FS IV 94 - 17
The Management of Transition in East German Firms
Horst Albach
November 1994
ISSN Nr. 0722 - 6748
discussion papers
Forschungsschwerpunkt Marktprozeß und Unter
nehmensentwicklung (IIMV) Research Unit
Market Processes and
Corporate Development (IIM)
Zitierweise/Citation:
Horst Albach, The M anagem ent of Transition in East German Firms, Discussion Paper FS IV 94 - 17, Wissenschaftszentrum Berlin, 1994.
Wissenschaftszentrum Berlin für Sozialforschung gGmbH, Reichpietschufer 50, 10785 Berlin, Tel. (030) 2 54 91 - 0
ABSTRACT
The Management o f Transition in East German Firms
For the management of transformation processes it is crucial to know in which way different strategies can shorten the duration of the transformation process. This paper shows that network analysis as a management tool is particularly well suited to structure and analyze the management of transition in East German firms. The methodology o f GERT-network simulation is used to analyze different strategies for successful transition. Based on more than 20 in-depth case studies of firms in transition a network of managerial activities of transition was developed. In the base case the transition process takes an average of 34 months until successful privatization. The mean time from start until liquidation is 14 months. The probability of a successful privatization is approximately 25 percent. Four cases show the possibilities to speed up the transformation process:
Case 1: Improving and speeding up core activities does not change the final result of the network simulation. Better management of the core activities does not reduce total time to survival in the market economy nor does it improve the probability of survival. The reason is that there are two critical paths, and better management of one path does not result in a shortening of the whole process.
Case 2: One of the most critical activities in the transition process is activity 5 „defining core business and outsourcing of other products“. The business plans which contain the definition of the core businesses have to be submitted to the Treuhandanstalt for approval. If the Treuhandanstalt is not convinced the whole activity has to be repeated. Introducing a 40 percent probability o f having to repeat the definition of the core businesses lengthens the period of transition by only half a month, and it increases the probability of success in the transition process by 8 percent.
Case 3: In this case it is assumed that privatization measures and personnel qualification and training can be shortened by a cooperation with partners in the West. Appropriate training reduces the total time for successful transition by nearly three months or 9 percent compared to the base case. The probability of survival increases by 8 percent.
Case 4: Experience has shown that extending all West German laws to East Germany has retarded the transition process of firms. Therefore case 4 eliminates for the sake of illustration claims of former owners and assumes that „setting up the Deutschmark opening statement“
and „withdrawal of the Treuhandanstalt“ can be brought about in 50 percent of the time required in the base case, due to changes in the administrative procedure. The duration of successful transformation is in this case reduced by more than 20 percent, and the probability of success is increased by 15 percent.
ZUSAMMENFASSUNG
Das M anagement des Transformationsprozesses in ostdeutschen Unternehmen
Besonders wichtig für das Management von Transformationsprozessen ist die Frage, welche Wirkungen von Verbesserungen einzelner Maßnahmen auf die Dauer des gesamten Prozesses ausgehen. In dieser Studie wird gezeigt, daß die Netzwerkanalyse ein sehr geeignetes Instrument ist, um das M anagement von Transformationsprozessen zu strukturieren und zu analysieren. M it Hilfe der Methode der GERT-Simulation werden ein Ausgangsfall des Transformationsprozesses in ostdeutschen Unternehmen und vier Erweiterungsfälle untersucht. Der Ausgangsfall wurde anhand von 20 Fallstudien generiert. Im Ausgangsfall dauern erfolgreiche Transformationsprozesse durchschnittlich 34 Monate. Liquidationen dauern etwa 14 Monate. Die W ahrscheinlichkeit einer erfolgreichen Privatisierung liegt bei etwa 25 Prozent. Anhand von vier Erweiterungsfällen wird aufgezeigt, wie sich der Transformationsprozeß beschleunigen läßt.
Erweiterungsfall 1: Verbessert man das Management der sogenannten Schlüsselaktivitäten des Transformationsprozesses, dann zeigen diese Maßnahmen keine Auswirkungen auf die Simulationsergebnisse. Dies hängt damit zusammen, daß ein verbessertes Zeitmanagement im ersten kritischen Pfad keine Auswirkungen auf die Prozeßdauer hat, wenn sich der zweite kritische Pfad „Klärung der Eigentumsverhältnisse“ nicht verkürzen läßt.
Erweiterungsfall 2: Ähnlich verhält es sich mit der Definition der Kemgeschäftsfelder und der Auslagerung unrentabler Produktlinien. Das Verfahren sieht vor, daß die Untemehmenspläne mit den Kemgeschäftsfeldem der Treuhandanstalt zur Prüfung vorgelegt werden. Legt man die W ahrscheinlichkeit auf 40 Prozent fest, daß ein revidierter Untemehmensplan vorgelegt werden muß, dann verlängert diese Verzögerung den Zeitraum der Transformation nur geringfügig, erhöht jedoch die W ahrscheinlichkeit einer erfolgreichen Privatisierung um 8 Prozent.
