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Property rights, finance and entrepreneurship
Is investment constrained more by insecure property rights or by limited
external finance? For five transition economies in eastern Europe and the
former Soviet Union we find that weak property rights limit the reinvestment
of profits in start-up manufacturing firms. Access to credit does not appear
to explain differences in investment. At least in the early stages of
post-communist reform, retained earnings appear to have been enough to finance
the investments that managers wanted to make.
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