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Über dieses Buch

Much of the research on transformation/transition in Central and Eastern European Countries (CEECs) focuses on macroeconomic issues (inflation, economic growth, employment ...). Little research has been devoted so far to microeconomic analysis. Recently the issue of new enterprises and firm founders has moved to the centre of economic and policy considerations. Readers of this book will learn about the role played by these firms in the transformation of central and eastern European countries. The book also includes contributions from Central and Eastern Europe on which little or no investigation has been performed until now (Yugoslavia, Romania, Slovakia).





Interest in small firms and entrepreneurship has spread over the last two decades from the US and England to the rest of Europe, first Western and then Eastern Europe, as well as to the former Soviet Union. In CEECs much hope was and still is pinned on the emerging entrepreneurial small firm sector to carry these economies out of their current economic position, e.g. either to a comparable level, adequate to meet the standards of a reunifying Europe, or at least to an improved level, first and foremost out of theit specific transformation crisis.1
Oliver Pfirrmann, Günter H. Walter

Western Experience and General Questions

Small Firms and Entrepreneurship: The Western Experience

The role that small firms play in economics has evolved considerably since the second world war. This paper seeks to document how and why small business plays a very different role in industrial organisation research today than it did some three decades ago.
David B. Audretsch

Private Ownership and Markets: Limits to Privatisation in the Transition Process

An almost stereotypically repeated phrase in scientific literature as well as in political statements maintains that one of the essentials of a market economy lies in the existence of private ownership in general, and of the means of production in particular. Whereas for critiques of market society, private ownership is the very root of nearly all evils, proponents see it as an absolute prerequisite for individual freedom, human dignity and social justice, as is expressed for example in John Locke’s famous sentence: “Where there is no [private] property there is no justice” (Hayek 1988, 34). Whether this may hold in general or not, in any case it seems to be true that some private property is at least favourable for a person’s privacy and individuality, and must thus be seen as a virtue in itself (Munzer 1990, 88 ff). Although not independent from the above-mentioned discourse, from an economic point of view private ownership of resources and goods provides a necessary condition for economic efficiency, meaning a state in which any resource and good in the economy finds its best (i.e. highest valued) use. It is for this reason that privatisation of state-owned enterprises, land, accommodation etc. has become a pivotal issue of political, social and economic transition in countries formerly under the control of Soviet-oriented communists. Great hopes have been placed in privatisation, not least with regard to stimulating an entrepreneurial potential. The target is clear and sensible enough, but the route, speed and results of this undertaking have hitherto nowhere been completely satisfactory, though there are, of course, significant differences in degree between countries. A closer look, in particular, raises doubts as to whether the results achieved justify focusing on privatisation as an important policy for promoting entrepreneurship. In this essay we shall look more closely at the concept of ownership to find out some of the reasons why privatisation in CEECs is so thorny a matter. We argue two main theses: first, whatever further reasons may (and actually do) exist for the overall unsatisfactory state of transition after ten years, as well as for the large differentials in performance between the economies, the remaining deficiencies with regard to property rights and ownership, properly understood, are perfectly sufficient as an explanation.
Walter Heering, Oliver Pfirrmann

Industrial Modernisation in Post-Socialist Economies: Primary Endogenous and Elites Oriented Modernisation as a Socio-Economically Oriented Strategic Concept

Following the collapse of communist rule in Central and Eastern Europe which was accelerated not least by serious deficits in the socialist economic system, the people there looked to a new beginning under the sign of a market oriented economic system. They hoped for the release of economic potentials which were definitely present but had previously been prevented from developing; under the conditions of a market economy, they expected to find the incentives which were necessary to strengthen the motivation to perform, and to benefit individual subjects and societal groups. Confidence was placed in the idea that the mass of the people in the former east block would necessarily experience more prosperity if the transition from a socialistic economic system to a free market economy could be successfully brought about.
Fuad Kandil, Günter H. Walter

Central and Eastern Europe: Country Studies

Entrepreneurship and Innovativeness of Small and Medium-Sized Enterprises (SMEs) in Poland

