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Corporate restructuring and export performance in the transition process: The case of Eastern Germany

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  • Schmidt, Klaus-Dieter

Abstract

Economic restructuring in the transition from plan to market concerns the way enterprises try to achieve competitive advantage. Therefore, enterprises have to decide where to compete, that is to say with which product they should enter which markets, and how to compete, that is by which strategy they could succeed. During the seven years since unification, the eastern German economy has undergone considerable structural changes. However, the outcome is a poor market specialization: industries which sell their products mainly in local markets have remarkably increased their share in total output, while industries producing for world-wide markets have lost importance. Sailing into the safe harbour of local markets may be the need of the moment for many companies. But it is a dangerous strategy. In the long run, it may prove to be a trap without any escape. The paper provides a selective and interpretative account of the restructuring process in eastern German manufacturing. It starts with the given constraints - exchange rate and wage convergence - which constitute the wrong model for opening up a closed economy. It presents some stylized facts revealing a strong vertical differentiation between eastern and western German producers - with respect to product quality and product markets as well as with respect to technological and organizational environment. As a result, the division of labour between the eastern German economy and the rest of the world tends to be an inter-industry type rather than an intra-industry one. Finally, the paper turns to the key policy question of how to overcome these difficulties. It scrutinizes the main arguments for and against government's trade promotion towards eastern German enterprises.

Suggested Citation

  • Schmidt, Klaus-Dieter, 1997. "Corporate restructuring and export performance in the transition process: The case of Eastern Germany," Kiel Working Papers 845, Kiel Institute for the World Economy (IfW Kiel).
  • Handle: RePEc:zbw:ifwkwp:845
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    References listed on IDEAS

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    1. Schmidt, Klaus-Dieter & Naujoks, Petra, 1993. "De-industrialization or re-industrialization? On the future of the Eastern German economy," Kiel Working Papers 576, Kiel Institute for the World Economy (IfW Kiel).
    2. Landesmann,Michael A. & Székely,István P. (ed.), 1995. "Industrial Restructuring and Trade Reorientation in Eastern Europe," Cambridge Books, Cambridge University Press, number 9780521480857, October.
    3. Kerstin Gerling, 2008. "The Real Consequences of Financial Market Integration when Countries Are Heterogeneous," Working Papers 141, Oesterreichische Nationalbank (Austrian Central Bank).
    4. George A. Akerlof & Andrew K. Rose & Janet L. Yellen & Helga Hessenius, 1991. "East Germany in from the Cold: The Economic Aftermath of Currency Union," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 22(1), pages 1-106.
    5. Klodt, Henning & Boss, Alfred, 1994. "Standort Deutschland: strukturelle Herausforderungen im neuen Europa," Open Access Publications from Kiel Institute for the World Economy 822, Kiel Institute for the World Economy (IfW Kiel).
    6. Naujoks, Petra, 1993. "Strukturwandel unter dem Aspekt der Handelbarkeit von Gütern: Der Fall der ostdeutschen Industrie," Kiel Working Papers 584, Kiel Institute for the World Economy (IfW Kiel).
    7. Gerling, Katja & Schmidt, Klaus-Dieter, 1997. "On the competitive position of Eastern German manufacturing: Why is catching-up so slow?," Kiel Working Papers 825, Kiel Institute for the World Economy (IfW Kiel).
    Full references (including those not matched with items on IDEAS)

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    JEL classification:

    • P52 - Political Economy and Comparative Economic Systems - - Comparative Economic Systems - - - Comparative Studies of Particular Economies

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