Erweiterungsfall 3: Behält man die Erweiterung des zweiten Falls bei und verkürzt zusätzlich die Zeiten, welche für Mitarbeiterqualifizierung benötigt werden und kooperiert bei den Qualifikationsmaßnahmen mit Partnern im Westen, dann verkürzt sich die Transformationszeit allerdings um drei Monate, das heißt sie ist um 9 Prozent geringer als im Ausgangsfall. Die Erfolgswahrscheinlichkeit erhöht sich um 8 Prozent.
Erweiterungsfall 4: Da die Erfahrung gezeigt hat, daß die Übernahme aller westdeutschen Gesetze die Transformationsprozesse der Unternehmen in Ostdeutschland verzögert hat, werden im Erweiterungsfall 4 die entsprechenden Aktivitäten zur Illustration verändert. Bei einer Eliminierung der Aktivität „Klärung der Eigentumsverhältnisse“ und einer 50- prozentigen Verkürzung der beiden Pfade „DM-Eröffnungsbilanz“ und „Rückzug der Treuhandanstalt“, läßt sich die Transformationzeit um 20 Prozent verkürzen und die Erfolgswahrscheinlichkeit um 15 Prozent erhöhen.
The Management of Transition in East German Firms1 Horst Albach
A. Introduction
The wall between East and West Germany was opened on November 9, 1989. The economic and monetary union was enacted on July 1, 1990. On October 3, 1990, five new states on the area of the former German Democratic Republic joined the Federal Republic of Germany. Basically, all the West German laws applied to East Germany from this very date on.
Transition from a socialist economy to a market economy started with the Treuhandanstalt, established under the Modrow Government, as a huge holding company for all the state owned firms in the former German Democratic Republic. The Treuhandanstalt acted on two principles:
- privatization takes priority over rehabilitation
- restitution to former owners takes priority over privatization with new owners.
B. The process o f transition
I. The socialist firm
Privatization is the process of transition of a firm from state ownership in a socialist economy to private ownership in a market economy. This process is basically explained by two "theories": equity theory and scrap theory.
1 Paper presented to the German-Russian Conference on "New Developments in Economic Theory and Policy" in Berlin, October 5 - 7 , 1994. A prior version was presented to IFSAM’s Second World Conference on Management in Dallas, Texas on August 17th, 1994.
1
According to equity theory2, socialist firms were valuable assets. The actual prices concluded for them by the Treuhandanstalt were much too low because supply came from a stock of wealth (all the 13.000 firms of Eastern Germany), and demand came from a flow of wealth (the incomes earned by Western buyers). If the East German population had been given shares in the firms, the true value of the assets of the state owned firms could have been realized.
According to scrap theory, the socialist firms were scrap only3. All their products were not marketable on Western markets. All their factors of production were accordingly without value. They lacked the know-how that makes firms viable in a market economy: product know-how, marketing know-how, production know-how.
II. The competitive firm
In order to survive in a competitive market environment, the firms had to build up this know-how.
In the first stage of the transition process, many Eastern firms thought they could buy this know-how on the market. Therefore, management consultants had a bonanza. However, the firms soon found out that this know-how is "network specific". It is investment that Western firms have made in the multitude of relationships and transactions with their customers, with their suppliers, with their financial institutions, with technical institutes. These Western firms were not willing to grant potential competitors from East Germany free access to this network specific know-how. Privatization was the only chance for survival. Scrap theory provides justification for the much disputed principle "privatization before rehabilitation" of the Treuhandanstalt.
2 Sinn/Sinn: Kaltstart (1993).
3 The term "scrap" was coined by Sinn and Sinn. I used the term "crash theory", because the socialist firms crashed into receivership by the state and by Western firms.
2
UI. Time to market
Managers generally know how to operate efficiently within a given network. But they do not know how to build a completely new network. Therefore, transition of firms in Eastern Germany is a challenging field of analysis how managers cope with the task of bringing about a fundamental change in their networks.
Our more than 20 in-depth case studies4 show that the "time to market viability" is definitely longer than originally expected.
But the longer it takes to make the transition from the socialist firm to the competitive firm, the smaller the chances for survival. The firm signals - involuntarily, of course, but inevitably - to potential buyers that it is a bad asset. Competitors of the firms signal to its customers that it is advisable to switch. Thereby they further reduce the chances of survival.
Transition is a process of management of time. The firms in transition do not have time, and they do not have the money to buy time.
C. Network M anagement of Transition
I. The market network
Management of time in the process of transition is, therefore, of vital importance. Our empirical studies show that management of transition in practice resembles more a random walk than a systematic management of time. We have, therefore, developed tools for time management in the transition process.
The most critical activities for management in the transition process are:
1. Management of change in the customer network.
2. Management of change in the production function.
3. Management of change in the supplier network.
4 See Appendix 1 for a list of the case studies 3
1. Management o f change in the customer network.
The network of customers in a socialist economy was simple. Each firm had at most two customers: the internal and the external trade authorities. The network was stable: these customers did not change. Figure 1 shows the customer network of a socialist dye stuffs company in 1989.
