Meyer (2002)

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Meyer (2002) - Management challenges in privatisation acquisitions in transition economies

There are many challenges in transforming post-socialist organisations into capitalist firms. The author discusses acquisition as a strategy of transformation of socialist firms, which a plan for integration must be drawn up prior to contract signing, where challenges such as resource upgrading, localised capabilities and learning process are to be overcome.

Negotiations

There are numerous barriers to negotiations:

• Differences in national politics
• Influence from multiple stakeholders, such as governments, managers and the worker's council
• Agents seeking personal wealth and exploiting the western firm
• There are few lawyers and laws
• Lack of experience of negotiations on the part of the socialist country
• High transaction costs from lengthy negotiations, (also as a result of the above)

Governments still interfere post-privatisation, which itself does not occur in a vacuum - it is related to other social and political process in the country. This means that western firms need to build good relationships with local governments and the local community.

Firms will benefit from sharing power with the government (if the latter maintains a minority share). It will spread risk and the government is more helpful if it gets a share of the profits.

To improve, firms need to upgrade knowledge and capabilities, as well as changing attitudes and corporate culture within the firm (See Meyer, 2001 for knowledge upgrades).