Russian Firms in Transition: Champions, Challengers, and Chaff

This paper proposes a composite measure to evaluate a firm's survival potential. The composite measure is applied to 51 Russian firms located in Moscow, Volgograd, Rostov and Taganrog, utilizing data collected in 1995 from in-depth interviews with top-level managers of manufacturing, trade, and other organizations. Using a straight scale with equal weights for each element of the composite measure, the survey results suggest that more than three years after the initiation of the transition from plan to market in Russia, champions number fewer than one-in-fifty, challengers may account for less than 10%, and firms unlikely to survive the transition process, the chaff, represent 80-85%. Utilizing unequal weights, that is, weighting current profitability, export experience, foreign investment, .monopoly power, and future financial and production strategies twice as much as the other elements in the composite measure, generates the outcome where 5 firms meet the criteria for champion (10%), 18 firms are challengers (35%), and 28 are chaff (55%). These results are somewhat more optimistic than estimates reported at the beginning of the Russian transition process that only one-in-ten firms would avoid bankruptcy.