Growth and Regional Development in an Enlarged European Union
Edited by Gertrude Tumpel-Gugerell and Peter Mooslechner
Chapter 9: Restructuring of firms in Central and Eastern Europe
9. Restructuring of ﬁrms in Central and Eastern Europe Jozef Konings 9.1. INTRODUCTION Figures 9.1 and 9.2 show the evolution of real GDP and employment for a selection of transition countries since the early 1990s. The unexpected huge collapse in output and employment that occurred in Central and Eastern Europe implied a transition process, which was much harder and longer than was originally anticipated. There are three central institutional developments that have characterized the transition process: the privatization and its sequencing of state-owned enterprises, the emergence of competitive pressure (due to liberalization of markets) and the hardening of budget constraints.1 These institutional changes most likely have had an impact on ﬁrm behaviour and it is in this context that a useful distinction can be made between defensive and strategic restructuring (Grosfeld and Roland 1997). ‘Defensive restructuring’ refers to measures taken to guarantee the immediate survival of the ﬁrm. These measures include reducing costs and 1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 Poland Romania Bulgaria Slovak Republic Czech Republic Hungary Estonia Slovenia Note: We normalized GDP at 1 in 1990. Figure 9.1 Evolution of real GDP in CEE countries 168 Restructuring of ﬁrms 1.1 1.05 1 0.95 0.9 0.85 0.8 0.75 0.7 0.65 0.6 169 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 Poland Romania Bulgaria Slovak Republic Czech Republic Hungary Estonia Slovenia Figure 9.2 Evolution in employment scaling down unproﬁtable units in the...
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