Organizational Transformation in Transition Economies: Resource‐based and Organizational Learning Perspectives

ABSTRACT The capitalist and socialist societies of the twentieth century assigned firms different roles within their economic systems. Enterprises transforming from socialist to market economies thus face fundamental organizational restructuring. Many former state‐owned firms in the transition economies of Central and Eastern Europe have failed at this task. These firms have pursued primarily defensive downsizing, rather than strategic restructuring, as a result of both internal and external constraints on restructuring strategies. Building on the organizational learning and resource‐based theories, we analyse strategies available to management in privatized, former state‐owned enterprises in transition economies to restructure their organization. Both internal forces promoting or inhibiting the restructuring process, and external constraints arising in the transition context are examined. A model and testable propositions are developed that explain post‐privatization performance. Implications of our research point to the ways in which firms should manage and develop their resource base to transform to competitive enterprises.