Les sociétés mixtes en Europe de l'Est : considérations théoriques, examen des faits et leçons pour la Chine
Authors: Neuberger Egon 
Published: December 2010

Joint ventures in Eastern Europe : theoretical considerations, survey of facts and lessons for China

The paper defines a unique type of microeconomic organization  the joint venture, a child born of a "marriage" of two organizations, and one based on careful calculation of the benefits derived by each one of the founding organizations. The differences among various key types of joint ventures, e.g. equity vs. non-equity, national vs. international, shared management vs. one party dominance, and joint ventures established to transfer technology vs. those established to gain market power are analyzed.

To illuminate the "marriage" of two partners, one from a Western market economy and the other from a socialist centrally planned economy, two theoretical strands are brought together : I) the transactions costs and internalization approach is used to analyze the nature of socialist partners in the joint venture and compare the motives of the Eastern and Western partners, and 2) a game-theoretic analysis of socialist-capitalist joint ventures is used to analyze the negotiation process in the setting up of the joint venture. The relative bargaining powers of the socialist and capitalist partners at different stages of the process are examined, and special attention is given to the role played by the socialist state in the process.

The paper surveys the historical record of socialist participation in joint ventures from 1922 till the present. It finds that joint ventures domiciled in the West have always been popular with socialist leaders. It is those domiciled in their own countries that have had a checkered career. They were popular in the Soviet Union between 1922 and 1930, and then became anathema to Soviet leaders. Only in 1972 were these ventures again allowed to be established in the Soviet bloc, beginning in Hungary and Romania. It was as late as 1987 that the first joint ventures were permitted in the Soviet Union, Czechoslovakia and Poland. The large increase in the number of joint ventures in that year resulted from new ventures in these countries, but even more from a major spurt in Hungary. The number and the size of the ventures (very smal compared to those located in China or market economies), the activities they are engaged in (mainly manufacturing), and the legal aspects are considered.

This survey shows that joint ventures in Eastern Europe are small in number and importance, gained in importance only when perestroïka began, and were most numerous and successful in the countries, like Hungary and Yugoslavia which had departed furthest from the traditional centrally planned model. The major lesson is that the likelihood of a successful agreement to form a joint venture and its subsequent successful operation depends on the nature of the two partners, with socialist firms being better partners than government bureaus, but even more on the nature of the government and economic system of country in which the venture is domiciled, with Hungary, China or Yugoslavia being better partners than a country like Romania that has resisted reform.