The Role of Different Ownership Structures for Restructuring: Evidence from Baltic and other Transitional Economies

In the core of the transition in Eastern Europe is the change of enterprise governance with a change in the distribution of ownership rights on the different stakeholders involved in the enterprises. What has been the role of different types of ownership structures for the success of this restructuring process? Ownership of five different stakeholders is analyzed: state, employees, managers, domestic outsiders and foreign investors. The ownership changes are analyzed over four different stages of the transition process.
It is shown how employee ownership played an important role in the first stages of transition in some countries. Management ownership has been decisive for the dynamics of SMEs. Domestic outside and foreign ownership have grown with the progress of transition and play an increasing role for restructuring. The role of each ownership type is analyzed both from a theoretical point and with presentation of some of the empirical evidence on performance and restructuring. There is mostly referred to the experience in the Baltic countries, but evidence from Russia, Slovenia and other transitional countries are also included. Both theory and evidence put state ownership on the low and foreign on the high level of performance and restructuring. For the question of insider versus outsider the picture is less clear. The weight of different ownership structures are changing over the different stages, the change follows the governance cycle from state to employee, to manager, to outside/foreign ownership. The speed of change and the weight of different types is to a high degree a political question. The paper ends up with a list of policy recommendations.