A survey on institutions and new firm entry: How and why do entry rates differ in emerging markets?

This paper considers the impact of institutions on new firm entry in emerging markets. In particular, it surveys the findings of a 2-year research project on the sources of success in terms of entry rates and conditions (including gross entry rates, exit rates and therefore net entry rates) across the BRIC countries (Brazil, Russia, India, China). These emerging market economies display widely varying entry and exit rates and a framework is developed to capture the interaction between key aspects of formal institutions, how those institutions play out in practice, and their impact on entry and exit rates. The country case studies reveal that, whilst different contingencies affect the relationships between institutions and entry in each country, there are some empirical regularities in the determinants of successful entry and conversely in its constraints. One such regularity is the critical interaction between formal rules and informal mechanisms. There is also variation in whether these works so as to compensate for deficiencies in formal institutions, as in China and India, or whether deficiencies in formal mechanisms are compounded by poor informal mechanisms, as is sometimes true in Brazil. Indeed, relatively good formal rules and structures can be undermined by informal mechanisms deterring or blocking entry, as is largely the case in Russia.     

Convergence in Transition Countries – Focus on Investment: Central and Eastern Europe, 1970–1996

Our data on investment in Central and Eastern European economies reveal that, though investment rates were typically high in the 1970s, the marginal efficiency of investment was low. Investment shares begun to decline in the 1980s, before the collapse of the communist system, but there was some recovery in most countries after transition. We use the Kalman filter framework to test for convergence in investment rates. We find some evidence of convergence in Central European countries – former Czechoslovakia, Poland and the countries of the former Yugoslavia. For the remainder of the socialist bloc, however, we were unable to isolate convergence in investment shares. This revised version was published online in July 2006 with corrections to the Cover Date.     

Investing in Eastern Europe: Two case histories

This feature is in three parts: the first two are case histories of the contrasting experiences of two Western companies which expanded abroad for the first time in the mid-1990s, into different countries in Eastern Europe. One is so far successful, the other not. The third section draws out the implications of these experiences: although still quite risky, investment in Central and Eastern Europe can already be made to pay by firms that enter as part of a well-conceived and financed global strategy. Particular benefits are lower labour costs and access to untapped markets.     

The effects of workers' participation on enterprise performance: Empirical evidence from French cooperatives

The results of estimating production functions augmented by various measures of workers' participation on a large enterprise level data set of French cooperatives are reported. Value added is found to be an increasing function of participation in profits, in collective membership and in ownership, even when a wide assortment of enterprise specific and environmental factors are taken into account. This finding is very robust, surviving tests between alternative specifications of technology, for reverse causality, for simultaneous equation bias and for multicollinearity. The typical productivity effect from participation, however, is small, around 5% of output. The results suggest that Western policymakers should investigate ways to increase workers' participation in capital stakes and profit shares.     

Extending the economics of disorganization

Many of the states of the former Soviet Union have experienced a dramatic collapse of output during transition, which has not yet been reversed in a sustainable way. The economics of disorganization, proposed by Blanchard (1997) and tested empirically by Blanchard and Kremer (1997), reasons that this phenomenon can be explained by specificity of inputs and the breakdown of traditional domestic supply linkages. We replicate the Blanchard-Kremer study for Ukraine and Kazakhstan, and also find that longer and more complex domestic supply chains are associated with greater reductions in output. When we extend their analysis to incorporate measures of the complexity of the Commonwealth of Independent States (CIS) trade and non-CIS trade however, we find that complexity of non-CIS trade is the significant factor in explaining the output collapse. We therefore argue that the disintegration of the Council for Mutual Economic Assistance and the requirement of hard currency trade, are equally, if not more, significant in explaining the output declines experienced by Ukraine and Kazakhstan.     

Opportunities and tripwires for foreign investors in Eastern Europe

This article discusses how the local environment influences the strategic decisions of foreign investors entering Central and Eastern Europe. The current economic transition of the region offers unique opportunities arising from virgin markets and low labor costs. Foreign businesses have been eager to exploit the former, often pursuing first-mover advantages. However, the underlying structural problems of the economies in transition inhibit the development of business: in adapting to the new market environment, firms are in a process of fundamental restructuring. Moreover, the privatization process in the region creates both opportunities and obstacles for entry by acquisition. While the institutional framework is developing toward Western models, it remains incomplete. © 1998 John Wiley & Sons, Inc.     

Recent developments in French economic planning

Conclusions French planning seems to have had a very real effect on the economy in its early years. Industrialists' expectations were raised and new ideas were disseminated in a subtle way, and not merely because people believed the numerical values of published forecasts. In the early 1960s the idea of a consensus was extended beyond the need for greater private investment and the plan became the focus for a national debate on priorities. This exercise was valid and effective in a period of fast and accelerating growth but later the authorities chose instead to impose their own priorities, which included turning away from planning at the industrial level. This was partly because the underlying techniques of traditional French planning were seriously flawed in an open economy, but it probably also represented ideological preferences. However the consultative mechanisms continued to exist through the 1970s, though largely restricted to the macro-economic sphere. The 7th Plan generated a serious and powerful debate about responses to the recession but this was ignored by the authorities. Somewhat surprisingly, the reduced circumstances of planning did not affect the respect for its institutions in the eyes of other social actors: unions and business.¹⁰ In calling for a restoration of planning, the Socialists were therefore responding to a real need in a society with very limited channels for dialogue between social partners who nevertheless were forced to confront one another in the macro-economic sphere. But at the time of writing it looks as if an opportunity has been lost to carry out a detailed multi-scenario reflection on medium term economic policy.