In a market economy, the network of customers is rich. There are many customers. It is unstable. Customers tend to switch to competitors. It is diversified. Customers want customized products. Figure 2 shows the customer network of the dye stuffs company two years after unification. Managing such a significant change in the number and in the nature of the transaction relationships is a major challenge to management.
2. Management o f change in the production function.
Meeting the demands of the new network of customers requires a radical change in the production function. The core business of the privatized firms has to be defined. All other businesses have to be liquidated or outsourced. Figure 3 shows how the Wamow Ship Yard in Rostock divested itself of all production activities except shipbuilding.
New technology had to be installed. The old machinery was not only technically obsolete, but also economically inadequate for producing marketable products. Bulk, low quality commodities were produced in the socialist economy. A competitive firm markets high quality, customized products in small batches. Changes in the production program and in the production technology had to be effected. These cannot be brought about without a radical change in the technological information network of the firm. Figure 4 shows such an information network before unification, figure 5 shows this network after unification.
4
Figure 1: Customer Network Combine Coatings and Dye Stuffs 1989
Soviet Union
Sojuzchim-import COMECON-Countries
(without Soviet Union) (via TCO in every country)
Technical-commercial office (TCO)
10% 3 0 %
z
External Trade Authority Chemistry
y
NS-Countries
(Non socialist countries) - Egypt (via TCO)
- Algeria (via TCO)
- West Germany (via TCO) - France
-U S A
5 %
State Planning Commission
- East German Railway - People's Army
- Car Industry
- Shipbuilding industry - Chemistry plant building - others
Regional Chemistry Trade Companies
5
Figure 2: Customer Network Lacufa Corporation 1991
Corrosion Coatings Sliip Coatings Road Marking Dye Stuffs
7 7
East German Railway
Railroad Coaches Manufacturing Poland
Shipbuilding Bulgaria
Steel Industry CSFR
Chemical Industry Greece
Painting Companies Soviet Union (Sales office Moscow) Others
V____________________ 7 7_____________________ 7
6
Figure 3: Employee-Network: Warnow Shipyard, Rostock
Activity Employees
1988
Employees 1991
Difference due to
administration 1856 1253 Unemployment/retirement
production
ship building 1537 1204 Unemployment/retirement
ship repair 457 232 Unemployment/retirement
consumer goods 285 184 -
Subtotal production 2279 1620
services
steel surfacing 29 0 privatized
anti-corrosion 115 0 privatized
insulation 58 0 privatized
scrap steel handling/trading 15 0 privatized
cleaning 20 0 privatized
carpentry 36 0 privatized
metal works, zinc 30 0 privatized
work frames building 26 0 privatized
masonry 47 0 privatized
maintenance and repair 89 0 privatized
interior furnishing 32 0 privatized
upholstery 8 0 privatized
flooring 16 0 privatized
car pool:
chauffeurs 4 0 privatized
repairs 16 0 privatized
testing of measur. instruments 7 0 privatized
kitchen 30 0 privatized
child care 16 0 transferred to community
education 20 0 transferred to community
subtotal services 614 0
total employees 4749 2873
7
co
German Democratic Republic
technical journals 4
newspapers 4
profess, literature 10
trade fairs 9
patent offices
c.p.a.: continous 7
suppliers o
c.p.a.: continous o d.o.r.: > 10 yrs.
customers
c.p.a.: continous 8 d.o.r.: > 10 vrs.
Companies (s.b.)
c.p.a.: continous b d.o.r.: > lOvrs.
associations
regional authorities
c.p.a.: 3-5 ZD
state ministries
c.p.a.: 5-10 10
Socialist United Party (SED) c.p.a.: 5-10
E
Figure 4: Information Network of
VEB Köthen Coatings 1988
Federal Republic o f GermanyVEB Paint and Dye Stuffs Research and Rationalisation Institute
c.p.a.: from case to case
New Federal States
technical journals newspapers
profess, literature trade fairs
associations 10 '
c.p.a.: 5-12 suppliers
10 s c.p.a.: continuous
d.o.r.: > 10 yrs.
customers
c.p.a.: continuous 8 Companies in the
same business 10
c.p.a.: 5-12
Treuhandanstalt -10 regional authorities.
c.p.a.: 3-5 state ministries c.p.a.: 7-10
Chamber of Industry and Commerce c.p.a.: 4
Figure 5: Information Network of Köthen Coatings Ltd. 1991
Lacufa Corporation Headquarters Berlin c.p.a.: 12-15
10
10
8 / /
Fürstenwalde Factory
H r / of Lacufa Corporation
c.p.a.: 8-10 8 '
Old Federal States c.p.a.: contacts per annum d o r.: length of relation figures in boxes indicate the intensity of contact
■ technical journals prof, literature trade fairs licenses
auditors customers
suppliers c. p.a.: 5-12 d. o.r.: > 2 y rs.
companies in the same business c.p.a.: 5-12
issociations c.p.a.: 1-2
state ministries c.p.a.: 7-10
The individual plants of the socialist company conserved the plant sizes of the thirties and fourties. A viable firm in a market economy today is larger. Therefore, changing the production function means closing down production sites as well as increasing the capacity of others.
