Ownership and Management in Holding Companies and the Future of the Russian Textile Industry

Abstract

Outside ownership has been long praised by mainstream transition economics for providing the context for effective enterprise restructuring. On the basis of two case studies in the Ivanovo-based textile industry, this article analyses the impact of this new corporate structure on management and production. An account of the developments in the 1990s argues for the rationality of survival strategies by inside owners and reveals how new economic agents played a primary role in the collapse of the industry. The analysis of holding company strategies indicates that little has changed so far in market strategies and organisation of production. Reliance on traditional Soviet practices prevents restructuring and undermines co-operation between managers and new owners. Findings, corroborated by existing case study research, indicate that the way to successful restructuring lies in overcoming Soviet-type personnel and production management. This is unlikely to happen without thorough technological change at enterprise level and organisational change in holding companies' command structure. Experience of restructuring reveals how building trust between managers and owners represents an essential precondition for pursuing these goals.