Date Added: Aug 2010
This paper examines the role of Multi National Enterprises (MNEs) in the shutdown of former State-Owned Enterprises (SOEs) in transitional economies of Central and Eastern Europe. An oligopoly model in an international setting predicts that MNEs can acquire SOEs and successfully operate in the local market. If productivity of SOEs is expected to increase only under MNEs ownership, then domestic private firms may acquire and shutdown SOEs to prevent MNEs entry into the market. Firm-level privatization data from Central and Eastern Europe reveals that MNEs' ownership of SOEs significantly reduces the probability of SOEs shutdown as compared to domestic ownership.