Barriers to Entry and Growth of New Firms in Early Transition: A Comparative Study of Poland, Hungary, Czech Republic, Albania and Lithuania

337 Pages·2003·10.88 MB·English

by  Ewa Balcerowicz

BARRIERS TO ENTRY AND GROWTH OF
NEW FIRMS IN EARLY TRANSITION
BARRIERS TO ENTRY AND GROWTH OF
NEW FIRMS IN EARLY TRANSITION
A comparative study of Poland, Hungary, Czech Republic,
Albania and Lithuania
edited by
IRAJHOSHI
Staffordshire University, Stoice on Trent, u.K.
EWA BALCEROWICZ
CASE Foundation, the Centre for Social and Economic Research, Warsaw, Poland
LESZEK BALCEROWICZ
President ofthe National Bank ofPoland
Springer-Science+Business Media, LLC
ISBN 978-1-4613-4851-1 ISBN 978-1-4419-9234-5 (eBook)
DOI 10.1007/978-1-4419-9234-5
Library of Congress Cataloging-in-Publication Data
BARRIERS TO ENTRY AND GROWTH OF NEW FIRMS IN EARLY
TRANSITION
Iraj Hoshi, Ewa Balcerowicz, and Leszek Balcerowicz
978-1-4613-4851-1
A C.I.P. Catalogue record for this book is available
from the Library of Congress.
Copyright © 2003 by Springer Science+Business Media New York
Originally published by Kluwer Academic Publishers in 2003
Softcover reprint ofthe hardcover Ist edition 2003
All rights reserved. No part ofthis work may be reproduced, stored in a retrieval
system, or transmitted in any form or by any means, electronic, mechanical,
photocopying, microfilming, recording, or otherwise, without the written
permission from the Publisher, with the exception of any material supplied
specifically for the purpose ofbeing entered and executed on a computer system,
for exclusive use by the purchaser ofthe work.
Permission for books published in Europe: [email protected]!
Permission for books published in the United States of America: [email protected]
Printed on acid-free paper.
Toourchildren:
Ania, Bijan, Wojtek,Rosa andStella
With the hope that they will live in less turbulentand morepeaceful times than
wedid.
Chapter2has appearedinasimilar form inanarticle copyrighted©by TheJournal
ofEast WestBusiness, Vol.6,No.2,2000.
Chapter3has appearedinasimilar form inanarticle copyrighted© by The
Economics ofTransition,Vol. 8,No.1,2000.
This book isbasedontheresearchprojectentitled: 'TheImpact ofBarriers toEntry
ontheSpeedofTransition:A Comparative Study ofCountries inDifferent Stages of
Transition', coordinated by Professor Leszek Balcerowicz. The project received
financialsupportfrom the European Commission's PHARE ACEprogramme,grant
No.P95-2047-R, whichisgratefullyacknowledged.
Table ofContents
List ofFigures ix
List ofTables xi
Contributors xvii
1.INTRODUCTIONAND OVERVIEW 1
Ewa Balcerowicz, LeszekBalcerowicz, Ira}Hoshi
Appendix 1.1.Enterprise Survey Questionnaire 28
2. FISCALAND REGULATORY IMPEDIMENTS TOTHE ENTRY
OFNEW FIRMS INFIVE TRANSITIONECONOMIES .49
Ira}Hoshi, Jan Mlitdek
3. INVESTMENTAND FINANCE IN DENOVO PRIVATE FIRMS:
EMPIRICALRESULTS FROMTHE CZECHREPUBLIC,
HUNGARYAND POLAND ,.., '" 83
Andrze} Bratkowski, Irena Grosfeld, JacekRostowski
Appendix3.1. Additional EconometricResults 95
4. FOREIGNDIRECTINVESTMENTIN SMALLFIRMS 99
Miklos Szanyi
5.BARRIERS TO ENTRYAND THEUNOFFICIALECONOMY...121
Jane Christian
viii
6.FROMFOE TO FRIEND IN 10YEARS: PRIVATE BUSINESS
DEVELOPMENTIN HUNGARY 1989-1998 143
Miklos Szanyi
7.BARRIERS TOENTRYANDTHEIRIMPACT ON PRIVATE
SECTORGROWTHIN POLAND 185
Ewa Balcerowicz
8.BARRIERS TO ENTRYANDTHEIRIMPACT ON FIRMS'
PERFORMANCE IN ALBANIA 243
LinditaXhillari,Shqipon}a Telha}
Appendix8.1. Correlation Matrix 284
9.BARRIERS TOENTRY OF NEW FIRMS IN THE CZECH
REPUBLIC 291
Jan Mlddek, Ira}Hoshi
INDEX 323
List ofFigures
Figure 2.1. Themain activityofsample firms infive countries. 54
Figure 2.2. Date ofestablishment ofsample firms 54
Figure 2.3. Distribution ofsamplefirms accordingto theirsize
