An enterprise's ownership form has important implications for its ability and incentive to restructure. Privatization sought to distance enterprises from direct political control, foster the pursuit of new ideas and new sources of investment funds, and facilitate ongoing change and adaptation within the enterprise sector. World experience suggests that in most circumstances private enterprises perform better than state-owned enterprises. Particularly in the Russian Federation, a significant share of private ownership of industrial enterprises has emerged out of privatization efforts.
Private owners encompass "insiders" (workers and managers of the given enterprise) and "outsiders" (individuals and enterprises unrelated to the given firm, such as banks, investment funds, and foreign investors). Private owners of industrial enterprises in developed market economies are primarily outsiders, and insider ownership is relatively insignificant. In contrast to developed market economies and leading transition economies in Central Europe, private owners in the FSU are predominately insiders. Moreover, in the Czech Republic, Hungary, and Poland firms can be relatively clearly defined by dominant ownership types. In contrast, firms in the Russian Federation that have majority outside ownership stakes also have on average very significant insider ownership stakes.
Insider ownership of enterprises is likely to be less conducive to enterprise restructuring than outsider ownership. Outsiders can bring to enterprises new ideas about how to operate the enterprises under the new conditions, and can serve as links to new sources of investment funds. Enterprise insiders are likely to be a less promising source of radical new ideas and have less capability to provide investment funds. World experience suggests the importance of openness to new, outside models and ideas in fostering economic development. Evidence from developments in the Czech Republic, Hungary, and Poland, while not conclusive, indicates that the nature of enterprise restructuring varies by ownership form, and that outside ownership may promote deeper restructuring.