The labor force of the socialist firms had good vocational training. And yet, the human resources were obsolete. Lack of knowledge in computerized equipment, lack of knowledge of modem organisation methods and work flows, lack of knowledge of work safety regulations and worker participation required drastic changes in the nature of the firms’
human resources.
3. Management o f change in the supplier network.
Many of the old suppliers to the socialist firm proved unable to meet the new demands of their former customers with respect to quality, specifications, and speed of delivery. They had to be exchanged by the firm in the process of transition. These changes were dramatic.
Figures 6 and 7 show the supplier networks of the Thuringia Carpet Company before and after unification. Spinning material is no longer purchased because the spinning and dying production units have been closed down, weaving had also to be closed down so that tufting remains the only production process. Quality of the tufted products has been raised significantly, resulting in a concentration of supply of base fabrics, a shift of yam supply to suppliers in the West and specialization of suppliers of yam in the West. Also, the number of suppliers of auxiliary material was increased. At the same time total production decreased considerably: production volume by 82 %, and employment by 93 % (from 1484 at the end of 1988 to 107 at the beginning of 1994).
10
NSC
Figure 6: VEB Thuringia Carpets - Supplier Network 1990
GDR
Legend: NSC= non-socialist countries; FTO= foreign trade organization; SPC= state planning commission; TCO= technical-commercial office SC= socialist countries
Figure 7: Thuringia Carpet Company - Supplier Network 1992
[V)
former NSC
( '
Deufil Bergkamen Du Pont
Aquafil Schilgen Kempische Sp. ,
— yarn
z--- \ Amoco TtC (Holland)
base fabric
V J
Synthomer Eni-Chem
Bayer Kleinwächter
Geia Schorr
Nova Plus Zapf Röckelein
Knüppel
- auxiliary material
Laufa Guben
Graupner Plastv. Saargrund
former GDR
Pirol
II. The transition network
1. Base case
All these activities and many more form a complex network of managerial activities in the process of transition. We call this network the "transition network". Figure 8 shows this network.
It is idealized from the case studies that were done by our research group. Appendix 2 gives details of the different activities.
The activities 5 and 9 through 14 are the core activities in the transition process which were described in some detail above.
The activities 2: Deutschmark opening statement, 6: clarification of restitution claims, and 19: withdrawal of the Treuhandanstalt are activities which cannot be influenced by management.
The network has two exits: XIII survival and XIV liquidation.
Appendix 2 gives details of the cases analyzed in the context of the transition network5.
In the base case the transition process takes on average 34,6 months until successful privatization. However, the chances of liquidation are not negligible: They are 75 %. The mean time from start until liquidation is 14 months. Figure 9 shows the distribution of time required for successful transition derived from 1000 runs of the base case.
5 It is a GERT-activity network (Elmaghraby 1977: 358). Different computer programs are available to compute GERT-networks (see Bellas/Samli 1973; Hertrich 1978). For these computations I have used a program developed by Olaf Schmidt in my research group (Schmidt 1994). It is easy to handle because it is based on Microsoft Excel on any IBM compatible personal computer. The program is called GERTSIM.
13
Figure 8: Activity Network, Base Case
0,3 20
Legend for Figure 8
Activities in Transformation Process, Base Case
(1) Setting the firm up in a private legal form (2) Creation of the DM-opening statement (3) First basic change in organizational structure
(4) First dismissal of employees to reduce "hidden unemployment"
(5) Defining key businesses and outsourcing of other product lines (6) Clarification of claims of former owners
(7) Financial rehabilitation measures
(8) Proof of the ability for rehabilitation, to get into a Management-KG (9) Changes in the network of customers
(10) Changes in the network of suppliers (11) Changes in the depth of production (12) Changes in the human capital (13) Changes in the production program (14) Outsourcing of production sites (15) Admission to a Management-KG (16) Change in organizational structure (17) Privatization measures
(18) Personnel qualification and training (19) Withdrawal of the Treuhandanstalt (20) Liquidation of the firm
(21) Profit-making
(22) Repetition of activities (23) "Dummy activties"
15
35
30
25
20
15
10
5
0
Figure 9
Distribution of transition period base case
1000 runs of GERT network
Time in months
16
2. Speeding up transition: a management task
We now consider three cases of speeding up the transition process by improved management.
a) Case 1
The core activities
- defining key businesses and outsourcing of other product lines - changes in the network of customers
- changes in the network of suppliers - changes in the depth of production - changes in the human capital - changes in the production program - outsourcing of production sites
can be speeded up significantly if the East-German firm hires West-German managers who have sound experience in the market and who have the necessary stamina to go through the outsourcing of production sites and to perform the appropriate changes in the human capital, which requires in general the dismissal of a significant number of employees. Our case studies show that indeed East-German managers - understandably - lack this kind of determination and strong leadership. We assume that by improving management of transition in this manner, the times required for the core activities can be shortened by one third (case
1).
