DUAL SUPERVISION IN THE REFORMED FOREIGN TRADE SYSTEM OF THE GERMAN DEMOCRATIC REPUBLIC, 1978-198

Whether economic reforms in the socialist nations of Eastern Europe are successful is a question that vexes international business and political leaders. Previous analyses of reforms have been severely limited by their applications of market decision theory to nonmarket economic systems. The objective of this research is to determine whether the dual supervision of the Foreign Trade Enterprise (FTE) by the Ministry of Foreign Trade and the industrial combine or ministry, which resulted from the economic reforms in the German Democratic Republic between 1978 and 1983, creates potential conflicts that could hinder the performance of the Foreign Trade Enterprise and thus limit the success of the reforms.;The theoretical framework of the research is the model of organizational differentiation and integration developed by Lawrence and Lorsch. The model identifies overlaps and gaps in the relationships of organizational entities to their tasks. The methodology consists of analysis of regulations and policy statements, interviews with foreign trade officials of the GDR, and interviews with firms that trade with the GDR.;The findings are (1) that potential conflict is inherent in dual supervision, (2) that areas of potential conflict exist in the structure of goals and tasks within the foreign trade system, and (3) that effects related to potential conflict are visible outside the foreign trade system to the trading partners of the GDR. The primary conclusion of the research is that dual supervision of the FTE potentially hinders the performance of the FTE in Western countries, but potentially enhances the performance of the FTE in socialist countries. As a result, the GDR will be operating at an increasing disadvantage in the future, as its worldwide environment becomes increasingly suited for small, relatively autonomous and flexible decision-making units.;The research offers a new perspective on reforms of the GDR's foreign trade system, which are representative of the general process of socialist economic reform. The research thus contributes both to assessment of economic reforms in the region and to the formulation of multinational business strategies and governmental policies toward the economies of Eastern Europe.