5.6 Conclusions and future challenges


The case studies show that managers in the region, when given appropriate incentives and autonomy by the owners of their firms, reacted vigorously to the challenges facing them. The measures and strategies adopted to ensure the survival and restructuring of the firms examined seem quite consistent with what would be viewed as good and appropriate managerial behaviour in developed market economies. Thus East European managers quickly mastered the basic principles of management and applied what might be seen as textbook or common-sense solutions to the problems they faced when restructuring their firms.

Although the period of transition and restructuring is now largely over for firms in the Czech Republic, Hungary and Poland there are two important challenges ahead for managers and policy makers . The first of these is the globalization of the region s firms. In the case of foreign trade, the reorientation towards the markets of Western Europe is dramatic, as is the volume of foreign investment in the three countries . However what is still lacking is the ability of the firms in the region to project their core competences into the international market by undertaking foreign direct investment (FDI) of their own in Western Europe and beyond. Business theory stresses the need for firms to exploit their competitive advantage not only through exports but also through FDI, and both managers and policy makers in transition economies have to be aware of this.

The second challenge is to introduce corporate governance in the region. This may seem a rather bold statement, but corporate governance means neither the ˜good management of day-to-day corporate affairs nor the existence of strong outside owners. What it does mean is that outside owners of capital are willing to entrust managers with their capital (Shleifer and Vishny, 1997). Evidence of such willingness would be numerous initial public offerings (IPOs) of shares by firms in the region and the readiness of banks to lend without the compulsion of ties to past, often bad, loans to the same firms. Neither of these conditions exist. The net flow of funds has been largely from the non-financial sector to the banks rather than the opposite , and the stock markets of these countries have yet to see a real IPO. The concentration of shareholdings in the hands of strategic investors merely underlines the non-existence of corporate governance because strategic ownership is a substitute for effective corporate governance since a strategic owner is, by definition, an owner-manager, a situation that eliminates any problems of corporate governance.

Notes

  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.

  2. For a description of privatization programmes see Brada (1996). Hart (1995) provides a useful survey of corporate governance from both a theoretical and a practical standpoint.

  3. Nevertheless there were positive short- term responses by some Polish firms, as Wosinska (1995), Pinto et al . (1993) and Pinto and van Wijnbergen (1994) show.

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Change Management in Transition Economies. Integrating Corporate Strategy, Structure and Culture
Change Management in Transition Economies: Integrating Corporate Strategy, Structure and Culture
ISBN: 1403901635
EAN: 2147483647
Year: 2003
Pages: 121

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