Table 1 gives results of running the GERT-network of transition with these changed input data. We notice that nothing has changed. Better management of the core activities does not reduce total time to survival in the market economy nor does it improve the probability of survival. It is still remarkably low.
The reason can be easily derived from looking at the transition network as a deterministic CPM-network. The path through the core activities takes 33 months, and the path through the clarification of claims of former owners and through privatization takes 33 months, also.
So we have two critical paths, and better management of one path does not result in a 17
shortening of the whole process. It should also be noted that the path through financial rehabilitation is almost critical: it takes 32 months.
b) Case 2
One of the most critical activities in the transition process is activity 5:
- defining core businesses and outsourcing of other product lines
We have assumed so far that this activity is a lenghty process. But we have not assumed that it has to be repeated. In fact, however, the "business plans" which contain the definition of the core businesses have to be submitted to the Treuhandanstalt for approval. If the Treuhandanstalt is not convinced or if the approved business plans have to be modified later on because of changed circumstances, the whole activity has to be repeated. We therefore assume now that the probability of having to repeat defining the core businesses and to write the business plan is 40 % (case 2). Surprisingly, this lengthens the period of transition by only half a month, and it increases the probability of success in the transition process by 8
% only.
18
Table 1: Cases of transition management
Case Expected
total time to survival
Standard deviation
Probability of success
Expected total time to liqui
dation
base case 34,6 3,5 25,5 14,0
transition management
case 1 34,5 3,5 25,5 14,0
case 2 35,0 4,0 27,6 14,4
case 3 31,8 4,3 27,6 14,0
legal framework
case 4 27,1 4,0 29,2 11,4
case 5 28,4 3,6 28,2 13,2
19
Figure 8: Activity Network, Case 1
0,3 20
Figure 8: Activity Network, Case 2
23
r
r\j
.0,3 20
c) Case 3
From the transition network we have noticed that activities 17 and 18 are critical activities also:
- privatization measures
- personnel qualification and training.
Therefore, we assume now that in addition to the measures taken in cases one and two these activities can be speeded up by a careful selection of an adequate partner in the West and by an exchange of personnel with this partner. This reduces activity times by 50 %. In fact, this was what happened with LEW Hennigsdorf, a manufacturer of locomotives and street cars.
AEG corporation early in the transition process emerged as the ideal partner. It made the management of its own railway division, located in West Berlin, responsible for transition management, exchanged personnel between these two sites and by deliberate outsourcing of activities outside the core business speeded up the transition process.
Table 1 shows that this leads to a reduction of total time for successful transition by nearly three months or 9 % less than in the base case even though the probability of having to repeat drawing up a business plan has not been changed (case 3). It increases the probability of survival by 8 %.
1U. Speeding up transition: The regulatory framework
Experience has shown that extending all West German laws to East Germany has retarded the process of transition of firms. Construction laws, product registration laws, zoning laws and investment approval laws proved too strict and have, in some instances, given way to more appropriate regulation. The bureaucracy in East Germany was not trained to apply West German laws and regulations. Hesitation to make decisions, so typical of socialist societies, added to the delays, and some laws like restitution proved outright counter productive for speeding up transition.
22
Figure 8: Activity Network, Case 3
ro
0,3 20
Figure 8: Activity Network, Case 4
0,3 20
We therefore assume, again for the sake of illustration, that activity 6 (claims of former owners) is eliminated, and setting up the Deutschmark opening statement and withdrawal of the Treuhandanstalt can be brought about in 50 % of the time required in the base case due to changes in the administrative procedures.
Table 1 shows the results (case 4). Obviously, the legal framework for transforming a socialist country into a market economy is of great importance. The duration of this process is in this case speeded up by more than 20 %, and the probability of success of the firm in the transition process is increased by 15 %.
Case 4 gives the impression that about two thirds of the reduction in the duration of transformation and somewhat more than 40 % of the increase in the probability of survival may be due to improved state policies. However, if we reverse the order of policy and management improvement (case 5) and analyze how the transformation process would have been affected by a better legal framework to start out with and improved management of the firm on the basis of better state regulation, we find out that more than 82 % of the reduction in transformation time and 73 % of the improvement in survival probability can be attributed to a more appropriate legal framework for the transformation process (table 1).
D. Conclusion
The transition of formerly socialist firms into a market economy is a time consuming learning process. Most managers had to learn on the job. This has not only cost the Treuhandanstalt 250 billion Deutschmarks, but many private investors have also paid many millions of Deutschmarks in retraining their workforce and in adapting to changing markets in Eastern Europe. This paper has tried to show that network analysis is a mangement tool particularly well suited to structure this process and to manage the different activities as well as the whole process for greater efficiency.
