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Estrin (2002)Management > Comparative Management > Lectures > Independent Research > Estrin
Estrin (2002) - Competition and corporate governance in transitionTransition economies are those which are becoming privatised and where the government is withdrawing and introducing hard budget constraints, meaning that firms have to be accountable for their own profits and losses. This has been met with mixed success. Restructuring of the business is needed, including changes in objectives, constraints and attitudes. In planned economies the planning emphasised was on what the planners wanted, not what the customers needed, so a complete restructuring was required. The structure of the planned economy permitted no competition entry or exit, which meant that industries were highly concentrated and there were close relationships between managers and politicians. Reallocation of resources, which requires a knowledge of the market and how good its institutions are. In most planned economies, allocation of resources was mainly based on quantitative methods, with no concept of a market. Capital was allocated through a central "monobank" and all the decisions were made by the government. Rewards for innovation were weak or perverse - those who achieved higher were then set higher goals than everyone else. Corruption and illegal activity was rife in central planning. In comparison with other planned economies (Yugoslavia, Poland, Hungary, Estonia), Russia was the least capitalist and was the least inviting to foreign firms. This was partly due to the complex (vertically integrated) industries, so the removal of the centrally planned economies left a larger gap. This was aggravated by poor infrastructure and a dispersed population, which made it harder to introduce competition
Reform paths - Competition/Exit
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