In 1878 Drvar, along with the rest of Bosnia, was subjugated to Austro-Hungarian rule. Around 1893 German industrialist Otto von Steinbeis leased the right to exploit fir and spruce forests in the mountains of Klekovača, Lunjevače, Srnetica and Osječenica. Steinbeis operated in the area until 1918 when, after the First World War, the company was taken over by the new Yugoslav state. During the 25 years that Steinbeis operated in the area, he created a complete infrastructure for processing forest products including the construction of modern lumber mills in Drvar and Dobrljin, and the construction of a network of roads and 400 km of narrow-gauge railway, and telephone and telegraph lines. During this time Drvar grew into an industrial town employing approximately 2,800 persons in which homes, hospitals, restaurants, cafe and retails shops were built. Additional factories appeared in Drvar, including a cellulose factory opened by Alphons Simunius Blumer.