Democratic upheaval and transformation of the economic system in Poland brought about a rapid growth of interest in self-employment and business activity. At the beginning of the 1990s the net number of new private enterprises increased by over two million. They made a significant contribution to overcoming economic stagnation, transformation of the economic structure and to Poland attaining an economic growth over 5 per cent rate. It should be noted here that the Polish economy, unlike economies of other CEECs, was characterised by a broad margin of freedom left for private business activity throughout the entire period of real socialism. Over 80 per cent of arable lands, a large part of the retail trade, the building sector and services were privately owned. Of course, business activity was run by private entities on a relatively small scale due to legal-administrative barriers and it could be carried only in fields that were not reserved for the public sector. Doctrinal barriers to market entries were removed gradually in the 1980s. 1 As a result of this, the number of private firms rose by almost 200 000 (from 375 000 to 572 000), while the size of the work force doubled (reaching 1 290 000 in 1988). Measures taken in that period provided an impetus for building a market economy started by the “Balcerowicz Programme”. Removal of remaining legal and administrative barriers to business start-ups in 1989 released a true “explosion of entrepreneurship”. Transformation of the economic system gave the proverbial “green light” for small and medium-sized private enterprises which had been handicapped in the previous period.
Krzysztof B. Matusiak

Small Businesses in Russia

The small business is considered as necessary in modern Russia and is claimed to be one of the priorities of a state policy oriented towards the development of favourable conditions for private initiative by Russian citizens. A competitive market economy cannot develop without small businesses.
Natalia Kovaleva

Small and Medium Sized Enterprises in Hungary

One of the important issues facing CEECs in the transformation from centrally planned to market economies is the need to develop SMEs. The potential role of SMEs includes generating employment and thereby possibly absorbing labour surpluses which result from economic restructuring, contributing to the development of a competitive economy with diversified structures, and being a source of innovation. Data for the European Union (EU) illustrates the important contribution of SMEs: They account for 99 per cent of all enterprises, 66 per cent of employment and turnover. In Central and Eastern Europe rapid progress with transformation was accompanied in most countries by a rapidly evolving private sector including SMEs due to privatisation and the formation of new firms.
Friederike Welter

Small and Medium Sized Enterprises in Yugoslavia: A Driving Force in the Catching-Up Process

SMEs are an economic miracle in the Federal Republic of Yugoslavia today — there were four times more in 1998 than in 1990. The “SMEs boom” has some roots in the socio-economic and cultural background as well as in the history of this country. The following contribution describes the development of SMEs in the 20th century in Yugoslavia and tries to identify possibilities for a further development of the SME sector here in the coming years. The paper is organised in five chapters:
Djuro Kutlaca

SME Development in the Republic of Slovenia

Some fifteen years ago, European institutions started to discuss the role of entrepreneurship as a push for further development of national economies, particularly in line with the formation of new small and medium-sized enterprises (SMEs), promotion of their faster growth and active employment policy. Researchers (e.g. Reynolds/Hay/Camp 1999 found a strong correlation between the economic success of national economies, enterprises, economic and employment growth rates and the awareness of the role of SME and entrepreneurship in a society).
Viljenka Godina

Small Business and Entrepreneurship in Romania

Romania, like other former communist countries, is in the situation of reinforcing the SME sector. After many years of a rigidly centralised economy, the result has been a disappearance of any entrepreneurial spirit. In this context, rapid development of the SME sector represents a priority in the complex process of transition, not only for the general reasons which sustain this sector in the developed countries, but also for other specific reasons, as follows:
  • the need to supply jobs for the labour force previously employed in the state sector
  • the need to promote increased adaptability to market demands
  • acceleration of the decentralisation process
  • promoting the creation of a “middle stratum” of people
  • the need to reinforce the economic basis of political pluralism
Ioan Piturescu

Selected Aspects of Small Firms Environment and Policy

Supporting Innovation Through Institution Building in Central and Eastern Europe: Between Visions and Realities

After 10 years of transformation and recovery the economies of the most of CEECs, including Russia, are recording positive growth rates. If this growth is to continue it will require, beside physical and human capital investments, new and further institution building. This has been obvious throughout the whole transition period in areas of macroeconomic policy, privatisation and other areas of establishing market economy. However, institution building for innovation was not given equal importance. Yet, growth literature tells us that the long-term growth and its sustainability in CEECs will rest not only on competitive markets but also on the emergence of systems of support to innovation.
Slavo Radosevic, Günter H. Walter

Entrepreneurship, Innovation and Small Firms: A Case for Technology Centres and Science Parks in the Transition Process?

Eastern reform countries formerly under the influence of the Soviet Union apparently now have all concluded the first phase of the transition process and have entered a second stage (Stern 1998; EBRD 1998). In the first phase priority was laid on macroeconomic stabilisation and on privatisation of state enterprises. Depending on initial conditions as well as design and persistence of the chosen transition policy, there are large differences between countries with regard to success. Generally, the further East one looks, the slower the transition process and the larger the transition problems. Especially, the Czech Republic, Hungary and Poland seem to be quite advanced, while Russia and other countries of the CIS still show poor performance. It is now becoming clear that further progress, even in the macroeconomic field, needs support from more microeconomic measures. All countries, although to a different degree, lack appropriate institutional environments to provide proper incentives for market-oriented economic activity. In particular, there is now widespread disillusionment concerning the results of privatisation, which left serious problems of enterprises restructuring unsolved and created some fairly new problems too. Emphasis on privatisation of existing state-owned enterprises has often diverted attention away from establishing of new firms, which is at least as important.
Walter Heering

