Internationalization of Firms from Economies in Transition
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Internationalization of Firms from Economies in Transition

The Effects of a Politico-Economic Paradigm Shift

Edited by Mai Thi Thanh Thai and Ekaterina Turkina

This book provides a detailed analysis of how and why firms from economies in transition internationalize and examines the effects of domestic politico-economic factors on this process.
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Chapter 1: The theory of transition

Mai Thi Thanh Thai and Ekaterina Turkina


During the 1990s and 2000s, the world witnessed a large number of countries attempting to move from a centrally planned economic system towards freer markets and increased international entrepreneurship. Called 'transition economies' because of their continual progress in changing their basic constitutional elements towards market-style fundamentals (Falke, 2002), these countries make up an important part of the world's economy (Ahlstrom and Bruton, 2010). They have experienced strong economic growth and increased productivity while coping with a number of vexing challenges such as distorted information, feeble market structures, poorly specified property rights, a weak regulatory environment and uncertainties of institutional development (Delis et al., 2011; Huang, 2008; Kolodko, 2001). Furthermore, companies from these countries are making important footprints on the world's economic map (Marinov and Marinova, 2011). As a result, how firms from these countries do business has attracted a wide interest in academic publications as well as policy briefings (for example, Farashahi and Hafsi, 2009; Peng, 2000; Shinkle et al., 2013; Thai and Chong, 2011; Yusuf and Saffu, 2005). Transition economies undergo economic liberalization, which enables market forces rather than a central planning organization to set prices. Their transition process is usually characterized by significant evolutional/ revolutionary changes in the role of the state, the creation and promotion of privately owned enterprises, markets and independent financial institutions, extensive price and trade liberalization, the end of guaranteed employment, mass privatization, shifting favouritism towards certain industries and firms, and loss of traditional markets (IMF, 2000; Marinov and Marinova, 2011).

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