Improvements in economic efficiency and productivity are the most important sources for economic growth and will play a major role in the process of industrial restructuring in the Russian Federation, which has yet to occur. The Soviet Union left an institutional vacuum and large economic distortions behind, which set the stage for an established elite to systematically exploit factors of production for their personal benefit. Economic agents lacked the resources and incentives to increase efficiency of the markets they operated in. This paper generates some empirical highlights of the outcomes of industrial transformation from 1987 to 1997 and focuses on one of the most popular theoretical explanations for industrial output decline during transition, which proves that the initial need of restructuring causes output decline but brings with it efficiency improvements. Despite large uncertainties on the accuracy of Russian industrial statistics, the following results are worth mentionin..