The role of small firms in East Germany

This paper examines the role which small firms in East Germany have played under the system of combines and the important contribution they can make in the current reform process. The evolution of a striking trend towards the centralization of economic power in the GDR during the last three decades is documented. Not only has the share of economic activity accounted for by the combines greatly increased, but the number of establishments, and particularly small establishments, has drastically decreased. It is concluded that the establishment of a vital entrepreneurial sector is essential if East Germany is to succeed in its process of economic reform and the transition to the market economy.