Chapter 5: Privatization, Restructuring, Corporate Governance and the Behaviour of Firms in Transition Economies

Josef C. Brada

Abstract

This chapter uses published case studies of firms in the Czech Republic, Hungary and Poland to investigate how firms reacted to the pressures of transition. Most firms made short-term adjustments to outputs and inputs, but fewer made strategic adjustments. Nevertheless these short-term responses influenced their ability to implement long- term strategies for survival and growth. In general, successful firms were those which strengthened their marketing function, reorganized their internal decision making and information systems, invested in human resources and created effective mechanisms of corporate governance. The shedding of workers and large investments in capital and technology were, rather surprisingly, less important features of successful restructuring.

^[1] The research that forms the basis of this chapter was part of a research project entitled ˜Enterprise Behavior and Economic Reforms: A Comparative Study in Central and Eastern Europe , undertaken by the Transition Economics Division of the Policy Research Department of The World Bank. I am indebted to the William Davidson Institute at the University of Michigan Business School for allowing me a period of time for reflection and the writing of this chapter.