While a variety of studies analysed the benign effects of privatisation on firm performance
under post-socialist transition using financial data very little is known about how the apparent
productivity gains were achieved. This paper follows a weaving mill from 1998 to 1997 on its
way of becoming a capitalist enterprise and gives a detailed account of the sources and limits
of productivity growth. The data suggests that the factory was not far from the competitive
optimum given the size of ‘plant and equipment’ - efficiency gains were mostly achieved by
plant size reduction and asset stripping. The gains from this sort of initial restructuring helped
many former state enterprises stay on the market but they did not necessarily indicate high
levels of adaptability, capacity to innovate and ability to attract outside investors. In
economies with many ‘seemingly restructured’ privatised enterprises the elimination of the
former state sector jobs is likely to continue within the private sector. The process may last
for years after privatisation as a legal act had been fully accomplished.
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