But it has shown also that the major part of the blame for the long and painful process of transition with an extremely high probability of failure has to be borne by the
25
mismanagement of the socialist system which put the firms in such a dismal situation at the beginning of the transformation process. Secondly, the federal government seems to have made many mistakes in setting up a legal framework for the transition process which was not conducive to speedy transition. Experience shows and network analysis proves that East- German and West-German managers have done a remarkable job in the struggle for survival.
26
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Appendix 1
Case Studies
1. Güstrow Spedition GmbH 2. Lacufa AG
3. ELPRO AG 4. Jenapharm GmbH 5. Helicon GmbH 6. Neptun-Wamowwerft 7. NORDAG GmbH 8. Carl Zeiss Jena
9. Germed Handelsgesellschaft mbH 10. Tele Filter tft GmbH
11. DKFL - Deutsche Kugellagerfabriken GmbH, Leipzig 12. THOP Gotha GmbH
13. Greußener Salami & Fleischwaren GmbH 14. Arzneimittel werk Dresden
15. Berlin Chemie AG 16. Laubag AG
17. VEB Lokomotivbau- und Elektrotechnische Werke (LEW) Henningsdorf 18. Thüringer Teppichfabriken
19. TAKRAF Schwermaschinenbau AG 20. SKET Maschinen- und Anlagenbau AG 21. Jenoptik AG
29
Appendix 2
Base Case
(1) Setting the firm up in a private legal form H = 2, a2 = 0,16, Min = 1, Max = 3 (2) Creation of the DM-opening statement
H = 4, a1 = 0,64, Min = 2, Max = 6 (3) First basic change in organizational structure
/x = 2, o2 = 0,16, Min = 1, Max = 3
(4) First dismissal of employees to reduce "hidden unemployment"
H = 2, a2 = 0,16, Min = 1, Max = 3
(5) Defining key businesses and outsourcing of other product lines H = 9, a2 = 5,76, Min = 3, Max = 15
(6) Clarification of claims of former owners /x = 3, a2 = 0,64, Min = 1, Max = 5 (7) Financial rehabilitation measures
H — 4, a2 = 0,16, Min = 3, Max = 5
(8) Proof of the ability for rehabilitation, to get into a Management-KG /x = 2, a2 = 0,16, Min = 1, Max = 3
(9) Changes in the network of customers M = 6, a2 = 1,44, Min = 3, Max = 9 (10) Changes in the network of suppliers
p. = 6, a2 = 1,44, Min = 3, Max = 9 (11) Changes in the depth of production
/x = 3, o2 = 0,16, Min = 2, Max = 4 (12) Changes in the human capital
/x = 6, o2 = 1,44, Min = 3, Max = 9 (13) Changes in the production program
/x = 5, o2 — 1,44, Min = 2, Max = 8
30
(14) Outsourcing of production sites /x = 6, a2 = 2, Min = 3, Max = 9 (15) Admission to a Management-KG
H = 2, o2 = 0,16, Min = 1, Max = 3 (16) Change in organizational structure
= 3, o2 = 0,16, Min = 2, Max = 4 (17) Privatization measures
H = 8, o2 = 1,44, Min = 6, Max = 12 (18) Personnel qualification and training
H = 6, o2 = 1,44, Min = 2, Max = 8 (19) Withdrawal of the Treuhandanstalt
/x = 6, a2 = 0,64, Min = 4, Max = 8 (20) Liquidation of the firm
n = 2, a2 = 0,16, Min = 1, Max = 3 (21) Profit-making
fj. = 10, a2 = 10,24, Min = 2, Max = 18 (22) Repetition of activities
/x = 0
(23) "Dummy activties"
/x = 0
Case 1
(1) Setting the firm up in a private legal form /x = 2, o2 = 0,16, Min = 1, Max = 3 (2) Creation of the DM-opening statement
H = 4, a2 = 0,64, Min = 2, Max = 6 (3) First basic change in organizational structure
/x = 2, a2 = 0,16, Min = 1, Max = 3
(4) First dismissal of employees to reduce "hidden unemployment"
/x = 2, a2 = 0,16, Min = 1, Max = 3 31
(5) Defining key businesses and outsourcing of other product lines fi = 6, o2 = 2,56, Min = 2, Max = 10
(6) Clarification of claims of former owners g = 3, a2 = 0,64, Min = 1, Max = 5 (7) Financial rehabilitation measures
g = 4, a2 = 0,16, Min = 3, Max = 5
(8) Proof of the ability for rehabilitation, to get into a Management-KG H = 2, a2 = 0,16, Min = 1, Max = 3
(9) Changes in the network of customers
= 4, o2 = 0,64, Min = 2, Max = 6 (10) Changes in the network of suppliers
