Frontiers of Entrepreneurship Research
1996 Edition
SUMMARIES

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WATER SUPPLY AND WASTE WATER TREATMENT: CONVERTING FROM A NOT-FOR-PROFIT TO A FOR-PROFIT ORGANIZATION


Svatopluk Mackrle (1)
Miroslav Pivoda (1)
Frank Hoy (2)

(1) ESC Brno
Uzbecks 2, 62500 Brno
CZECH REPUBLIC

(2) College of Business Administration
University of Texas at El Paso
El Paso, TX 79968-0545 U.S.

Telephone
(1) ++42-5-324009
(2) 915-747-5241

Fax
(1)++42-5-324009
(2)915-747-5147

Principal Topics

This study investigates privatization in the emerging market economy of the Czech Republic. It examines the national decentralization of the provision of water and the treatment of waste water. In the communities studied, alternative organizational forms are available for the delivery of services. In one community, a private frim is brought in to provide technology and management to a nominally public utility.

Method

The paper reports a multi-level case study. The first level of analysis is national. A determination had to be made by the Czech government as to which national model to follow in the ownership and management of water utilities. The next level of analysis is the local community, and the final level is the company participating in the privatization. Data for the study were provided by a senior executive of the private firm as a participant observer in the research project, and by the consultant for the privatization effort.

Major Findings

Lacking experience in decentralized management of utilities, the government of the Czech republic sought alternative models from other countries. They chose to emulate France. Initial efforts to privatize resulted in monopolies. Prices and service varied considerably from region to region. Additionally, the regional monopolies proved to be unorganizationally unstable. In the region under study, mistrust among political leaders of communities within the region led to the dismantling of the regional monopoly. This opened the door for an entrepreneurial approach by one local community. The town of Zasmuky contracted with a waste water treatment company to operate its water utility for a ten year period, at the end of which, the utility will revert to public ownership. The private company is given the opportunity to install state-of-the-art technologies at subsidized costs. The privatization period allows the firm to recoup its investment and earn a profit.

Implications

First, the case study indicates that the French model is a viable framework for privatization. It allows for decentralization to municipalities where entrepreneurial experiments can be conducted. The experiment at Zasmuky demonstrates that new, cost effective technologies can be implemented to replace older, large-scale, fixed-asset utilities, apparently with the facilitation of private enterprise. The case proposes an alternative model of ownership and financing for waste water treatment plants. The implications of reversion to municipal ownership are yet to be determined.

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