Fifteen Years of Transformation in the Post-Communist World: Rapid Reformers Outperformed Gradualists

From abnormal to normal

“…With regards to reform progress, a big debate in the early transition literature concerned the optimal speed of reforms; shock therapy vs. gradualism (for instance Roland, ; Havrylyshyn, ). Expressed as ‘a race between the tortoise and the hare’, influential early proponents argued in favour of a gradual approach, often with support from the dual track approach in China (Stiglitz, ; Dewatripont and Roland, among others).…”

Planning During Post-Socialism

“…Political reforms and economic recovery followed at varying speeds, with some countries, especially in Central Europe and the Baltic region, leading the pack and joining the European Union (The following former Eastern Bloc countries have joined the European Union: Bulgaria, Croatia, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia, and Slovenia. ), and others still mired in poverty and unrest (Havrylyshyn, 2007). In most countries, there was a general consensus that the end-of-state socialism meant the beginning of reforms leading to market economies and democratic governance; hence, the term 'transition' -that is, a pathway from socialism to capitalism -which is commonly applied to the postsocialist period.…”

Embracing the Second Best? Synchronization of Reform Speeds, Excess High Discretion Slack, and Performance of Transition Economy Firms

“…This is referred to as the 'first best' outcome in which all reforms are imple-mented simultaneously and proportionately as in a fully synchronized horse race (Bulow, Geanakoplos, and Klemperer, 1985;Lipsey and Lancaster, 1956;Milgrom and Roberts, 1995). According to this view, gradual reforms are a 'second best' outcome with lower welfare improvement, as they can delay or reverse reforms (Braga de Macedo and Martins, 2008;Lipsey and Lancaster, 1956;Havrylyshyn, 2007). ' [I]n the presence of a large number of distortions, a piecemeal reform approach is unlikely to produce a good strategy and may actually reduce welfare' (Braga de Macedo and Martins, 2008: 142).…”

“…First, economists have questioned whether a rapid (shock therapy) or gradual speed of reform is better for countries. Some have argued that shock therapy prevents reform reversals and allows for a big enough jump over the institutional abyss (Havrylyshyn, ; Lipton and Sachs, ). Others have countered that gradual reforms secure a longer adjustment period (Godoy and Stiglitz, ; Murrell, ).…”

“…First, economists have questioned whether a rapid (shock therapy) or gradual speed of reform is Keywords: institution-based view; synchronization of reform speeds; excess high discretion slack; performance; transition economy firms *Correspondence to: Elitsa R. Banalieva, International Business & Strategy Group, D'Amore-McKim School of Business, Northeastern University, Boston, MA 02115-5000, U.S.A. E-mail: e.banalieva@neu.edu better for countries. Some have argued that shock therapy prevents reform reversals and allows for a big enough jump over the institutional abyss (Havrylyshyn, 2007;Lipton and Sachs, 1990). Others have countered that gradual reforms secure a longer adjustment period (Godoy and Stiglitz, 2007;Murrell, 1992).…”