When Do Industries Become Competitive? States and Markets in Industrial Restructuring in Postsocialist Economies

The comparative political economy literature on eastern Europe argues that postsocialist transitions to capitalism have produced not a single model, but a variety of institutional configurations of capitalism. While the literature describes how distinct institutional models create markets, we know little of how those institutional structures shape the behavior of market actors in their responses towards competitive pressures. Using firm-level survey data across 28 countries, this paper shows that general macroinstitutional frameworks bear little relationship with the tendency of firms to engage in restructuring and industrial upgrade. Instead, the paper finds that field-level organizational factors such as firm embeddedness in transnational markets and policy environments supportive of industrial development are more significant in the making of dynamic industrial sectors. These firm-level organizational factors are posited to constrain the kinds of policy responses east European states can pursue in response to global competitive pressures.