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Network Restructuring and Firm Creation in East-Central Europe: A Public-Private Venture

  • Gerald A. McDermott
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    The transformation of East-Central Europe deepens the debate about firm creation in a unique way: how do approaches to institutional creation impact the creation of firms? This paper theoretically and empirically explores this question by offering an alternative, embedded politics approach to explain the sharp contrasts in policy and SME manufacturing growth in the Czech Republic (CR) and Poland. Whereas Polish policies of gradual privatization and state intervention into restructuring led to significant growth in new firms, Czech policies of rapid, mass privatization produced stagnation. I argue that institutional experiments based on public actors becoming financial partners and conflict mediators enhance the ability of network actors to learn and monitor one another, and thus experiment with new forms of organization. Poland facilitated such institutional experiments not only in the ways it approached the creation of market institutions, but also in the ways it decentralized power and resources to local and regional political actors. The study utilizes data on manufacturing networks, privatization, bankruptcy, and regional government reforms collected over the past six years.

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    File URL: http://www.wdi.umich.edu/files/Publications/WorkingPapers/wp361.pdf
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    Paper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number 361.

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    Length: pages
    Date of creation: 01 Dec 2000
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    Handle: RePEc:wdi:papers:2000-361
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    1. Andrei Shleifer & Robert W. Vishny, 1994. "Privatization in Russia: First Steps," NBER Chapters, in: The Transition in Eastern Europe, Volume 2: Restructuring, pages 137-164 National Bureau of Economic Research, Inc.
    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. van Wijnbergen, Sweder, 1994. "On the Role of Banks in Enterprise Restructuring: The Polish Example," CEPR Discussion Papers 898, C.E.P.R. Discussion Papers.
    4. Valentijn Bilsen & Jozef Konings, 1997. "Job Creation, Job Destruction and Growth of Newly Established, Privatized and State-Owned Enterprises in Transition Economies: Survey Evidence from Bulgaria, Hungary and Romania," William Davidson Institute Working Papers Series 106, William Davidson Institute at the University of Michigan.
    5. Carlsson, Bo & Taymaz, Erol, 1994. " Flexible Technology and Industrial Structure in the U.S," Small Business Economics, Springer, vol. 6(3), pages 193-209, June.
    6. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
    7. 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).
    8. Simon Johnson & John McMillan & Christopher Woodruff, 2000. "Entrepreneurs and the Ordering of Institutional Reform: Poland, Slovakia, Romania, Russia and Ukraine Compared," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 8(1), pages 1-36, March.
    9. 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.
    10. 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.
    11. Ellerman, David, 1998. "Voucher privatization with investment funds : an institutional analysis," Policy Research Working Paper Series 1924, The World Bank.
    12. Ostrom, Elinor, 1995. "Self-organization and Social Capital," Industrial and Corporate Change, Oxford University Press, vol. 4(1), pages 131-59.
    13. Montes-Negret, Fernando & Papi, Luca, 1997. "The Polish experience with bank and enterprise restructuring," Policy Research Working Paper Series 1705, The World Bank.
    14. Robert H. Bates & Steven A. Block & Ghada Fayad & Anke Hoeffler, 2013. "The New Institutionalism and Africa," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 22(4), pages 499-522, August.
    15. David Ellerman, 1998. "Voucher Privatization with Investment Funds: An Institutional Analysis," William Davidson Institute Working Papers Series 167, William Davidson Institute at the University of Michigan.
    16. Murrell, Peter & Olson, Mancur, 1991. "The devolution of centrally planned economies," Journal of Comparative Economics, Elsevier, vol. 15(2), pages 239-265, June.
    17. 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.
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