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The purpose of this chapter is to provide a comprehensive review of empirical research on performance management (PM) in former communist Central and Eastern European (CEE) countries, to evaluate the state of knowledge in this area and suggest possible directions for future research.

An examination of the literature was undertaken to review the empirical studies treating on PM in ex-communist countries from CEE. A total of 96 journal articles, PhD thesis, and conference papers were identified, categorized, and analyzed according to research questions, methodology, and theoretical framework. Contributions are classified by countries, according to progress in transition process (post-transition/transition countries) and membership in the Soviet Union (Soviet/non-Soviet countries). The review examines publications in four languages (English, French, Romanian, and Russian).

The literature review identified various stages of development of PM research and practice in the different groups of CEE countries.

In post-transition CEE countries, PM research follows the trends settled up in the developed countries (quantitative studies examining the extent of usage of different PM tools, influence of contingent factors, relationship PM-strategy, and impact on company’s performance). Also, the findings illustrate the modernization of PM practices: increasing importance of nonfinancial indicators and integrated performance management systems (PMS), although financial indicators are prevailing.

On the contrary, in transition countries PM research and practices are at an early stage, the reviewed literature highlights some specific issues related to transition context: the dynamic aspect of PM, change management, importance of informal systems, cultural aspects, and business traditions.

Because of the large number of CEE countries and the diversity of their national languages, many studies conducted in native languages have not been addressed in this literature review, which is essentially based on publications in English and French. Only for three CEE countries (Russia, Romania, and Moldova) publications in national language were considered.

This literature review may be useful for practitioners, providing insights on the extent of diffusion and usage of different PM tools and identifying difficulties and pitfalls to avoid in their implementation.

The chapter represents one of the first contributions to the knowledge about PM research and practice in former communist CEE countries. The adopted framework for reviewing and classifying the literature allows identifying the differences in PM research and practices between post-transition/transition and Soviet/non-Soviet countries.

The transition countries have been pursuing a market economy since the early 1990s. Crucial reforms in the banking and financial sectors are necessary to provide a financial structure that supports a market economy, particularly the private and enterprise sector, leading to economic growth. This paper examines the banking and financial development in the transition countries. Arguments for banking reforms are made and the conditions for an efficient banking system are examined. A comparison in the progress of banking reforms and economic growth provides useful lessons not only for the transition countries but for developing and other emerging countries. Lastly, policy choices are suggested for the transition countries.

Using various macro-level measures of economic and political performance Shleifer and Treisman (2005) and Treisman (2014) call Russia a “normal country” implying that Russia’s economic and political development is not deviating from the other middle-income or transition countries significantly. The purpose of this paper is to challenge this proposition and investigate whether Russia is a normal country in terms of entrepreneurship by comparing Russia with other post-socialist and similarly developed countries.

Many studies have examined Russia’s institutional setup to explain its deficiencies in entrepreneurial activity. However, there is a lack of comprehensive research taking into account both the individual and institutional dimensions of the entrepreneurial ecosystem. The authors use the Global Entrepreneurship Index (GEI) methodology to analyze Russia’s quality-related individual as well as institutional features from a system perspective in a single model.

Russia’s performance has been poor relative to the post-socialist countries and to most of the former republics of the Soviet Union. Russia’s entrepreneurial profile is different from other transition and similarly developed non-transition countries, as well. Russia’s scores are less than the scores of other post-socialist countries in six out of the nine pillars of entrepreneurial attitudes and abilities. In sum, conditions supporting entrepreneurship in Russia lag seriously behind other post-socialist countries. Moreover, Russia’s individual scores are even lower than the institutional ones. Hence, improving the hostile environment alone would not be sufficient for entrepreneurship development.

Although, there have been numerous studies analyzing Russia’s macroeconomic conditions, institutional development, and entrepreneurship, there is lack of comprehensive studies. Besides common macro-level measures, the authors use a unique, GEI data set that combines institutional factors relating to entrepreneurship or new business creation with measures of individual capabilities, motivations, and attitudes about entrepreneurship. The single-model framework reveals that individual factors are even greater obstacles to entrepreneurship development in Russia than the institutional factors that most studies focus on.

The purpose of this paper is to explain the operating background of combating money laundering in transition countries, to demonstrate the unique phenomenon of “adopt but not enforce” and “selective implementation,” to discuss the role of anti‐money laundering (AML) system as a part of political confrontation between transition countries and developed countries, and finally to criticize the defensive reporting in transition countries' financial institutions.

The paper analyzes the inherent limitations and practical issues in combating money laundering in transition countries, and provides various cases as well as statistic data to illustrate the AML difficulties faced by transition countries.

Many transition countries have taken AML actions during the past decade, however, the AML systems in these jurisdictions are not effective yet. AML motivations in transition countries are mainly surrounding international pressures and domestic political needs.

The paper highlights the unsound operating environment of fully implementing AML legislations in transition countries, and critically demonstrated that the effectiveness of AML systems in transition countries is heavily influenced by domestic and international political considerations.

This paper aims to conduct inter‐country analysis of agricultural productivity growth in transition countries in Asia and Europe. This paper pays particular attention to the magnitude and direction of productivity growth over different stages of their market reforms.

The paper adopts a nonparametric Malmquist index approach using an output distance function to measure productivity growth and decompose it into its associated components. The empirical analysis is performed using the most recent FAO data set of 35 transition countries in Asia and Europe over the period of 1979‐2004.

The paper shows that decomposition analysis of productivity growth differs considerably at different stages of the transition period. This study presents supporting evidence that serious improvements in performance and efficiency, as well as continued technology transfer and adoption are required for transition economies to meet the demand for food and anticipated increases in world population.

