There are many different methods for successfully integrating into the world economy. Managerial transfer, adoption of world-class technology, penetra-tion of world customer markets, and acceptance in world capital markets are just a few ways. Clearly, some CEE companies have integrated into the world economy using one or more of these methods. However, many more have not integrated and fewer still have integrated on more than one front.
Between 1989 and 1995 the private sector grew dramatically in the Czech Republic, Slovakia, and Hungary. In appraising the impact of this change on managerial behavior, analysis should distinguish between new private enter-prises and privatized SOEs. Our evidence suggests that the new enterenter-prises – in terms of managerial behavior – tend to behave like their counterparts in the market economies. The same cannot be said for the privatized SOEs, at least, not to the extent that this can be attributed to the post-1989 estab-lished firms. Those privatized SOEs that have foreign joint-venture partners have, not surprisingly, adopted their managerial practices to market stan-dards better than those that are without such partners. This was the case in many, but not all, joint ventures. Overcoming inherited managerial practices is a task that still lies ahead for many privatized CEE companies.
An effectively functioning financial sector is key to the further develop-ment of companies in CEE countries. Healthy banks that lend money and
Joint ventures CEO attitudes Defensive strategies
Foreign companies moving in (virtually all)
Refocus on former Soviet bloc markets (many)
Marketing from FTOs Quality, ISO-9001 Franchising (virtually all)
Capital markets and stock exchanges Integrating
CEE companies into the world
economy
Figure 2. Company factors affecting integration into the world economy.
financial markets that provide long-term capital based on actual risks and returns are sorely needed. A smooth and stable financial sector provides both the foundation for growth and the discipline that management and companies need.
From discussions about wanting to trade with the European Union and wanting to be admitted to the EU, one might conclude that CEE companies should look to Western Europe for trade. Instead, it appears that several companies have successfully refocused on East European markets. Other companies have approached both the East and the West, looking for different things from each, which, on reflection, makes a great deal of sense (Figure 2).
The financial sectors in the Czech Republic, Slovakia, and Hungary are still far from being efficient. We observed that it was easier to liberalize and deregulate product markets (by removing price controls, subsidies, im-port restrictions, barriers to foreign companies, and so on) than to liberalize the financial markets. This seems counterintuitive given the global nature of financial markets coupled with the telecommunications revolution which introduced flexibility in this market. The reason for the lag in making the financial markets not as rapidly efficient as was the case in many product markets was political reluctance to opening up the financial sector to for-eign investors. To be sure, branches of forfor-eign banks have been established and joint ventures in financial institutions have been formed. Still the pace of opening up this sector was slower than the liberalization of products and services. However, steps taken toward liberalizations and deregulations, cou-pled with privatizations and foreign direct investments in this sector, and
international finance corporation assistance all point to improvements in the functioning of the capital markets in these countries.
In our opening paragraph we stated that managerial behavior during the integration of CEE firms into the world economy largely depends on the man-agers’ flexibility to adapt to rapid and uncertain changes. The managerial group that learns the fastest is the one that comprises what we call dysfunc-tional entrepreneurs. They are not managers as the term is understood in Western Europe, North America, and Japan, as they are not particularly interested in running a business. They trade (rather than “make”), taking advantage of macroeconomic instability and market imperfections caused by partial liberalizations and deregulations. Considering how much money has been made by some of the dysfunctional entrepreneurs, their flexibility to adapt must be judged a huge success.
Surprisingly we found few fundamental changes in what we call opera-tions management. We observed a perception gap in what looked like change and what was actual change. The former includes managers’ foreign language ability and the competent use of business jargon. When we examined actual performance, and certainly there were exceptions, we found that business plans and systems for managing budgets, people, schedules, and financial, operational, or marketing targets were lacking. Nor was taking responsibil-ity for decision-making or risk-taking high on the managers’ agenda. We conclude that flexibility to adapt to change was somewhat a function of the degree of competition in the particular product or service market. This is hardly surprising. We were most interested to find out that, based on our case analyses, middle-aged managers were not likely to be more flexible than older ones. A Slovak manager told us “dinosaurs” can be found in all age groups. Further, some of the larger companies in our sample proved to be more adaptable than smaller ones. Managerial transfer was characterized by start-up difficulties; subsequently it was unsuccessful at Ganz (Hungary) but successful at Skoda (Czech Republic) – both large companies. The purpose of operations management is to keep the long-term objectives of the firm in mind, while optimizing available resources. Management over the long term will likely require modifications in managerial behavior that have not yet been identified in the six years that have elapsed since the collapse of the centrally planned regimes. Our comments suggest that managerial behavior has a way to go before CEE companies become internationally competitive.
The 1989–1995 years may be characterized for the CEE companies and managers as a period of survival and transformation. We conclude that, in the post-1995 years, managerial behavior must change in many ways to make CEE companies internationally competitive. There are considerable opportunities available to CEE companies. Those companies that recognize these opportunities and make the requisite changes will be rewarded.