Transcript Mihály Laki – Julia Szalai Institute of Economics Hungarian

TEN YEARS AFTER: HUNGARIAN BIG
ENTREPRENEURS IN THE EUROPEAN UNION
Prof. MihályLaki
Institute of Economics
Hungarian Academy of Sciences
VUZF University
Open International Seminar
30 November 2012
1
RESEARCH HISTORY
- Basic research (48 interviews in 1998-2001)
Mihály Laki – Júlia Szalai: The Puzzle of Succes: Hungarian Entrepreneurs
at the Turn of the Milleneum Europe Asia Studies Vol. 58 N2 3 May 2006
317-347 pp
- Follow-up research (35+7++31 interviews in 2009-2011)
under publication
2
WHAT IS PERMISSIBLE (ACCEPTABLE) IN OUR
ECONOMIC SYSTEM?
Salaries wages defined by the market (instead of the
state)
37
57
6
Private ownership of big companies
37
59
4
Foreign ownership of companies
28
69
3
Incompetent employees lost their jobs
25
70
5
Enrichment of succesfull businesmen
23
73
3
Exitence of big private landed property (big private
farms)
20
77
3
Real estate owned by foreigners
20
78
3
Big energy producers (energy power stations) owned by
foreigners
8
89
4
Hungarian soil in foreign ownership
8
89
3
0
Permissible
20
Not permissible
40
60
80
100
120
Don't know
3
PERFORMANCE OF DE NUOVO AND OF PRIVATIZED
COMPANIES/OWNER MANAGERS
CZECH REPUBLIC
More recent studies have reached similar conclusions,
confirming that the oldnew elite of the former Czech
nomenklatura and the marketeers from the first stage of
the transition were not always selected on the criteria of
the first best. Their position was unsustainable as society
moved into the second stage of the transition and the rise
of the market, competition and efficiency-enhancing
institutions of capitalism.
Benaczek (2006) pp. 1165-1166
4
NEGATIVE EFFECTS OF THE FIRST ROUND
SELECTION PROCESS
CZECH REPUBLIC
„So the progress of the transition in the Czech Republic – establishing a market
economy – was detoured by incompetent entrepreneurship, unsustainable property
holdings, frauds, profits derived from implicit subsidies, decision-making
intertwined with state bureaucracy and market competition impeded by
government intervention. The result was the economic crisis in 1997–1999 when
real GDP fell by 1.3%. The macro-economic misalignments were not the cause but
a concomitant effect.”
Benaczek (2006) p. 1164.
5
WEAK PERFORMANCE OF THE OLD GUARD AND OF THE
PRIVATIZED ENTREPRISES
POLAND
„In privatized enterprises, not to mention enterprises that are state owned, the
owner-management, and management-employee relations have been for some
time a carry-over from the communist past. Privatization means that these
relations among the same people (limited replacements in the management
notwithstanding) are changing rather slowly under the impact of the market
environment outside the firm and owners’ performance within the firm. The
reason this occurs slowly is because the same people nearly the same intrafirm environment find it difficult to get rid of the bad habits of the communist
past.
The story is completelly different in the new firms. There, owner-managers
relations (if they are not the same individuals, as often is the case) are set right,
that is in accordance with the rules of the market, from the beginning.”
Winiecki ( 2004) p.143.
6
SELECTION PROCESS
RUSSIA
„In many large Russian firms „ownership” of private
assets is allocated by individual political elites in a
personalistic manner.„
King (2002)
7
FIRST ROUND OF THE SELECTION PROCESS
ROMANIA
„Based on survey and ethnographic data, I suggested that
in the race to marketization, the former cadres are at an
advantage due to their organizational experience (as a
form of human capital) and their network resources.
Nevertheless, education, as the most basic form of
human capital, plays an extremely important role in this
story of post-socialist entrepreneurship: better educated
Romanians have the upper hand in operating as
employers eleven years after the collapse of the
communist regime.”
Stoica (2004) 271. p
8
PERFORMANCE OF PRIVATIZED ENTREPRISES
ROMANIA
The managers of the studied organizations respond to
the‘transition’ institutional norms in the way they responded
yesterday to the norms of a centrally planned economy.
Consequently, old managerial identities are still appropriate to
perform the ceremony.
Kelemen (1999) 207.p
9
CONCLUSION OF OUR PREVIOUS RESEARCH
„The strategy of adaptation has again been successful, as
the earlier statistical data indicate, and domestic grand
business has been able to maintain its share and its
position. In light of such renewed success EU accession
seems to promise easier conditions and mowing forward
rather than collapsing. Obviously, it is a new phase with
new challenges for adaptation, but after all, this is very
area in which Hungarian grand entrepreneurs have for
decades shown their most outstanding performance.”
Laki-Szalai (2006)
10
How to analyse non-representative small
samples ?
What could be the optimal outcome?
- to produce a documented hypotesis
- which is (could be) an incentive to reconsider (to
modify ) the mainstream/dominant theory
11
Definition
(previous and
follow up research)
All the interviewed persons are owners of a decisive (in
lot of cases majority) share of the stocks and they are the
main decision makers at a company or at a group of
companies with hundreds of employees and/or with 0.510 thousand million HUF (3-4 million Euro)
turnover/year.