A comprehensive picture about the agricultural performance of the transition countries has somehow been missing in the literature. This study fills this gap by analyzing the productivity in these transition countries.

This chapter is intended to provide the reader with information and insights on the transition or transformation from socialism to a market economy in what are generally termed the transition economies. This includes countries in Central and Eastern Europe (CEE), the Commonwealth of Independent States (CIS), sometimes referred to as the Former Soviet Union (FSU), the South East European (SEE) countries, sometimes referred to as the Balkans and the major socialist economy of Asia, China. The chapter covers the critical years of reform for most of these countries, from 1990 to 2000. Some transition economies started reforming earlier, such as China which has continued state-owned enterprise (SOE) reforms to the present time. Other transition countries, primarily the SEE economies, lagged due to the conflict which raged throughout most of the region and the period of isolation which followed, particularly for Serbia. China and Serbia are sui generis for a number of reasons. They will be referenced as examples in this chapter, but they will not form part of the core statistical and data analysis.

This paper aims to examine the influence of formal and informal institutional quality on country-level variations in foreign equity shares in transition economies (TEs).

Drawing on institutional theory and transaction cost theory, this paper examines the influence of formal and informal institutional quality on country-level variations in foreign equity shares in TEs. The authors use a two-step empirical strategy, identifying clusters of explanatory variables and running generalized least squares random effect estimations to test for the influence of explanatory and control variables on foreign equity shares.

Foreign equity share is positively affected by informal institutions and negatively by formal institutions. However, when control for stage of transition we find that the the presence of informal institutions in more rapidly or advanced transforming economies negatively influences foreign equity shares. Complex infrastructure discourages foreign equity shareholdings, and foreign companies use informal practices to overcome unfavourable host country conditions. Government size has a negative effect, and gross domestic product per capita positively affects foreign equity shares.

The study is the new groundwork for the re-enactment of a fruitful discussion on foreign equity. The study has practical implications for managers, too – managers of foreign-owned firms operating in weakly installed institutional environments should carefully analyse the entry strategies because of the high presence of informal institutions. Furthermore, managers could understand the various facilitation roles of informal institutions in any firm internationalisation effort to arrive at optimal ownership holdings for better internationalisation performance. Although the study is based on a sample of transition countries, the findings have implications for other emerging economies’ contexts sharing similar institutional settings.

This study provides a unique empirical investigation and evidence based on country-level indicators on the effect of formal and informal institutions on foreign equity shares holdings in TEs, reinforcing the importance of impacts of both the formal and informal dimensions on ownership decisions of foreign investors.

The purpose of this paper is to examine the impact of audit assurance on tax enforcement, which is represented by whether firms have been visited by tax officials and, if so, the total number of inspections per fiscal year. The efficiency of tax administration is further examined by whether it becomes a binding constraint to a firm’s operations.

The sample consists of 18,746 firm-year observations from 28 transition and market-based economies in Central-Eastern Europe. The binary logit model, the Poisson model and the ordinal logit model are applied to test the hypotheses.

The empirical results show that, while audit assurance does not reduce the probability of being visited by tax officials (regardless of visit times) for the two country groups, firms with audited financial reports meet tax officials less often in market-based economies but not in transition economies. Furthermore, only in market-based economies does audit assurance reduce the probability that tax administration becomes a severe obstacle to firms’ operations.

This study addresses the relationship between tax administration and audit assurance in market-based and transition countries. One implication of the empirical findings is that audit assurance would add benefits to business environments when countries evolve from transition to market-based economies.

This study aims to investigate the moderating effects of subsidiary size on the association between institutional distance and subsidiary’s access to complementary local assets (ACLA) in a transition economy.

The data of 1,027 subsidiaries located in Vietnam were extracted from the survey of General Statistics Office of Vietnam. Hausman’s test shows that random effect model is appropriate to estimate the moderating effects of subsidiary size on the association between the institutional distance and subsidiary’s ACLA.

The findings revealed that the greater formal and informal institutional distances between home and host countries, the lower a subsidiary’s ACLA in a transition economy. In addition, larger subsidiaries’ ACLA in a more formal and informal institutional distant country are higher than smaller subsidiaries.

Multinational enterprise (MNEs) have a continuous need to use their foreign subsidiaries operating in host countries, particularly those with transition economies, to overcome institutional differences to ACLA in a transition economy. In addition, subsidiaries should be invested with greater resources to collaborate with local partners to serve for accessing to complementary local assets in transition economy characterized by an uncertainty institutional environment.

By integrating the institutional theory and the resource-based view, the study developed a theoretical model about the moderating role of subsidiary size on the association between institutional distance and subsidiary’s ACLA in transition economy. The findings confirmed that simultaneously applying the institutional theory and the resource-based view to investigate location-specific advantages exploitation of subsidiaries is relevant not only in developed economies but also in a transition economies.

In this chapter, the authors study how external knowledge contributes to the innovation results of firms in transition economies. Specifically, the authors distinguish between product and process innovations and identify the geographical origin of external knowledge – from the home country or from abroad. Theoretically, the authors discuss the innovation systems of transition economies and the effects of foreign and national external knowledge on product and process innovations in these under-researched contexts. Using a sample of firms from 19 countries from wave V of the Business Environment and Enterprise Surveys, the authors find that foreign and national external knowledge both contribute to the achievement of product and process innovations. However, the two types of external knowledge exert different effects depending on the innovation outcome analyzed. Firms in transition countries that incorporate foreign external knowledge are more likely to achieve product innovations than those that acquire national external knowledge. In contrast, both types of knowledge are equally useful for achieving process innovations.