Transitions Countries: The Special Case Of Transition Countries

2.2. The Special Case of Transition Countries
Transition economies is a subset of emerging countries, including those Central and Eastern European, post-Soviet and South-east Asian countries, which are still in the process of transition from a centrally planned to a market economy (Wang, 2008).
The term transition economy is applied to the set of these countries, as they all had undertaken a unique process of switching from a centrally planned economy to a market economy. The process of transition in all cases took place involving structural reforms and macro-economic stabilization. As many researchers admit, in many cases, mentioned economic processes were followed by a set of negative consequences, naming them, initial economic decline,
It should be admitted, that still regarding to business and institutional conditions, transition economies show significant differences comparing to developed markets.
From one perspective these markets give significant potential of growth. But from another they pose extensive challenges to new entrants while they choose the mode of entry and the way how to adapt their strategy to unknown conditions of the country.
According to Varblane and Ziacik (2000), transition economies are characterized by extreme dynamics and unpredictability, which influence entry modes choice, particularly FDI mode.
Additionally, the lack of sufficient protection of intellectual rights may cause high losses to international companies (Javalgi and Wright, 2003).
In some of the transition economies with limited democratic experience, weak law enforcement can also remain a problematic issue.
Johanson and Vahlne (1990) stated that in conditions of transition economies export is the most preferable entry
The question of entry mode that companies can apply for transition economies markets has occupied big quantity of international business researches. However, most of them have focused of quantitative and mostly static examinations of entry mode choice, and very few of them have studied industry influence, which might have high impact on the entry mode choice.
Factors influencing FDI inflows into transition countries with the emphasis on Ukrainian market were examined by Bogun (2009).
Additionally, interdependencies between the factors affecting the choice of market entry modes in transition economies have been analyzed more detailed by Wrona and Trapczynski (2012, 2014). Using data from the pharmaceutical industry, their study found the dependence between market advantages and expected risk to be highly influential for the entry mode