12
Basic social indicators
Indicator
Interview partners
1999-2001 and 20102011 (%)
TARKI
Control group
representative
2010-2011 (%)
survey (2000) (%)
Male
92
93
84
Older than 40
(1999-2001
University or
College Degree
90
79
36
88
84
80
Living in
Budapest or in
big towns
73
75
13
Turning points of the old guard’s carrier
path and methods of acquisition
Turning point indicators Privatization
Founding
companies
of
new
Party membership
rather party member
rather non party member
Rank or position
rather top manager
rather staff member
Sector changes
rather remained
in rather moved into the
the
socialist
sector private sector before 1989
tillv1989
14
Performance measured by company
development 1990-1999
START UP SIZE
OF THE
COMPANY
SIZE OF THE COMPANY IN THE TIME
OF THE INTERVIEW
small
medium size
TOTAL
big
small
-
15
11
26
medium size
-
7
6
13
big
-
-
7
7
uncertain
-
-
2
2
Total
-
22
26
48
15
Performance measured by company
development 2000-2008
START UP SIZE
OF THE
COMPANY
SIZE OF THE COMPANY IN THE TIME
OF THE INTERVIEW
small
medium size
TOTAL
big
small
-
-
-
-
medium size
9
8
3
20
big
6
2
15
23
15
10
18
43
uncertain
Total
16
Plausible explanations (explanatory
factors) of the weak performance in
the last decade (companies)
- the mood of property acquisition
- world economic crisis since 2008
- macro economic development
- conventional incentives 1 (taxes)
- conventional incentives 2 (loans and rate of interest)
- non conventional incentives 1(stable/calculable state regulation)
- non conventional incentives 2 (stability of the property rights
regime)
- branch structure
- innovativeness
- involvement of the state
17
Growth of GDP industrial production and
of the number of companies
Period
yearly average
yearly average
growth of GDP (%) growth of industrial
production (%)
Number of
companies
1983-1989
1.5
1.5
fast growth
1990-1993
- 4.7
- 4,6
fast growth
1994-2002
3.6
7.5
fast growth till
1998 later slow
down
2003-2008
3.1
6.3
slow growth
18
Taxes as % of GDP in Hungary
Year
Current tax burden
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2353.3
2790.1
3332.1
3946.7
4461.1
5231.4
5843.3
6511.8
7129.0
7788.5
8244.2
8842.3
10113.1
10731.5
10271.5
Total taxes
Total taxes
(including SSC) as (including SSC as
% of GDP in
% of GDP EU 25
arithmetic)
41,6
36,9
40,6
37,3
39.0
37,5
39,0
37,5
39.1
37,8
38.5
37,9
38.3
37,6
38.0
37,4
37.7
37,4
37.6
37,2
37.5
37,6
37.2
37,7
39.8
38,2
19
Volume of company loans compare to GDP
1999-2008 (%)
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Company loans 21.02 22.7 21.45 19.38 21.57 22.61 24.12 24.87 26.16 27.42
Loans for small 4.05 6.68 8.39
and
medium
size companies
8.16
9.43
10.75 12.72 13.19 14.36 14.09
20
The distribution of subscribed capital of
enterprises with single and double entry in
1992-2009
Year
State
1992
1994
1995
1997
1998
1999
2000
2001
2002+
2003+
2004
2005
2006
2007
2008
52,1
44,5
25,7
13,5
12,0
9,2
7,9
7,7
12.3
13.3
13.3
8.9
8.1
6.6
6.5
T H E D O M I N A N T
Hungarian
Hungarian
private person
company
10,2
0,0
10,7
17,6
11,5
19,1
10,5
22,6
10,7
25,6
9,1
18,0
9,2
20,6
8,8
17,0
13.2
24.5
12.9
22.0
14.0
24.0
15.1
24.0
14.0
25.0
13.1
30.9
10.4
25.7
O W N E R I S
Foreign person or
company
11,4
17,8
26,8
35,0
40,3
51,6
58,5
60,1
40.2
44.2
40.7
40.9
44.2
40.6
50.0
Other
Total
26,2
9,5
17,0
18,4
11,3
9,5
6,4
6,4
9.9
7.7
8.1
11.1
8.7
8.4
7.2
100,0
100,0
100,0
100,0
100,0
100,0
100,0
100,0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
21
Frequent (typical) characteristics
of life/carrier path
indicator
old guard
controll group
profession of the father
middle level manager at owner of a small private
a state owned company company
education
university - college
university - college
foreign language skills
weak
advanced
dominant places of
learning by doing
state owned big
company
family business or
foreign owned company
(in Hungary or abroad)
involvement in
professional-political
activities
moderate
weak
22
The usual market strategy and
development (old guard )
- the collapse of state owned companies produced additional demand
- enter to the (shortage) market or market niches of these previous/privatized companies was
lucrative
- fast growing market share on these markets stimulate other (Hungarian or foreign)
companies to enter
- the impacts of the additional demand disappeared these markets began to saturate – mainly
in the first years of the new century
- the newcomers (multinational companies for example) used very efficient tools of
competition
- the market share of the previous participants of the competition diminishes
23
Some elements of the successful
adaptation (control group)
-Diversification
- New markets or market niches at home and abroad
- Restructuring the network capital (cooperation with the
multinationals – subcontracting)
- Implementation of West European management methods
24
Frequent reasons for business
failures (delays)
- too optimistic forecasts
- trade of real estates
25
Thank you for your
attention!
26