Effects Of Privatization And Ownership In Transition Economies

Abstract

The paper evaluates the effects of privatization in the post-communist economies and China. In postcommunist economies privatization to foreign owners results in a rapid improvement in performance of firms, while performance effects of privatization to domestic owners are less impressive and vary across regions, coinciding with differences in policies and institutional development. In China relatively more estimates suggest that privatization to domestic owners improves the level of performance. Concentrated private ownership has a stronger positive effect on performance than dispersed ownership in the post-communist economies, but foreign joint ventures rather than wholly owned foreign firms have a positive effect in China. Worker or collective ownership does not have a negative effect. In the postcommunist economies new firms are equally or more efficient than firms privatized to domestic owners, and foreign start-ups are more efficient than domestic ones. Privatization is not associated with lower employment. When accompanied by complementary reforms, privatization has a positive effect on economic growth. Three factors appear to drive the more positive effect of privatization to foreign than domestic owners. Domestic managers have more limited skills and access to world markets, domestically privatized firms have been more subject to tunneling and in some countries new large shareholders artificially decreased performance. The important policy implication is that privatization per se does not guarantee improved performance, at least not in the short-to medium-run. Type of private ownership, corporate governance, access to know-how and markets, and the legal and institutional system matter for firm performance.

The Effects of Internationalization on Innovation: Firm-Level Evidence for Transition Economies

“…6 For instance, in the early 1990s privatization of state-owned firms was widely regarded as a milestone in the transition, because private ownership combined with market forces would ensure efficient allocation of resources and economic performance. Djankov and Murrell (2002) and Estrin et al (2009) evaluate prior literature on the effects of privatizations in transition economies. In general, most empirical firm-level studies find that privatizations to foreign owners significantly improve firm productivity and related measures of firm performance (see Hagemejer and Tyrowicz, 2012).…”

“…Following the wave of privatization efforts and institutional transformations there is still a legacy in terms of administrative heritage form the former Soviet period which affects organizational routines and the management of the firm (Gelbuda et al, 2008;Estrin et al, 2009). Signs of inertia and slow adaptation to organizational excellence are evident in Bloom and Van Reenen (2010).…”

“…However, firms have reacted differently to the opening-up of the economy. After major reform and economic development, some firms have been unable to take advantage of the transition to a market-oriented economy due to the planned economy legacy that still affects organizational norms and practices (Gelbuda et al, 2008;Estrin et al, 2009). We use the variation in response to institutional change in order to isolate the causal effects of internationalization on firm productivity and innovation.…”

Entrepreneurial education and internationalisation of firms in transition economies: a conceptual framework from the case of Croatia

“…Nevertheless, although these two processes are prerequisites, the phenomenon of becoming an entrepreneur or starting a company is much more complex than simply the statutory right for private citizens to engage with economic activities. Accordingly, the academic debate has recently also moved forward, beyond the mere role of privatisation and liberalisation that remain elements studied for entrepreneurial diffusion (Dana, 1997;Dana et al, 2004;Estrin et al, 2009;Dana et al, 2012;Ramadani and Dana, 2013). The expansion of the phenomenon of entrepreneurship in transition economies hence is related to the evolution of the context in time and it is influenced by several factors: the legacy of the communist period that created a hostile environment for private business, a series of new social needs, the tormented conflicts, and the instability of a relatively young and not well-balanced market (Hitt, Dacin, Levitas, Arregle and Borza, 2000;Wright and Dana, 2003).…”

Internationalization by State-owned Enterprises (SOEs) and Sovereign Wealth Funds (SWFs) after the 2008 Crisis. Looking for Generalizations

“…Global privatization in the former planned economies in the 1980 s and 1990 s is manifested by the development of the private sector and decline in the number and significance of SOEs [Vickers andYarrow, 1992, Gorynia, 2007;Estrin et al, 2009]. However, even after 25 years of transformational changes in the Middle and East European countries SOEs still coexist with private firms [Hall, Soskice, 2001: Redding, 2005 and are noticeable in other countries that did not go through the transition process.…”