Laszlo Czaban

Institutional Transformation and Enterprise Change in an Emergent Capitalist Economy: The Case of Hungary:

The collapse of state socialism in Eastern Europe has transformed many of the institutions governing state enterprises and was expected to lead to radical changes in enterprise structures and practices. This was especially so where ownership had changed. However, just as new constitutions do not create liberal democracies overnight, so too the withdrawal of the state from direct control over the economy and privatization does not automatically generate dramatic enterprise transformations. This study of 27 Hungarian enterprises in the early 1990s shows that products and the markets served changed remarkably little, and the employment and organizational changes that have taken place in most enterprises have been less radical than might be expected. Ownership changes have not always led to major shifts in control, nor have private owners implemented sharply different policies from state controllers. The highly fluid institutional environment limited the commitment to, and capacity for, major strategic changes in most substantial Hungarian enterprises. Where changes have occurred, they have been most significant in: (a) state enterprises that are in severe financial difficulties, and (b) companies controlled by foreign firms.

Trust and Contractual Relations in an Emerging Capitalist Economy: The Changing Trading Relationships of Ten Large Hungarian Enterprises

Inter-firm relationships vary greatly between capitalist economies as a result of institutional differences, especially in forms of trust and prevalent mechan isms of ensuring that commercial agreements are kept. The transformation of the command economies of Eastern Europe since 1989 and the intensification of competition in their major markets might be expected to destroy previous connections between suppliers and customers and generate instead short-term, ad hoc contractual relationships. However, this study of ten large enterprises in Hungary found that contractual relations between them tended to be more similar to the Japanese firms studied by Sako in her Prices, Quality and Trust (1992) than to the British ones. This seems to reflect the limited extent of change in products, markets and organizational structures of these firms — and the gradual approach to transformation adopted in Hungary as a whole — as well as their specialization in particular industrial branches and their high degree of mutual dependence through debt. Continued dependence on the state has meant that competition between these firms for political support remains important and so they compete more across industrial sectors than within them.

Incremental Organizational Change in a Transforming Society: Managing Turbulence in Hungary in the 1990s

The rapid liberalization of the former state socialist economies of Eastern Europe coupled with privatization were thought by many in the early 1990s likely to generate effective capitalist firms quite quickly. However, the radical institutional transformation and collapse of Soviet markets resulted in considerable uncertainty for most companies which, together with high sunk costs and lack of resources, inhibited organizational restructuring and strategic change. Despite high levels of foreign ownership and control by the mid-1990s, many Hungarian companies continued to produce much the same kinds of products for mostly the same customers with inputs from mostly the same suppliers as in 1990. While most had reduced employment substantially, and many had disposed of ancillary organizational units, the bulk of the companies considered here had not greatly altered their work systems and overall organizational structures. In the few enterprises where the production process had been extensively reorganized by 1996, this was funded and directed by foreign firms who had taken them over. These foreign firm-controlled companies also tended to have new top managers from outside the enterprise. They additionally introduced new products more often than Hungarian firms, albeit within rather narrow product lines that usually dominated the domestic market. Overall, most of the enterprises studied were still doing much the same set of activities in the mid-1990s, though with fewer staff, as at the start of the decade, and privatization per se had not led to major shifts in enterprise structure and strategy, nor did it seem likely to do so in the foreseeable future.

Globalisation, Institutional Legacies and Industrial Transformation in Eastern Europe

Companies are integrated into the world economy in a number of ways. This article, starting from a sympathetic, though critical engagement with the global commodity chains (GCC) perspective, explores the extent to whcih this perspective is relevant to the analysis of the international firm networks that have developed in Estern Europe. In so doing the article examines the wayus the institutional legacies of the state socialist past and inherited macro-and micro-economic structures influence the integration of the regions companies into global production networks. While the authors do not deny the existence of inter-firm relations similar to the ones described by the GCC perspective, they point out that the situation in Eastern Europe is much more complex than in the developing world, and its complexity is a product of the very different historical backgrounds and modes of incorporation in the world economy that Eastern European countries have experienced. Drawing on a number of case studies from the auto...

Path Dependence and Contractual Relations in Emergent Capitalism: Contrasting State Socialist Legacies and Inter-Firm Cooperation in Hungary and Slovenia

Inter-firm relations vary significantly between capitalist economies as a result of institutional differences, especially in terms of trust and mechanisms ensuring adherence to contractual commitments. The transformation of the state socialist economies in Eastern Europe might be expected to destroy the pre-1989 relationships between suppliers and customers and generate new types of connections. This study of 18 Hungarian firms and eight Slovenian firms found significant differences between the ways companies transformed and/or preserved the way they managed their supplier-customer relationships. These differences were mainly due to the differences between the legacies of state socialism, the mode of the macroeconomic transformation and the general business environment in the two countries. This study also shows that unlike the Japanese firms studied by Sako, firms in Eastern Europe show contradictory behaviours if Sako’s indicators of trust are applied.

Commodity chains, foreign investment and labour issues in Eastern Europe

In terms of ownership and operations, many companies in Eastern Europe have now been integrated into the world economy. In this article, informed in part by a critical engagement with the Global Commodity Chains (GCC) perspective, we explore the nature and significance of international linkages among firms in Eastern Europe. In particular, we argue that it has been the legacies of the state socialist past embedded in the inherited macro- and microeconomic structures, on the one hand, and the strategies of multinational firms on the other, rather than the international linkages in any simple sense, that have been the main influencing factors. While we do not deny the existence of inter-firm relations similar to the ones described in the GCC literature, we point out that these relationships are much more complex than assumed in that approach and that this complexity is a product of the very different historical backgrounds and modes of incorporation into the world economy of the various Eastern European societies. Drawing on empirical evidence from Hungary and focusing specifically on employment and other labour issues, we argue that there are a variety of firm development paths in Eastern Europe and that these have differing implications for the integration of firms, regions and countries of Eastern Europe into the world economy.

Ownership, control and authority in emergent capitalism: changing supervisory relations in Hungarian industry

The liberalization of the former state socialist societies of Eastern Europe, coupled with the loss of traditional markets, was expected to lead to the radical restructuring of work organization and workplace authority relations. This was especially likely in enterprises which had been privatized. This study of 385 workers in thirteen Hungarian industrial enterprises found that supervisors in foreign-owned firms had more authority and responsibility than did those in the financially more stable state enterprises, and also discriminated more between skill levels in how they managed workers. The most significant changes in supervisory relationships from those prevalent in the late state socialist period occurred in the foreign-owned firms that had reorganized and re-equipped their production systems. Privatization on its own, however, was neither a necessary nor a sufficient condition for radical shifts in authority relations to take place. Overall, these Hungarian workers appeared to have greater control o...