The rise and fall of employee ownership in Estonia, 1987–2001

Abstract

This paper analyses the post-privatisation ownership dynamics in employee-owned firms in transition. We use new, detailed survey data from Estonia.We link our analysis to the long-standing literature on the viability of employee ownership. We pay attention especially to the effects from institutional environment, and to the institutional structure of the market for shares. Our empirical analysis helps us to identify the reasons behind the decline of employee ownership. The main reasons behind the sharp decline of employee ownership are: 1) excessive selection of employee ownership by uncommitted managers and employees, due to peculiarities of the privatisation process; 2) weak employee representation; 3) ill-suited property right structure that helped to undermine the viability of employee ownership.JEL codes: J54, P31

Perceptions of business purpose and responsibility in the context of radical political and economic development: the case of Estonia

“…In 1989, semi-privatisation of large industrial enterprises started. This process was known as the leasing of state enterprises (Jones et al 2003, Kalmi 2003). Discussion of privatisation began to play a central role on the Estonian political and economic scene by the beginning of 1990.…”

“…Estonia has been one of the best examples and, therefore, much research has been carried out and numerous articles written about the transition in Estonia in an attempt to define why the process has been so successful. Most of these works have dealt with political and macroeconomic policies (Purju 1996, Vensel 1996, Gilles et al 2002, Postma & Hermes 2002, Tiits et al 2003, ownership structures and privatisation (Terk 1998, Kalmi et al 1999, Bennett et al 2003, Jones et al 2003, Kalmi 2003, Kooskora 2003, internationalisation and foreign investments (Cicinskas 1998, Ziacik 2000, Terk & Varblane 2001) and innovations and fiscal determinants (Purju 1996, Terk 1999, Government of the Republic of Estonia 2000, Kurik et al 2002, Kooskora 2004b). But only a limited number of studies of management and business corporations have been conducted (Liuhto 1996a, 1996b, 2001, Aaltio et al 2002, Alt et al 2003, Barnowe et al 2003, Terk et al 2004, Kooskora 2005b, and almost nothing on corporate responsibility (Elmik et al 2004, Kooskora 2004a, 2005a.…”

Self-employment in Estonia: Forced move or voluntary engagement?

“…The first stage was connected to Gorbachev's reforms in the Soviet Union after 1986. Between 1987and 1990, several hundred small state enterprises and worker co-operatives were established in Estonia (see also Kalmi, 2003). Co-operatives were privately owned from the start.…”

“…After the change in privatisation policies, it became very rare for enterprises to be privatised to employees (Kalmi, 2003). Most of the large enterprise privatisation followed the 'Treuhand' approach of individual sales through evaluated bidding.…”

Guest Editorial

“…• Fourth, the implications of the rather sharp and fast decline of ESO and EOCs in the CEE countries following privatization have not been systematically reflected in the Western literature yet (Kalmi 2003).…”