g = 4, a2 = 0,64, Min = 2, Max = 6 (11) Changes in the depth of production
ft = 2, a2 = 0,16, Min = 1, Max = 3 (12) Changes in the human capital
g = 4, o2 = 0,16, Min = 3, Max = 5 (13) Changes in the production program
H = 3, o2 = 0,16, Min = 2, Max = 4 (14) Outsourcing of production sites
H = 4, o2 = 0,64, Min = 2, Max = 6 (15) Admission to a Management-KG
g = 2, o2 = 0,16, Min = 1, Max = 3 (16) Change in organizational structure
g = 3, a2 = 0,16, Min = 2, Max = 4 (17) Privatization measures
(j. = 8, a2 = 1,44, Min = 6, Max = 12 (18) Personnel qualification and training
g = 6, a2 = 1,44, Min = 2, Max = 8 (19) Withdrawal of the Treuhandanstalt
g = 6, o2 = 0,64, Min = 4, Max = 8 (20) Liquidation of the firm
g = 2, o2 = 0,16, Min = 1, Max = 3 32
(21) Profit-making
g = 10, o2 = 10,24, Min = 2, Max = 18 (22) Repetition of activities
g = 0
(23) "Dummy activties"
g = 0
Case 2
(1) Setting the firm up in a private legal form g = 2, a2 = 0,16, Min = 1, Max = 3 (2) Creation of the DM-opening statement
g = 4, a2 = 0,64, Min = 2, Max = 6 (3) First basic change in organizational structure
g = 2, o2 = 0,16, Min = 1, Max = 3
(4) First dismissal of employees to reduce "hidden unemployment"
g = 2, a2 = 0,16, Min = 1, Max = 3
(5) Defining key businesses and outsourcing of other product lines g = 6, a2 = 2,56, Min = 2, Max = 10
(6) Clarification of claims of former owners g = 3, u2 = 0,64, Min = 1, Max = 5 (7) Financial rehabilitation measures
g = 4, a2 = 0,16, Min = 3, Max = 5
(8) Proof of the ability for rehabilitation, to get into a Management-KG g = 2, o2 = 0,16, Min = 1, Max = 3
(9) Changes in the network of customers g = 4, a2 = 0,64, Min = 2, Max = 6 (10) Changes in the network of suppliers
g = 4, o2 = 0,64, Min = 2, Max = 6 (11) Changes in the depth of production
g = 2, a2 = 0,16, Min = 1, Max = 3 33
(12) Changes in the human capital
/x = 4, o2 = 0,16, Min = 3, Max = 5 (13) Changes in the production program
/x = 3, a2 = 0,16, Min = 2, Max = 4 (14) Outsourcing of production sites
/x = 4, o2 = 0,64, Min = 2, Max = 6 (15) Admission to a Management-KG
/x = 2, cr2 = 0,16, Min = 1, Max = 3 (16) Change in organizational structure
p = 3, a2 = 0,16, Min = 2, Max = 4 (17) Privatization measures
/x = 8, a2 = 1,44, Min = 6, Max = 12 (18) Personnel qualification and training
/x = 6, o2 = 1,44, Min = 2, Max = 8 (19) Withdrawal of the Treuhandanstalt
p = 6, o2 = 0,64, Min = 4, Max = 8 (20) Liquidation of the firm
p = 2, o2 = 0,16, Min = 1, Max = 3 (21) Profit-making
p = 10, o2 = 10,24, Min = 2, Max = 18 (22) Repetition of activities
p = Q
(23) "Dummy activties"
p = Q
Case 3
(1) Setting the firm up in a private legal form p = 2, o2 = 0,16, Min = 1, Max = 3 (2) Creation of the DM-opening statement
p — 4, d2 = 0,64, Min = 2, Max = 6 34
(3) First basic change in organizational structure /x = 2, o2 = 0,16, Min = 1, Max = 3
(4) First dismissal of employees to reduce "hidden unemployment"
/x = 2, o2 = 0,16, Min = 1, Max = 3
(5) Defining key businesses and outsourcing of other product lines /x = 6, o2 = 2,56, Min = 2, Max = 10
(6) Clarification of claims of former owners /x = 3, o2 = 0,64, Min = 1, Max = 5 (7) Financial rehabilitation measures
/x = 4, o2 = 0,16, Min = 3, Max = 5
(8) Proof of the ability for rehabilitation, to get into a Management-KG /x = 2, cz2 = 0,16, Min = 1, Max = 3
(9) Changes in the network of customers H = 4, o2 = 0,64, Min = 2, Max = 6 (10) Changes in the network of suppliers
/x = 4, o2 = 0,64, Min = 2, Max = 6 (11) Changes in the depth of production
/x = 2, o2 = 0,16, Min = 1, Max = 3 (12) Changes in the human capital
/x = 4, a2 = 0,16, Min = 3, Max = 5 (13) Changes in the production program
/x = 3, o2 = 0,16, Min = 2, Max = 4 (14) Outsourcing of production sites
/x = 4, o2 = 0,64, Min = 2, Max = 6 (15) Admission to a Management-KG
