Article

Journal of International Business Studies (2008) 39, 725–746. doi:10.1057/palgrave.jibs.8400379

Articles

Restructuring of firms in transition: ownership, institutions and openness to trade

Polona Domadenik1, Janez Pras caronnikar1 and Jan Svejnar2

  1. 1Faculty of Economics and Institute for South-East Europe, University of Ljubljana, Slovenia
  2. 2Gerald R. Ford School of Public Policy, University of Michigan, Ann Arbor, USA

Correspondence: J Svejnar, University of Michigan, 701 Tappan Street, Room 7211, Ann Arbor, MI 48109-1234, USA. Tel: +1 734 936 5042; Fax: +1 734 936 8715; E-mail: svejnar@umich.edu

Received 29 July 2004; Revised 10 December 2006; Accepted 20 June 2007; Published online 3 April 2008.

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Abstract

We develop a theoretical framework for defensive and strategic restructuring, and provide estimates of restructuring in privatized firms in an advanced transition economy: Slovenia. Our rich data point to both types of restructuring, as well credit rationing and bargaining with respect to investment. Privatized firms display profit-maximizing behavior, and a firm's export orientation and institutional features, such as insider vs outsider privatization, employee ownership, and employee control, do not affect the firm's employment and investment behavior. The results suggest that a major exposure to world competition induces similar economic behavior in firms with different structural and institutional characteristics.

Keywords:

transition, R&D investment, firms in transition, employee ownership and control, institutions, openness