic tolerance in BiH are affected by the most important factors, such as: employment status, education and age; they both singly and in combination move individuals in BiH towards greater probability of being both prosperous and tolerant. The similar conclusions are supported by the qualitative analysis based on interviews conducted in BiH and Macedonia - the most important factors affecting ethnic tensions include: employment, education, and neighborhood. Finally, the empirical findings from the business survey in BiH suggest that the export performance of firms located in these communities are adversely affected by the ethnic tensions inherent in company's culture, formal institutions and firm's environment.