/x = 2, o2 = 0,16, Min = 1, Max = 3 (16) Change in organizational structure
/x = 3, a2 = 0,16, Min = 2, Max = 4 (17) Privatization measures
H = 4, o2 = 0,16, Min = 3, Max = 5 (18) Personnel qualification and training
/x = 3, u2 = 0,16, Min = 2, Max = 4 35
(19) Withdrawal of the Treuhandanstalt fi = 6, o2 = 0,64, Min = 4, Max = 8 (20) Liquidation of the firm
H = 2, a2 = 0,16, Min = 1, Max = 3 (21) Profit-making
(i = 10, a2 = 10,24, Min = 2, Max = 18 (22) Repetition of activities
M = 0
(23) "Dummy activties"
M = 0
Case 4
(1) Setting the firm up in a private legal form H = 2, a2 = 0,16, Min = 1, Max = 3 (2) Creation of the DM-opening statement
H = 2, a2 = 0,16, Min = 1, Max = 3 (3) First basic change in organizational structure
g = 2, a2 = 0,16, Min = 1, Max = 3
(4) First dismissal of employees to reduce "hidden unemployment"
fj. = 2, a2 = 0,16, Min = 1, Max = 3
(5) Defining key businesses and outsourcing of other product lines H = 6, a2 = 2,56, Min = 2, Max = 10
(7) Financial rehabilitation measures
H = 4, o2 = 0,16, Min = 3, Max = 5
(8) Proof of the ability for rehabilitation, to get into a Management-KG fi = 2, a2 = 0,16, Min = 1, Max = 3
(9) Changes in the network of customers H = 4, a2 = 0,64, Min = 2, Max = 6 (10) Changes in the network of suppliers
fi = 4, d2 = 0,64, Min = 2, Max = 6 36
(11) Changes in the depth of production fj. = 2, o2 = 0,16, Min = 1, Max = 3 (12) Changes in the human capital
g = 4, a2 = 0,16, Min = 3, Max = 5 (13) Changes in the production program
y. = 3, a2 = 0,16, Min = 2, Max = 4 (14) Outsourcing of production sites
y = 4, o2 = 0,64, Min = 2, Max = 6 (15) Admission to a Management-KG
g = 2, o2 = 0,16, Min = 1, Max = 3 (16) Change in organizational structure
g = 3, o2 = 0,16, Min = 2, Max = 4 (17) Privatization measures
g = 4, o2 = 1,44, Min = 2, Max = 8 (18) Personnel qualification and training
g = 3, o2 = 0,16, Min = 2, Max = 4 (19) Withdrawal of the Treuhandanstalt
g = 3, o2 = 0,16, Min = 2, Max = 4 (20) Liquidation of the firm
g = 2, o2 = 0,16, Min = 1, Max = 3 (21) Profit-making
g = 10, cr2 = 10,24, Min = 2, Max = 18 (22) Repetition of activities
g = 0
(23) "Dummy activties"
g = 0
Case 5
(1) Setting the firm up in a private legal form g = 2, o2 = 0,16, Min = 1, Max = 3
37
(2) Creation of the DM-opening statement /z = 2, o2 = 0,16, Min = 1, Max = 3 (3) First basic change in organizational structure
/z = 2, a2 = 0,16, Min = 1, Max = 3
(4) First dismissal of employees to reduce "hidden unemployment"
M = 2, o2 = 0,16, Min = 1, Max = 3
(5) Defining key businesses and outsourcing of other product lines /z = 9, o2 = 5,76, Min = 3, Max = 15
(7) Financial rehabilitation measures
fj. = 4, o2 = 0,16, Min = 3, Max = 5
(8) Proof of the ability for rehabilitation, to get into a Management-KG /z = 2, o2 = 0,16, Min = 1, Max = 3
(9) Changes in the network of customers fi = 6, a2 = 1,44, Min = 3, Max = 9 (10) Changes in the network of suppliers
fi = 6, o2 = 1,44, Min = 3, Max = 9 (11) Changes in the depth of production
/z = 3, o2 = 0,16, Min = 2, Max = 4 (12) Changes in the human capital
/z = 6, o2 = 1,44, Min = 3, Max = 9 (13) Changes in the production program
fi = 5, o2 — 1,44, Min = 2, Max = 8 (14) Outsourcing of production sites
fi = 6, o2 — 2, Min = 3, Max = 9 (15) Admission to a Management-KG
fi = 2, a2 = 0,16, Min = 1, Max = 3 (16) Change in organizational structure
fi = 3, o2 = 0,16, Min = 2, Max = 4 (17) Privatization measures
H = 8, g2 = 1,44, Min = 6, Max = 12 (18) Personnel qualification and training
fi = 6, a2 = 1,44, Min = 2, Max = 8 38
(19) Withdrawal of the Treuhandanstalt H = 3, a2 = 0,64, Min = 1, Max = 5 (20) Liquidation of the firm
H = 2, o2 = 0,16, Min = 1, Max = 3 (21) Profit-making
H — 10, o2 = 10,24, Min — 2, Max = 18 (22) Repetition of activities
fj. = 0
(23) "Dummy activties"
g = 0
39
