Transforming Post-Communist Political Economies (1998) / Chapter Skim
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6 Learning in Networks: Enterprise Behavior in the Former Soviet Union and Contemporary Russia
6 Learning in Networks: Enterprise Behavior in the Former Soviet Union and Contemporary Russia
Pages 156-176
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From page 156... ...
For example, in the absence of both firms that provide long-term leases and laws that would regulate this activity, enterprises must create quasi-leasing institutions themselves, inventing sophisticated barter schemes and ingenious forms of enforcement. The absence of market institutions necessitates the investment of already accumulated competencies (in managerial time and financial resources)
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From page 157... ...
In contrast, the debate on post-socialist transformation stresses discontinuity and shocks, assuming that market institutions are created from scratch (Blanchard et al., 1994~. This chapter reveals the importance of path dependence and continuity in institutional formation during transition through an examination of enterprise behavior in periods of drastic economic liberalization in both the former Soviet Union and contemporary Russia.
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From page 158... ...
Because of the broad array of disequilibrium processes inherent in transition, including privatization and firm-level decentralization, the firm is currently best described as a fluid constellation of personal networks with constantly changing boundaries. Given both the difficulty in working with such a fluid definition and the available micro-level information, one must be prepared for certain stylized facts presented in this chapter to be somewhat speculative.
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From page 159... ...
Even in advanced market economies, one can observe the coexistence of informal and formal venture capital markets.3 This example of stable equilibrium in which informal and formal capital markets coexist is important because informal institutions are usually perceived as a spontaneous response to the failure of formal markets. Yet as this example demonstrates, informal networks and formal institutions not only coexist, but are mutually supportive.
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From page 160... ...
During the post-socialist transformation, the interaction among these various facets of enterprise learning has created an unusually rich and diverse set of transformation options. THE SOVIET ECONOMY AND ENTERPRISE NETWORKS This section summarizes and reinterprets as a set of stylized facts the results of a number of empirical studies of Soviet planning conducted at the end of the 1970s and during the 1980s.
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From page 161... ...
If opportunistic behavior is so pervasive and the level of uncertainty/complexity is so high that every transactor involved in "planning" expects mutually agreed-upon action (the plan) to be violated on a daily basis, it is perfectly rational for the process coordinator (the planner)
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From page 162... ...
These changes are usually interpreted as merely a bureaucratic imitation of activity. However, I would stress that organizational changes, and even organizational shocks, were a vital part of the regime changes necessary for central planners to maintain any degree of control over the economy.
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From page 163... ...
gives an illuminating account of the interaction among actors during the process of investment plan formation, which explains why the "normal level of shortage" of some goods is not the only, and may not even be the primary, variable in the allocation of the relevant investment. The key factor is obtaining the support of all parties on whom completion of the investment process is dependent: the construction agencies, the ministries providing equipment and other necessary inputs, and the local authorities where the project will be physically located.
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From page 164... ...
In other words, Soviet planners had to administer organizational shocks to ensure the credibility of policy moves however minor. Viewing the process of Soviet planning as a string of minor regime changes initiated to counteract the inertia of horizontal networks is important for understanding the enterprise sector's reaction to Gaidar's 1992 price liberalization.
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From page 165... ...
To establish such a network, one had to invest a tremendous amount of organizational talent and time; this explains why coordination among various branches of Soviet industry usually failed. In the case of the fertilizers, no one was willing to incur the fixed costs of establishing such a network (although the problem was important, there were more pressing ones)
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From page 166... ...
If this innovation had not appeared, it is likely that mounting pressures from both consumers and transporters of frozen fertilizers would eventually have induced the producer to switch to much more efficient granulated fertilizers that do not freeze. After the technical innovation appeared, however, these pressures abated, and a low-level equilibrium trap, in which a more efficient outcome became permanently locked out, was established.
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From page 167... ...
All relevant firms in the sample had to establish (with the help of Western consulting firms) agencies dealing with the preparation of export contracts, and had to set up service and customer networks abroad.
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From page 168... ...
That is why if a company's initial competencies are below a certain threshold, no amount of Western consulting will help it establish competitive marketing and service and customer networks abroad. Similarly, to recoup investment in the establishment of a new institution, the benefits should be sufficiently high, yet the revenue stream from the (more often than not)
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From page 169... ...
Marginal learning related to private rent seeking (asset stripping) and traditional rent seeking (lobbying the government)
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From page 170... ...
Associations of graduates of elite Moscow colleges such as Moscow Physics-Technical Institute, University imeni Bayman, and the Aviation Institute play an active role in the process. Once the major source of human capital for the defense industry, these institutions have now become major suppliers of skilled labor for the banking and trade spheres.
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From page 171... ...
Second, the federal government should allot more specific and transparent subsidies to social infrastructure, thereby discouraging alliances between antireform enterprise managers and local authorities. The distinction between rent-seeking and restructuring-oriented networks once again underlines the differences between rudimentary learning with little 12Anyone seeking rent will be willing to commit resources (which is a deadweight loss for society)
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From page 172... ...
This observation can be interpreted in three ways. First, we might say that reform-oriented managers prefer a competitive industrial structure with no room for enterprise alliances and associations.
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From page 173... ...
Personal trust inherited from the days of a planned economy provides strong path dependency in institutional formation. Trust inherited from past relationships and thus acting as a barrier to entry gradually evolves into an instrument for reducing barriers to entry.
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From page 174... ...
ANNEX 6-1 THE SAMPLE Although the sampled companies include enterprises from all branches of the defense sector and all major regions of Russia, the group is biased in at least three ways. First, half of the sample comprises the radio, communications, and electronics branch, which is less asset-specific compared with, for instance, tank manufactunng, and thus possesses more favorable conditions for conversion and diversification.
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From page 175... ...
Les sons from the former Soviet Union, contemporary Russia and countries of late-late industrialization. Communist Economies: Economics of Transformation 5(4)
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From page 176... ...
176 LEARNING IN NL7V~ORKS 1994 Recombinant Property in East European Capitalism. Paper presented at the Joint Conference of the World Bank and the Central European University Privatization Project, December 15-16, Washington, DC.
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