Marek P. Hessel

When Does Privatization Work? The Impact of Private Ownership on Corporate Performance in the Transition Economies

This paper compares the performance of privatized and state firms in the transition economies of Central Europe, while controlling for various forms of selection bias. It argues that privatization has different effects depending on the types of owners to whom it gives control. In particular, privatization to outsider, but not insider, owners has significant performance effects. Where privatization is effective, the effect on revenue performance is very pronounced, but there is no comparable effect on cost reduction. Overlooking the strong revenue effect of privatization to outsider owners leads to a substantial overstatement of potential employment losses from postprivatization restructuring.

Why Ownership Matters? Entrepreneurship and the Restructuring of Enterprises in Central Europe

This paper, based on a study of mid-sized firms in the Czech Republic, Hungary, and Poland, seeks to explain the reasons behind the marked impact of ownership on firm performance which has been observed in a number of studies in Eastern Europe and other parts of the world. Focusing in particular on the differential impact of ownership on revenue and cost performance, the paper argues that privatized firms controlled by outside investors are more entrepreneurial than those controlled by corporate insiders or the state. The paper provides evidence that all state and privatized firms in transition economies engage in similar types of restructuring, but that product restructuring by firms owned by outsider investors is significantly more effective (in terms of revenue generation) than that by firms with other types of ownership. The paper also examines the impact of managerial turnover on revenue performance, as well as differences among managers of firms with different types of ownership, and concludes that the more entrepreneurial behavior of outsider-owned firms is due primarily to incentive effects, rather than human capital effects, of privatization. More specifically, the authors argue that the success of outsider-owned firms is due to their greater readiness to accept risks (as evidenced by the higher variance of the revenues generated by restructuring) and a lesser need to defend, and account for, their managerial decisions.

Threat Power in Sequential Games

The analysis of 2 × 2 ordinal games, in which both players can sequentially move and countermove after an initial outcome is chosen, is extended to repeated play of these games in which one player has ‘threat power’. This power enables this player to threaten the other player with a mutually disadvantageous outcome in order to deter certain moves in the future play of the game. Except for no-conflict games with a mutually best outcome, there are relatively few games in which neither player can threaten the other. Of the games in which one or both players has a threat strategy, those in which one player does enables him to implement an outcome at least as high-ranking for himself as for the other player. In the bulk of games in which both players have threat strategies, threat power is effective—it is always better for a player to have it than for the other player to have it. Where ‘deterrent’ and ‘compellent’ threat power outcomes conflict, deterrent threat power induces a better outcome; conditions for the existence of both kinds of threats in 2 × 2 games, and for the threatener to implement his best outcome in general two-person games, are given. To illustrate the threat-power model, it is applied to the Polish strategic situation in 1980–81. Finally, threat power is compared with other kinds of power that have been proposed in nonrepeated play, and, ominously, ‘Chicken’ is the one game in which threat power is uniquely effective in undermining a nonmyopically stable ‘cooperative’ outcome.

The intermediate structure of designs for quality

Changes in world markets have brought renewed interest in quality management, and a proliferation of quality‐assurance methods. The new methods focus on design rather than inspection, thereby shifting managers’ attention from inspecting quality to designing quality into products and services. A powerful approach to designs for quality is the quality function deployment (QFD) process. QFD’s simplification procedures call for improvement through the analysis of indirect relationships among quality’s ends and means. An illustrative example enhances QFD’s capability of capturing and representing the effects of multiple interdependencies among specifications and design variables, while the computation that matrix multiplication requires is both simple and efficient.

Optimal system design: towards new interpretation of shadow prices in linear programming

Abstract We start with the concept of an optimally designed product-mix system and formulate the corresponding duality theory. We show that although the system is degenerate, the optimality of design “overcomes” its own degeneracy and allows unique valuation of all resources. This valuation rests on the reinterpretation of the shadow prices in optimally designed systems: it requires separating the resourcevaluation function of a dual variable from its resource-pricing function.