Ownership, business environment and productivity change

Using a panel data of manufacturing firms in Romania (1995-2003) we investigate productivity changes due to ownership and business environment. Our results show that privatization by itself is not sufficient for improving the productivity of enterprises. Fully private enterprises perform better than state-owned enterprises in highly competitive sectors but not in lowly competitive sectors. The privatized enterprises in which the state retained a minority stake are performing no better than the majority-owned state enterprises. The significant correlation of institutional proxies with productivity growth rates shows that privatization and institutional restructure are complements rather than substitutes in improving the performance of enterprises. Journal of Comparative Economics 36 (3) (2008) 498-509.