The capitalist and socialist societies of the 20 th century assigned firms different roles within their economic systems. Enterprises transforming from socialist to market economies thus face fundamental organizational restructuring. Many former state-owned firms in the transition economies of Central and Eastern Europe have failed at this task. These firms have pursued primarily defensive downsizing, rather than strategic restructuring, as a result of both internal and external constraints on restructuring strategies. Building on the organizational learning and resource-based theories, we analyze strategies available to management in privatized, former state-owned enterprises in transition economies to restructure their organization. Both internal forces promoting or inhibiting the restructuring process, and external constraints arising in the transition context are examined. A model and testable propositions are developed that explain post-privatization performance. Implications of our research point to the ways in which firms should manage and develop their resource base to transform to competitive enterprises.

JEL No. O3 This paper examines patterns of knowledge diffusion from US and Japan to Korea and Taiwan using patent citations as an indicator of knowledge flow. We estimate a knowledge diffusion model using a data set of all patents granted in the U.S. to inventors residing in these four countries. Explicitly modeling the roles of technology proximity and knowledge decay and knowledge diffusion over time, we have found that knowledge diffusion from US and Japan to Korea and Taiwan exhibits quite different patterns. It is much more likely for Korean patents to cite Japanese patents than US patents, whereas Taiwanese inventors tend to learn evenly from both US and Japanese inventors. The frequency of a Korean patent citing a Japanese patent is almost twice that of the frequency of a Taiwanese patent citing a Japanese patent. We also find that a patent is much more likely to cite a patent from its own technological field than from another field.

Fundamentally, poverty reduction is about bringing growth processes to poor areas. Because poor areas can benefit from technical and organizational innovations made elsewhere in the world, it is possible today to create productive jobs faster and in greater quantity than ever before. The puzzle is what helps spread such "best practices." Saving, investment, education, resources, and new technology are all needed---and fairly easy to obtain. What is hard to obtain are the institutions that allow these factors of production to be combined and translated into productive job creation. Firms are the key vehicles that spread best practices and productive jobs to areas where poor people live. Because we can never be sure which firm will be successful, it is necessary that new firms can enter markets, that substandard firms are allowed to fail, and that good firms face few barriers to growth. This is the definition of competition, and competition is what selects good firms and thus drives the spread of best practice and productive jobs. Governments need to provide the framework, in which capable firms can emerge. Yet, the right mix of state activity and how it best interacts with firms are not fully understood. Some selection mechanism, which allows for policy experiments and selects successful ones, is valuable for national, provincial, and local governments. Thus competition among jurisdictions and firms is an integral part of dynamic social systems that hold promise for creating wealth and ending poverty. WAYSOUT OF POVERTY TABLEOF CONTENTS List of Boxes ....................................................................................................................... 4 I. EXECUTIVE SUMMARY....................................................................................

This paper is part of the World Bank-funded research project Micro Foundations of International Technology Diffusion. We thank Wolfgang Keller, Jim Levinsohn, Marc Melitz and Mark Roberts for useful discussions and absolve them of blame for methodological flaws that remain. 1 ###################### # What mechanisms most frequently transmit foreign technologies to LDC firms? Do these foreign technologies affect both productive efficiency and product quality in the recipient firms? Under what circumstances do firms pursue activities that give them access to foreign knowledge? This paper develops a new methodology for addressing these issues and applies the framework to plant-level panel data from Colombia, Mexico and Morocco. The paper has several basic messages. First, by imposing enough structure on the production function and the demand system, it is possible to measure product quality and marginal costs at the plant level and to relate the evolution of these variables to firms activity histories. Doing so, we find strong firm-level persistence in both quality and marginal costs, as expected. However, in most industry/country panels we studied, past international activities do not help much to predict current performance, once past realizations on quality and marginal cost are controlled for. That is, activities do not typically Granger cause performance. Interestingly, in the minority of cases where significant associations emerge, international activities appear to move costs and product quality in the same direction. Thus, the net effect on profits in these cases is not immediately apparent. Concerning the determinants of international activities, several basic patterns emerge. Most fundamentally, activities are highly persistent, even after o...

The success of East Asian firms in high technology industries such as semiconductors and information technology products is now an established fact. Against all the advantages of incumbents' these latecomer firms have found ways to insert themselves in worldwide production systems and to compete in advanced markets. But this very success poses a number of challenges for organizational and management theory. According to the conventional view, firms ground their success in R&D and innovation. When the firm wishes to expand abroad, it exports its technology. Yet it is clear that successful firms from East Asia have not built their competences on conventional foundations through R&D. Nor have they been recipients of technologies transferred by advanced firms for reasons to do with product cycles. On the contrary, the East Asian firms and agencies act as instigators of the processes of technology acquisition, acting in accordance with their own strategic impulses. Nevertheless a coherent and plausible account of East Asian success in knowledge intensive industries can be built on the basis of a ‘competence’ or ‘dynamic capabilities’ approach, where the focus is not on

Abstract. The resource-based view of the firm provides a satisfactory account of how firms go about sustaining their existing competitive advantages, but it is less successful in accounting for how firms create such advantages in the first place, or overcome incumbent advantages, when the firms start with few resources. The paper utilizes the case of latecomer firms from the Asia-Pacific region breaking into knowledge-intensive industries such as semiconductors, to illustrate the issues involved and the resource-targeting strategies utilized. This results in a strategic theory of the overcoming of competitive disadvantages through linkage, resource leverage, and learning. The dynamic capabilities of such firms are enhanced through repeated applications of linkage and leverage. The resources strategically targeted are characterized as being those most amenable to such linkage and leverage, namely those that are least rare and most imitable and transferable, i.e. as positive versions of the criteria utilized in the conventional resource-based view of the firm. It is argued that this adaptation of the RBV is potentially of wide applicability, and is the needed amendment that makes it of prime significance in accounting for latecomer success within the conceptual framework of strategic management. Keywords: latecomer firm, resource-based view of strategy industrial catch-up 1.

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This paper provides an overview of the evolution of the small and medium enterprise sector in Korea during the past quarter century. It shows how the industrial structure of Korea has changed dramatically over this period to feature much greater shares in employment and value added by small and medium enterprises (SMEs). It reviews the evidence on SME dynamism showing that SMEs have contributed to the enormous transformations that have taken place in the Korean economy since 1975, especially with regard to exports, foreign investment and productivity performance. It discusses the role of subcontracting as well as that of government and non-governmental institutions in supporting SME development. Finally, it examines the link between variations in the economic importance of SMEs and aspects of growth and inequality to assess whether SMEs function as business cycle shock absorbers and inequality-reducing mechanisms.

In the initial stages of the industrialization of virtually all developing countries, capital and technology (production and managerial technology) are scarce. A promising means of promoting economic development to overcome these bottlenecks is attracting foreign direct investment (FDI). Apart from its direct effects in terms of the expansion of domestic output, capital formation,

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