Competition and Enterprise Performance in Transition Economies: Evidence from a Cross-country Survey

Wendy Carlin (), Steven Fries, Mark Schaffer () and Paul Seabright

No 376, William Davidson Institute Working Papers Series from William Davidson Institute at the University of Michigan

Abstract: 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.

Keywords: competition.restructuring; privatization; soft budget constraints; business environment (search for similar items in EconPapers)
JEL-codes: L1 L33 P0 (search for similar items in EconPapers)
Pages: pages
Date: 2001-05-01
New Economics Papers: this item is included in nep-eec, nep-lam and nep-tid
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (89)

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Working Paper: Competition and Enterprise Performance in Transition Economies: Evidence from a Cross-country Survey (2001)
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