Regional Innovation Capacities and Economic Transition: The Example of West Transdanubia

In the literature devoted to interrelations between innovative firms and economic transition, only little attention has been paid to the influence of regional determinants. In line with the current academic and political debates on the role of regions for competitiveness and economic development, the aim of this paper is to provide some insights on innovation activities from a regional perspective. The investigation deals primarily with a Hungarian region: West Transdanubia. More precisely, the analysis focuses on firm behaviours and characteristics with regards to innovation and cooperation, determining remarkable facts on an empirical basis. This in turn enables a typology of regional firms to be established which may be helpful for innovation policy in West Transdanubia. The paper is organised as follows. The first section reviews the background of the analysis, addressing the concept of innovation systems and economic changes from a regional perspective. The second section, concentrating on manufacturing firms, contrasts innovation and co-operation patterns in West Transdanubia with two other central European regions (Saxony and Slovenia) allowing the introduction of comparative elements into the investigation. The third section examines the innovation and co-operation activities of manufacturing and business service firms in West Transdanubia. Finally, concluding comments explore policy implications, insisting notably on the current and future importance of regional innovation capacities.
Emmanuel Muller, Andrea Zenker, Tibor Döry

From Old to New, from Big to Small? — Transformation of Firm Behaviour in Declining Regions in West and East

The paper explores changes in firm behaviour in old industrial areas in the West and draws parallels to declining regions in Central and Eastern Europe. It argues that the support for firm foundation and for small and medium-sized enterprises has to consider their embeddedness in a regional context. Strategic policy orientations are presented and lessons for transformation processes drawn.
Michael Steiner

Possible Strategies and Policy Steps for an Innovation Oriented Modernisation

Industrialisation and technology within large production complexes had been a key component of Central and Eastern Europe’s economic performance throughout the post World War II period. Nearly all countries within the area of influence of the former USSR had developed a science and technology (S&T) system similar to the Soviet pattern. This system had three elements: an Academy of Sciences for the leading researchers, and often highest priority for public funding, industrial or branch research institutions as a technology base for industry, and universities for education. Research institutions were not treated as autonomous entities but were controlled by respective ministries. As a result of the collapse of the socialist system, the links between industry and the S&T system disappeared (Bitzer 1998). With the beginning of the transition period, however, reforms and restructuring of both the S&T system and the industry sector led to considerable losses in the research potentials of all CEECs. The main negative tendencies were a declining gross expenditure on R&D and a decreasing number of R&D personnel, sometimes leading to a brain drain, i.e. either an external (for the country) or internal (for industry) loss of scientists and workers. While these often drastic changes are described perfectly elsewhere) the question arose of how to achieve industrial restructuring. Many concepts by policy makers and consultancies were offered to CEECs. However, all of them were rooted in the structures of the industrialised countries of the western hemisphere, and very often they were simply adopted by the CEEC authorities, taking the effectiveness of these technology and innovation policies for granted. Today, additional hurdles apart from the problem of financial means are created by the fact that existing and planned technology and innovation policies in the CEECs are not regarded in their entirety and are only evaluated for their specific effects in initiating and realising innovation activities in the different groups of enterprises. Moreover, many concepts are still in their infancies.
Günter H. Walter

Summary and Issues for Future Research

Summary and Outlook

In this last chapter we will summarise the main results of the contributions presented, draw some conclusions for policy, and dare to include a critical outlook on future issues. Here we compare traditional as well as the latest findings of certain research disciplines with recent developments in the countries under investigation. We have found no general confirmation regarding our theses drawn from the existing literature in the introductory chapter. The situation is still diverse, as is the matter of the investigation itself. Moreover, the picture on SMEs, especially in manufacturing, their role for economic restructuring and their innovative capacity in in our country studies seems less promising than expected. It would be misleading if the following were to be regarded as suggestions as to how the situation may be improved. Rather, the observations are intended to generate further discussion by emphasising issues that have received insufficient attention especially in the context of transformation in Central and Eastern Europe. Although the issues discussed may lead to the impression that more research is needed, they are far from constituting a research agenda. Indeed, as long as detailed research in western industrialised countries on topics like entrepreneurship remains incomplete there will be no lessons that can be simply transferred from West to East. We hope that an intensive consideration of the questions outlined will at least help to avoid pitfalls along the way to a market economy.
Oliver Pfirrmann


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