In this paper, I examine the causes of failure in the Gdansk shipyard, and alternatively, the determinants of success in Szczecin and Gdynia. I give particular attention to the role of the initial owner of these companies—the Polish government. Why were these three firms treated differently by the government, and how did this affect their approaches to restructuringŒ I find that in the cases of Szczecin and Gdynia, initial government aid conditionality, combined with pro-active employee support of reforms, produced environments where restructuring had a real chance. In Gdansk, the government and company employees failed to reach agreement on a strategy for initiating reforms. Both feared the potential consequences (economic for the workers and political for the government) of embarking on reforms that were in no way guaranteed to succeed. What emerged was an ongoing stalemate, with company management rejecting a series of reform projects and the government continuing to offer soft credits to keep the unprofitable firm alive. This stalemate, or sub-optimal equilibrium, was linked to the shipyard’s uniquely credible threats of intransigence.

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