Corporate Structure and Performance in Hungary

All economies are heterogeneous. The behaviour of the economic agents will differ in important aspects. However, in a stable environment usually strong forces shape a typical behaviour, thus many agents act similarly. On the one hand, the behaviour of agents will be much less uniform in an unstable transitional environment. On the other hand, transition also meant very strong pressures and narrow constraints for Hungarian enterprises, resulting in different, but typical behavioural patterns. The objective of this paper is to investigate these patterns through the phases of the transition process. We analyse relevant segments of the economy and follow through behavioral changes. We investigate the behaviour of both the newly created firms and the disappearing large former socialist corporations. We also analyse the behaviour of foreign owned companies. Strong import competition and competition from de novo firms shaped the behaviour of former oligopolists, and the response to these competitive pressures varied over groups of firms. We employ production functions for exploring differences among these groups of firms, and the typical adjustment process of each group separately throughout the transition period until 1996. The estimated production functions indicate gradual improvement in efficiency and a shift from decreasing to increasing returns to scale. Market share can be explained by the degree of internal and external competition and by the efficiency of the firm. There is little apparent relationship between efficiency and profit or investment