(full time employment in 1995) 55
Figure2.4.Average numberofemployees in Sample firms in 1995 55
Figure 2.5. The legal form ofsample firms 56
Figure 2.6. Difficulties ofdifferentstages ofregistration and licensing 58
Figure 2.7. Use ofprofessional consultants in registration and Iicensing 59
Figure 2.8. Average length oftime needed to complete registration and
licensing procedures 60
Figure 2.9. Use ofbribesto speed up registration and licensing
procedure 60
Figure 2.10.Proportion offirms not owningtheir premises 61
Figure 2.11. Proportion offirms facing problemswith the lease oftheir
premises 62
Figure 2.12. Nature ofchanges in real estates regulations 63
Figure 2.13. Proportion offirms having problemswithemployment
laws 64
Figure 2.14. The nature ofchanges inemployment laws 65
Figure 2.15. Proportionoffirms having problemswith differentaspects
ofemployment law aspects ofemployment laws 66
Figure 2.16.Average length ofdismissal proceedings 67
Figure 2.17. Changes intax burdens 71
Figure 2.18. Frequencyofchanges in regulations on taxes and
contributions 72
Figure 2.19. Nature ofchanges in regulations on taxes and contributions 72
Figure 2.20. Compliancecosts:changes in managementtime spenton
x
issues relatingto taxes and contributions 73
Figure 2.21. Compliance costs: the use ofoutsidetaxspecialists 73
Figure 2.22. Proportions offirms havingproblemswith regulations on
exportsand imports 74
Figure 2.23. The evaluation ofthe impactofdifferentrules and
regulations on new firms 75
Figure 2.24. The rankingofthe impactofdifferentrules and regulations 76
Figure 5.1. Private firms per 1000 ofthe population 124
Figure 5.2. The unofficial economy and taxrevenues 130
Figure5.3.Unofficial economyas a percentage ofGDP 133
Figure 5.4. Unofficial economyand Corruption PerceptionsIndex 134
Figure 5.5. Unofficial economyand taxburden 135
Figure 5.6. Unofficial economyand Banking&Non-Banking Sector
Reform Index 135
Figure 5.7. Unofficial economyand Financial Institutions Reform Index.136
Figure5.8. Size ofunofficial sectorand growth 137
Figure 7.1. Share ofprivate sector intotal employmentand GDP in
Poland (%) 187
Figure9.1.Average numberoffull-time employees in samplefirms,
1990-1995 309
Figure 9.2. Distributionofsamplefirms by legal form 309
Figure 9.3. Distribution offirms by sector inCzech economy(1995)
and in sample 310
List ofTables
Table 1.1. Types ofconstraintsto entryand developmentofnewfirms 7
Table 1.2. Newfirm entries in earlytransition 9
Table 2.1. Initial capital requirementfor two main legal forms ofbusiness
(in US$) 57
Table 2.2. Minimum wage as a proportion ofaverage wage(%) 66
Table 2.3. Taxes and contributions in five transition economies, 1999 69
Table 2.4. Change in corporationtax(%)in earlytransition 1992-1999 70
Table 3.1.Availabilityofbankcredit.. 86
Table 3.2.Investmentequation - Endogenous variable:log
(investment/assets) 90
Table 3.3. Determinants ofthe supply ofcredit(logit ML estimation) 91
Table 3.4. Determinants ofthe demand for credit(logitMLestimation) 93
Table 3.5. Sources ofinvestmentfinance in firms which received
credit(%) 95
Table 3.6. Sources offinance for workingcapital in firms which received
credit(%) 95
Table 3.7. Sources ofinitial capital in firms which receivedcredit(%). 95
Table 3.8. Ratio ofcreditto the private sectorto GOP (%) 95
Table 3.9. Numberofcommercial banks 96
Table 4.1. FDI incentives and impediments 103
Table 4.2. Evaluation ofdifficulties ofdifferentstages ofregistration and
licensingfaced by foreign and domesticfirms 104
Table 4.3. Experience ofdismissals in sample firms 105
Table 4.4. Evaluation ofeffectofregulations on the establishmentand
growth ofcompanies 106
Table 4.5. Size ofinitial capital and its sources 107