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International Handbook on Privatization

Edited by David Parker and David Saal

Privatization has dominated industrial restructuring programs since the 1980s and continues to do so. This authoritative and accessible Handbook considers all aspects of this key issue, including: the theory of privatization; privatization in transition, developed and developing economies; as well the economic regulation of privatized industries.
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Chapter 16: Privatization and Corporate Governance in Transition Economies: Theory and Concepts

Igor Filatotchev


Igor Filatotchev Introduction After many decades of centrally planned and state-controlled development, managers of industrial companies in the former command economies are now confronted by a growing pressure to restructure their organizations that affects, to different extents, all major sectors in the former command economies (Puffer, 1994). Although there may be different causes of this problem (the collapse of a highly integrated system of production and distribution, competition from imports, severe cuts in state subsidies and defence spending and so on), it produces a serious threat to an organization’s viability when managers fail to diagnose successfully the causes of their firm’s decline and respond with strategies appropriate for the demands of an evolving and changing environment (Peng and Heath, 1996). Large-scale privatization was expected to enhance restructuring in failing SOEs through the elimination of the major constraints on managerial actions imposed by state ownership and central planning (Boycko et al., 1995). Privatization has been an important tool of economic reform throughout former Communist Bloc countries, although particular privatization modes differed from country to country. For example, Hungary focused on sales of state assets to foreign owners, whereas the Czech and Slovak Republics employed equal-access voucher privatization (see Carlin and Aghion, 1996, for a summary of privatization programmes in Central and Eastern Europe). Russia used a combination of voucher insider privatization with auction sales of shares in former state-owned companies to outside individual and institutional investors (Blasi et al., 1997). The form, but not the scale,...

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