Privatisation and sustainable competitive advantage in the emerging economies of Central Europe

Extant research on the impact of privatization in the Central Europe (CE) region has focused on improvements in efficiency and the nature of cost-based advantages. This study argues that the development of a vibrant privatized sector requires attention to the broader resource configurations of domestic enterprises. Empirical research was conducted on a large sample of firms in Poland, Hungary and Slovenia. Foreign investment was found to significantly impact on resource accumulation with implications for the development of strategic capabilities and competitive advantage. Foreign direct investment is an effective vehicle for the transfer of financial resources, reputation and new brands but not organizational capabilities. In terms of practice, this study demonstrates the important role of outside investment in the development of a firm's resource base (Frydman et al. 1999). Companies can gain a competitive advantage in their domestic markets through gaining access to the resources of foreign investors.