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Institutional Change and Firm Creation in East-Central Europe: An Embedded Politics Approach

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  • Gerald A. McDermott

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    Abstract

    A central debate about the transformation of post-communists countries is how the process of institution building impacts firm restructuring and creation. This debate has largely been dominated by approaches that emphasize either the depoliticization of institutional designs or the determining impact of pre-existing social structures. These views, however, have serious problems explaining one of the key comparative developments in East-Central Europe – the strong economic growth in Poland and the demise of the Czech Republic in the 1990s. This paper explains these differences by offering an alternative, embedded politics approach that views firm and institutional creation as intertwined experiments. Czech attempts to implant a depoliticized model of reform impeded the necessary reorganization of socio-political networks, in which firms are embedded. Poland facilitated institutional experiments not only in the ways it promoted negotiated solutions to restructuring, but also in the ways it empowered sub-national governments. The study utilizes data on manufacturing networks, privatization, bankruptcy, and regional government reforms collected over the past six years.

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    Bibliographic Info

    Paper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number 2003-590.

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    Length: 42 pages
    Date of creation: 01 Feb 2003
    Date of revision:
    Handle: RePEc:wdi:papers:2003-590

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    Keywords: Institutions; governance; restructuring; post communism; transitions;

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    1. Barbara Blaszczyk & Richard Woodward, 1999. "Privatization and Company Restructuring in Poland," CASE Network Reports 0018, CASE-Center for Social and Economic Research.
    2. Andrzej Bratkowski & Irena Grosfeld & Jacek Rostowski, 1999. "Investment and Finance in De Novo Private Firms: Empiracal Results from the Czech Republic, Hungary and Poland," William Davidson Institute Working Papers Series 236, William Davidson Institute at the University of Michigan.
    3. McDermott, Gerald A & Mejstrik, Michal, 1992. " The Role of Small Firms in the Industrial Development and Transformation of Czechoslovakia," Small Business Economics, Springer, vol. 4(3), pages 179-200, September.
    4. Hayri, Aydin & McDermott, Gerald A, 1998. "The Network Properties of Corporate Governance and Industrial Restructuring: A Post-Socialist Lesson," Industrial and Corporate Change, Oxford University Press, vol. 7(1), pages 153-93, March.
    5. Mariano Tommasi & Mark P. Jones & Sebastian M. Saiegh & Pablo T. Spiller, 2002. "Amateur Legislators-Professional Politicians: The Argentine Congress," Working Papers 31, Universidad de San Andres, Departamento de Economia, revised Jul 2002.
    6. Pohl, G. & Anderson, R.E. & Claessens, S. & Djankov, S., 1997. "Privatization and Restructuring in Central and Eastern Europe: Evidence and Policy Options," Papers 368, World Bank - Technical Papers.
    7. Petro, Nicolai N., 2001. "Creating Social Capital in Russia: The Novgorod Model," World Development, Elsevier, vol. 29(2), pages 229-244, February.
    8. Montes-Negret, Fernando & Papi, Luca, 1997. "The Polish experience with bank and enterprise restructuring," Policy Research Working Paper Series 1705, The World Bank.
    9. Bratkowski, A. & Grosfeld, I. & Rostowski, J., 1998. "Investment and Finance in De Novo Private Firms: Empirical Results form the Czech Republic, Hungary and Poland," DELTA Working Papers 98-19, DELTA (Ecole normale supérieure).
    10. Nellis, J., 1999. "Time to Rethink Privatization in Transition Economies?," Papers 38, World Bank - International Finance Corporation.
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