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

49 Pages Posted: 29 May 2001

See all articles by Wendy Carlin

Wendy Carlin

University College London - Department of Economics; Centre for Economic Policy Research (CEPR)

Steven Fries

European Bank for Reconstruction and Development (EBRD)

Mark E. Schaffer

Heriot-Watt University - Centre for Economic Reform and Transformation; Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

Paul Seabright

University of Toulouse I - Industrial Economic Institute (IDEI); Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: May 2001

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

JEL Classification: P0, L1, L33, O12

Suggested Citation

Carlin, Wendy and Fries, Steven M. and Schaffer, Mark E. and Seabright, Paul, Competition and Enterprise Performance in Transition Economies: Evidence from a Cross-Country Survey (May 2001). William Davidson Institute Working Paper No. 376. Available at SSRN: https://ssrn.com/abstract=270320 or http://dx.doi.org/10.2139/ssrn.270320

Wendy Carlin (Contact Author)

University College London - Department of Economics ( email )

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Steven M. Fries

European Bank for Reconstruction and Development (EBRD) ( email )

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Mark E. Schaffer

Heriot-Watt University - Centre for Economic Reform and Transformation ( email )

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Centre for Economic Policy Research (CEPR)

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IZA Institute of Labor Economics

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Germany

Paul Seabright

University of Toulouse I - Industrial Economic Institute (IDEI) ( email )

Manufacture des Tabacs
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Toulouse Cedex, F-31000
France
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Centre for Economic Policy Research (CEPR)

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United Kingdom

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