A central debate about the transformation of postcommunist countries is how political approaches to institution building affect firm restructuring and creation. This debate has largely been dominated by theories that emphasize either the depoliticization of institutional designs or the determining impact of preexisting social structures. By examining the relative economic performance of Poland and the Czech Republic in the 1990s, this article offers an alternative, embedded politicsanalysis that views firm and institutional creation as intertwined experiments. Czech attempts to implant a depoliticized model of reform impeded institutional development and the reorganization of sociopolitical networks, in which firms are embedded. Poland facilitated institutional experiments not only in the ways it promoted negotiated solutions to restructuring but also in the ways it empowered subnational governments. The study utilizes data on manufacturing networks, privatization, bankruptcy, and regional government reforms collected between 1993 and 2000.
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