Restructuring of firms in transition: Ownership, institutions and openness to trade

We develop a theoretical framework for defensive and strategic restructuring, and provide estimates of restructuring in privatized firms in an advanced transition economy: Slovenia. Our rich data point to both types of restructur-ing, as well credit rationing and bargaining with respect to investment. Privatized firms display profit-maximizing behavior, and a firm’s export orientation and institutional features, such as insider vs outsider privatization, employee ownership, and employee control, do not affect the firm’s employ-ment and investment behavior. The results suggest that a major exposure to world competition induces similar economic behavior in firms with different structural and institutional characteristics