Network Restructuring and Firm Creation in East-Central Europe: A Public-Private Venture

60 Pages Posted: 20 Feb 2001

See all articles by Gerald A. McDermott

Gerald A. McDermott

University of South Carolina - Moore School

Date Written: December 2000


The transformation of East-Central Europe deepens the debate about firm creation in a unique way: how do approaches to institutional creation impact the creation of firms? This paper theoretically and empirically explores this question by offering an alternative, embedded politics approach to explain the sharp contrasts in policy and SME manufacturing growth in the Czech Republic (CR) and Poland. Whereas Polish policies of gradual privatization and state intervention into restructuring led to significant growth in new firms, Czech policies of rapid, mass privatization produced stagnation. I argue that institutional experiments based on public actors becoming financial partners and conflict mediators enhance the ability of network actors to learn and monitor one another, and thus experiment with new forms of organization. Poland facilitated such institutional experiments not only in the ways it approached the creation of market institutions, but also in the ways it decentralized power and resources to local and regional political actors. The study utilizes data on manufacturing networks, privatization, bankruptcy, and regional government reforms collected over the past six years.

Keywords: Networks, Institutions, Entrepreneurship

Suggested Citation

McDermott, Gerald A., Network Restructuring and Firm Creation in East-Central Europe: A Public-Private Venture (December 2000). Available at SSRN: or

Gerald A. McDermott (Contact Author)

University of South Carolina - Moore School ( email )

1404 Greene St
Columbia, SC 29208
United States
803-777-1035 (Phone)


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