Bottom‐up transformation: prerequisites, scope and impediments

Looks at problems and experiences of the so‐called “bottom‐up” transformation of the post‐socialist countries of Eastern Europe. Bottom‐ up transformation stands for the change of economic structures by means of new enterprises and already existing private firms. Discusses the experiences with the performance of small and new firms in the countries of the West, the potential role of small firms in post‐socialist countries as well as the prerequisites and impediments to the establishment of an economically strong small‐firm sector. Based on information on the development of the small‐firm sector in post‐socialist countries during the past years, analyses the relationship between private‐sector share and economic performance. Draws conclusions concerning implications for the future economic policy, the main conclusion being that bottom‐up transformation may be the only viable way for post‐socialist countries of Eastern Europe to transform but this way requires thorough support by government policy.