Incentives and the Management of Enterprises in Economic Transition: Capital Markets Are Not Enough
AbstractThis paper examines the changing incentives for the efficient management of firms in Eastern Europe. It contrasts the internal constitution of the firm (its governance and reward structures) with the various constraints imposed on the firm's activities by external conditions in capital, labour and product markets. Public policy pronouncements in the Central European economies have tended to emphasize the overriding importance of capital market competition, but theoretical considerations and experience elsewhere in the world suggest that, while important, its effect will be limited in the absence of other internal and external reforms. Empirically, the paper examines progress towards enterprise restructuring in Eastern Germany and Poland, contrasting the direct intervention in the structure and constitution of firms (which is characteristic of the former) with the hopes for capital market reform (upon which much emphasis is being placed in the latter). The contrast is less stark than it first appears, however, since even in Poland there has been active competition policy, some direct industrial restructuring, and significant new firm entry. Finally, the paper examines the potentially perverse consequences of inefficient enterprise management for the progress of macroeconomic reform.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 640.
Date of creation: Mar 1992
Date of revision:
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Other versions of this item:
- Mayhew, Ken & Seabright, Paul, 1992. "Incentives and the Management of Enterprises in Economic Transition: Capital Markets Are Not Enough," Oxford Review of Economic Policy, Oxford University Press, vol. 8(1), pages 105-29, Spring.
- D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
- G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
- L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
- P52 - Economic Systems - - Comparative Economic Systems - - - Comparative Studies of Particular Economies
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- Irena Grosfeld, 1994. "Comparing Financial Systems. Problems of Information and Control in Economies in Transition," CASE Network Studies and Analyses 0026, CASE-Center for Social and Economic Research.
- Schröder, Philipp J.H., 2000. "On Privatisation and Restructuring," MPRA Paper 89, University Library of Munich, Germany, revised 2006.
- Nunnenkamp, Peter, 1995. "The German model of corporate governance: basic features, critical issues, and applicability to transition economies," Kiel Working Papers 713, Kiel Institute for the World Economy.
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