What Makes Firms Competitive? States,Markets, and Organisational Embeddedness in Competitive Firm Restructuring in Postsocialist Economies

The prevailing transitions literature suggests that dynamic firms in postsocialist economies are the result of macroinstitutional reforms leading to the making of markets. This article builds on work in comparative political economy and economic sociology to show that the degree of competitive behaviour of postsocialist firms is determined not by the existence of general market institutions alone but by the kinds of organisational allies firms possess and the kinds of markets they compete in. Using firm survey data across 28 postsocialist economies, the article examines the determinants of competitive restructuring by firms, including product innovation, standards upgrade, financial transparency, and investments in research and development. The article confirms insights from comparative political economy which suggest that dynamic enterprise sectors emerge when governance is effective. However, at the firm level, the article finds that transnational ties and supportive policy environments are most significant in the making of dynamic postsocialist enterprises. The article also highlights important regional variation in firm behaviour and discusses the relationship between institutional frameworks, organisational embeddedness, and firm restructuring in postsocialist economies.     

Firm-level determinants of tax evasion in transition economies

Business tax evasion is an important issue for governments. Yet the factors that determine business tax evasion have not been sufficiently examined in the literature in general, and in transition contexts in particular. To address this gap, this study uses the WB/EBRD Business Environment and Enterprise Performance Survey (BEEPS) database with a sample of over 12,692 firms from 26 transition economies. Applying various modelling strategies, we argue that tax evasion is a function of firm-level and institutional-level variables. We contribute to the literature by providing robust evidence showing that the perceived tax burden has a positive impact on tax evasion. We also find that the tax evasive behaviour of firms is positively influenced by low trust in government and in the judicial system as well as by higher perceptions of corruption and higher compliance costs. We find that smaller firms, individual businesses and firms in sectors that are less visible to the tax administration are more likely to get involved in evasive behaviour. Overall, institutional factors play an important role in determining firms’ tax evasion behaviour in transition economies. This finding has important policy implications.     

Are small firms really credit constrained? Empirical evidence from Kosova

This article uses firm level data from an SME survey conducted by Riinvest Institute in 2006 in order to examine the determinants of obtaining bank finance conditional upon applying. The results of the survey show that not all the firms receive credit they apply for, suggesting a slight excess of demand over supply of credit. Unlike some other studies in transition economies this article corrects for sample selection bias. Econometric evidence indicates that commercial banks base their decision to loan firms primarily on the basis of collateral. Well performing firms are more likely to ask for credit because of better business prospects in the future, but profitability as a measure of firm performance does not seem to be sufficient signaling for banks in order to allocate credits. Banks seems to prefer more to secure themselves from likely opportunistic behavior of potentially “bad borrowers” with use of collateral. Findings are in line with theoretical and empirical arguments that systematic use of collateral can mitigate the adverse selection by banks in choosing whom to allocate the credit especially in country with turbulent political environment and weak property right system. However, unlike other studies findings suggest that the rhetoric of financial constraints to some extent has been exaggerated in a transition context.     

Migration and intention to return: entrepreneurial intentions of the diaspora in post-conflict economies

This article examines the intentions of the diaspora to return to their homeland and engage in entrepreneurial activity. We focus on post-conflict economies where the development potential of return migration is significant. Our article demonstrates that the entrepreneurial intentions of returning diaspora are affected by their level of trust and perceptions of risk in institutions at home. Through a survey of diaspora returning to Kosovo, the paper finds that business experience has a negative relationship on probability to return, but it has a positive relationship on entrepreneurial intentions. However, those with professional and qualified jobs are more likely to have intentions to return, but less likely to have entrepreneurial intentions. The paper contributes to academic research on the central importance of institutions to post-conflict development, demonstrating that by enhancing the institutional environment investment can be attracted home.     

Whither State Ownership? The Persistence of State-Owned Industry in Postsocialist Central and Eastern Europe

After widespread privatization in the 1990s, the early 2000s witnessed the reemergence and consolidation of state owned industries in the postsocialist states of Central and Eastern Europe (CEE). To counter views that state owned industries have largely disappeared from postsocialist CEE due to extensive privatization, the paper demonstrates the continued economic significance of state owned industries across the region. The paper then offers a typology of state-firm relations and highlights differences in empirical cases of large state-owned firms that have emerged in the region, distinguishing between market-oriented and politicized firms. Finally, the paper develops a comparative, macro-level processual analysis accounting for the institutional and political factors that explain why some postsocialist states have developed state-owned industries that operate successfully in competitive markets while others have developed highly politicized state-controlled firm. It finds that political factors are what chiefly account for the emergence of successful state sectors in the region.     

Coming out of conflict: How migrant entrepreneurs utilise human and social capital

This paper examines how human and social capital influences the entrepreneurial activity of migrant entrepreneurs, with special reference to forced migrants due to conflict. The study uses Riinvest Migrant’s Survey data collected at the end of 2008 and beginning of 2009 to estimate the probability of entrepreneurial activity among Kosovan migrants. The findings demonstrate that host networking (foreign spouse and foreign language fluency) exerts a positive effect on entrepreneurial activity of migrants, while co-ethnic networking is found not to be important. We show that migration experience has a positive impact on the probability of entrepreneurship. Exposure to host country (both measured as years in migration and age) increases probability to start a business. Educational qualifications in the country of origin before migration do not have any influence on entrepreneurship, while specific business training in the country of residence has a positive impact. Contributions to scholarship on migrant entrepreneurship and policy approaches to mobilise them are discussed.