This paper was developed with financial support from the SBF Bourse de Paris and the New York Stock Exchange, and the assistance of George Sofianos, Bill Tschirhart, and Didier Davidoff is gratefully acknowledged. We appreciate comments received on this paper from Anthony Boardman, Bernardo Bortolotti, Narjess Boubakri, JeanClaude Cosset, Kathy Dewenter, Alexander Dyck, Ivan Ivanov, Ranko Jelic, Claude Laurin, Marc Lipson, Luis Lopez-Calva, John McMillan (the editor), Harold Mulherin, Rob Nash, John Nellis, David Newberry, David Parker, Enrico Perotti, Annette Poulsen, Ravi Ramamurti, Susan Rose-Ackerman, Nemat Shafik, Mary Shirley, Aidan Vining and three anonymous referees. Additionally, we appreciate comments received from participants at the NYSE/Paris Bourse Global Equity Markets conference (Paris, December 1998), the Harvard Institute for International Development Privatization Workshop (June 2000), the International Federation of Stock Exchanges' Third Global Emerging Markets Conference (Istanbul, April 2000), four World Bank and/or International Finance Corporation meetings, two OECD conferences (Paris and Beijing), the 1999 Conference on Privatization and the Kuwaiti Economy in the Next Century, the 1998 Financial Management Association meeting, the 1999 European Financial Management Association meeting, the Fondazione ENI Enrico Mattei (FFEM), the Swiss Banking Institute and Credit Suisse, and seminars at the City University Business School (London), London Guildhall University and the University of Oklahoma. All remaining errors are the authors' alone. Please address correspondence to: William L. Megginson Price College of Business 307 West Brooks, 205A Adams Hall The University of Oklahoma Norman, OK 73019-4005 Tel: (405) 325-2058; Fax: (405) 325-1957 e-mail:...

NOTE: We will make final revisions to this paper in July 2000, at which time we will make reference to all pertinent papers that have come to our attention by June 30, 2000. If anyone reading this survey knows of a pertinent paper not presently included in the list of references, please send a copy or a reference to one of us. *Djankov is Financial Economist at the World Bank. Murrell is Professor of Economics and Chair of the Academic Council of the IRIS Center, University of Maryland. We would like to thank Judy Hellerstein, John McMillan, John Nellis, and Jan Svejnar for helpful advice and Wooyoung Kim and Tatiana Nenova for research assistance. This research was made possible through support provided by the World Bank and by the U.S. Agency for International Development under Cooperative Agreement No. DHR-0015-A-00-0031-00 to the Center for Institutional Reform and the Informal Sector (IRIS). The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the IRIS Center, US AID, the World Bank, its Executive Directors, or the countries they represent. Enterprise Restructuring in Transition: A Quantitative Survey Abstract. There are now over 125 empirical papers that analyze the process of enterprise restructuring in transition

This paper uses a survey of 3,300 firms in 25 transition countries to shed light on the factors that influence restructuring by firms and their subsequent performance as measured by growth in sales and in sales per employee over a three-year period. We begin by surveying what a decade of transition has taught us about the factors that determine how firms respond to the new market environment. We go on to analyse the impact on performance of ownership, soft budget constraints, the general business environment and a range of measures of the intensity of competition as perceived by a firm. We find that competition has an important and non-monotonic effect on the growth of sales and of labour productivity: some degree of perceived market power is associated with higher sales growth, but competitive pressure is also important. Similar competition effects are found upon firms ’ decisions to develop and improve their products, but market power has an unambiguously negative impact on purely defensive (cost-reducing) restructuring activity. New firms have grown relatively fast, but among old firms ownership per se has no significant relationship to performance (though state-owned firms have engaged in significantly less development of new products). Soft budget constraints have a broadly negative and the business environment a broadly positive impact on restructuring and performance.

Privatizations in developing countries that don’t embrace a governance perspective will disappoint. This paper introduces the concept of ‘governance chains ’ that can constrain the ‘grabbing hands ’ of public and private actors by providing information and accountability mechanisms for investors. Recently available empirical data from established firms from 49 countries around the world provides estimates of the relative importance and strength of ‘private ’ and ‘formal ’ governance chains. The framework and empirical benchmarks help to explain past privatization outcomes and suggest steps to be taken to get the most out of future privatization activity.

This paper, based on a study of mid-sized firms in the Czech Republic, Hungary, and Poland, seeks to explain the reasons behind the marked impact of ownership on firm performance which has been observed in a number of studies in Eastern Europe and other parts of the world. Focusing in particular on the differential impact of ownership on revenue and cost performance, the paper argues that privatized firms controlled by outside investors are more entrepreneurial than those controlled by corporate insiders or the state. The paper provides evidence that all state and privatized firms in transition economies engage in similar types of restructuring, but that product restructuring by firms owned by outsider investors is significantly more effective (in terms of revenue generation) than that by firms with other types of ownership. The paper also examines the impact of managerial turnover on revenue performance, as well as differences among managers of firms with different types of ownership, and concludes that the more entrepreneurial behavior of outsider-owned firms is due primarily to incentive effects, rather than human capital effects, of privatization. More specifically, the authors argue that the success of outsider-owned firms is due to their greater readiness to accept risks (as evidenced by the

Summary and conclusions......................................................................................................... 12 Evolving regulation: trends and outcomes.............................................................................. 15 Regulatory reform in selected industries............................................................................. 15 Product market liberalisation and performance................................................................. 23

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.

In many countries throughout the world, regulators are struggling to determine whether and how to introduce competition into regulated industries. This essay examines the complexities involved in the liberalization process. While stressing the importance of case-specific analyses, this essay distinguishes liberalization policies that generally are procompetitive from corresponding anticompetitive liberalization policies.

abstract Existing strategic group studies have rarely examined ownership type as a variable to classify firms in an industry. Using Chinese firms of different ownership types, we suggest that ownership type can be a parsimonious and important variable that managers use to cognitively classify firms into different strategic groups. While ownership itself is an objective variable, we contend that different ownership types lead to different managerial outlook and mentality due to a number of macro and micro foundations giving rise to various managerial cognitions. Employing the Miles and Snow typology, we find that state-owned enterprises (SOEs) and privately-owned enterprises (POEs) tend to adopt defender and prospector strategies, respectively, while collectively-owned enterprises (COEs) and foreign-invested enterprises (FIEs) exhibit an analyser orientation that falls between defenders and prospectors on the strategy continuum. Three statistical tests suggest that ownership types can be used to successfully predict strategic group memberships in China’s emerging economy.

We analyze the effect of ownership on post-privatization performance in a virtually complete population of medium and large firms privatized in a model largescale privatization economy (Czech Republic). We find that concentrated foreign ownership improves economic performance, but domestic private ownership does not, relative to state ownership. Foreign firms engage in strategic restructuring by increasing profit and sales, while domestic firms reduce sales and labor cost without increasing profit. Ownership concentration is associated with superior performance, thus providing support to the agency theory and evidence against theories stressing the positive effects of managerial autonomy and initiative. We find support for a version of the hypothesis that firms restructure by first lowering and later increasing employment. The state as a holder of the golden share stimulates profitable restructuring while pursuing an employment objective, which is understandable in a period of rising unemployment. Our results hence portray the state as a more economically and socially beneficial agent than do some other recent studies.