Konings, Jozef --- "Restructuring of firms in Central and Eastern Europe" [2003] ELECD 15; in Tumpel-Gugerell, Gertrude; Mooslechner, Peter (eds), "Economic Convergence and Divergence in Europe" (Edward Elgar Publishing, 2003)

Book Title: Economic Convergence and Divergence in Europe

Editor(s): Tumpel-Gugerell, Gertrude; Mooslechner, Peter

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781843762416

Section: Chapter 9

Section Title: Restructuring of firms in Central and Eastern Europe

Author(s): Konings, Jozef

Number of pages: 15

Extract:

9. Restructuring of firms in Central
and Eastern Europe
Jozef Konings

9.1. INTRODUCTION

Figures 9.1 and 9.2 show the evolution of real GDP and employment for
a selection of transition countries since the early 1990s. The unexpected
huge collapse in output and employment that occurred in Central and
Eastern Europe implied a transition process, which was much harder and
longer than was originally anticipated. There are three central institutional
developments that have characterized the transition process: the privatiza-
tion and its sequencing of state-owned enterprises, the emergence of com-
petitive pressure (due to liberalization of markets) and the hardening of
budget constraints.1 These institutional changes most likely have had an
impact on firm behaviour and it is in this context that a useful distinction
can be made between defensive and strategic restructuring (Grosfeld and
Roland 1997).
`Defensive restructuring' refers to measures taken to guarantee the
immediate survival of the firm. These measures include reducing costs and

1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
Poland Romania Bulgaria Slovak Republic
Czech Republic Hungary Estonia Slovenia

Note: We normalized GDP at 1 in 1990.

Figure 9.1 Evolution of real GDP in CEE countries

168
 Restructuring of firms 169

1.1
1.05
1
0.95
0.9
0.85
0.8
0.75
0.7
0.65
0.6
1990 1991 1992 1993 1994 1995 1996 1997 ...