(Former) informal networks as a reflection of informal institutions in East European transitional societies: legacy or opportunism?
DOI:
https://doi.org/10.12775/EQUIL.2015.009Keywords:
informal networks, institutional interaction, transition, Eastern Europe, post-socialismAbstract
Only recently has the influence of culture on economic development been increasingly discussed among theoretical economists. Besides observing culture through cultural traditions inherited from ancestors, current social interactions are also considered as an influential factor. Over a long period of time, the research on East European transitional societies has been focused on formal institutions. Throughout that period, informal networks, many of which originated from the previous socio-political system, have mostly strengthened their position in the society and gained power in the formal structures. They helped in building the new capitalist states and therewith had positive effects by speeding up the transition process. Yet, in medium and long term, their activities typically resulted in state capture. This paper explores the persistence of tight informal and mostly inefficient formal business-government-society relations in Eastern Europe. It emphasises the influence of informal networks in the interaction of formal and informal institutions, and questions the possibility of new generations to make a turnaround in the functioning of the networks. Newly emerging social interactions are contextualised in the cultural dimensions: Power Distance and Collectivism versus Individualism. This paper argues that even when informal communities solely serve their own opportunistic purposes, the prevailing collectivist culture in the society provides tacit support to their existence and therewith delays the transformation from relation-based to rule-based governance. The empirical findings confirm the oversocialised view of the society and networks suggested by economic sociologists. Additionally, the changes in transitional institutional environment are deemed to be in line with the claims of institutional economists on durability and impact of informal institutions.
Downloads
Download data is not yet available.
References
Acemoglu, D. & Robinson, J.A. (2012). Why Nations Fail: The origins of Power, Prosperity, and Poverty. New York: Crown Business.
Aligicia, P. D. (2006). Learning in time: new institutionalism and the Central and Eastern European economic reform experience. Global Business and Economics Review, 8(1/2).
Aoki, M. (2011). Institutions as cognitive media between strategic interaction and individual beliefs. Journal of Economic Behavior and Organization, 79(1-2). doi:10.1016/j.jebo.2011.01.025.
Banks, J. A. (1998). The Lives and Values of Researchers: Implications for Educating Citizens in a Multicultural Society. Educational Researcher, 27(7).
Boettke, P. J., Coyne, C. J., & Leeson, P. J. (2008). Institutional Stickiness and the New Development Economics. American Journal of Economics and Sociology, 67(2). http://dx.doi.org/10.1111/j.1536-7150.2008.00573.x.
Borocz, J. & Akos, R. (1995). Small Leap Forward. Emergence of New Economic Elites. Theory and Society, 24(5).
Chavez, C. (2008). Conceptualizing from the inside: Advantages, complications, and demands on insider positionality. Qualitative Report, 13(3).
Delić, M., Singer, S., & Alpeza, M. (2011). The Role of Think Tanks in Shaping SME Business Environment in Croatia ? The Case of CEPOR. The Ninth International Conference: ?Challenges of Europe: Growth and Competitiveness ? Reversing the Trends?. Faculty of Economics, University of Split, Croatia.
Elster, J., Offe, C., & Preuss, U. (1998). Institutional Design in Post-Communist Societies: Rebuilding the Ship at Sea. Cambridge: Cambridge University Press.
Fligstein, N. (1996). The Economic Sociology of the Transitions from Socialism. American Journal of Sociology, 101(4).
Greif, A. (1994). Cultural Beliefs and the Organization of Society: A Historical and Theoretical Reflection on Collectivist and Individualist Societies. Journal of Political Economy, 102(5).
Guiso, L., Sapienza, P., & Zingales, L. (2006). Does Culture Affect Economic Outcomes? Journal of Economic Perspectives, 20(2), 23-48. http://dx.doi.org/ 10.1257/jep.20.2.23.
Hofstede (2013). Dimension Data Matrix. Retrieved from: http://www.geerthofsted e.nl/research--vsm (15.10.2013).
Hofstede, G., Hofstede, G. J., & Minkov, M. (2010). Cultures and Organizations: Software of the Mind: Intercultural Cooperation and Its Importance for Survival . New York: McGraw Hill
Jellema, J., & Roland, G. (2011). Institutional clusters and economic performance. Journal of Economic Behavior and Organization, 79(1-2). http://dx.doi.org /10.1016/j.jebo.2011.04.003.
King, L. (2002). Postcommunist Divergence: A Comparative Analysis of the Transition to Capitalism in Poland and Russia. Studies in Comparative International Development, 37(3). http://dx.doi.org/10.1007/BF02686229.
Kornai, J. (2000). What the Change of System From Socialism to Capitalism Does and Does Not Mean. Journal of Economic Perspectives. 14(1). http://dx.doi. org/10.1257/jep.14.1.27.
Kušić, S. (2007). Institucionalni i evolucijski aspekti privatizacije u srednjoj i istočnoj Europi. Ekonomski pregled, 58(1/2).
Kušić, S. (2009). Neue Wirtschaftseliten, Schumpeter und der Transformationsprozess in Suedosteuropea. Ekonomski pregled, 60(11).
Lemke, C. (2001). Social Citizenship and Institutions Building: EU-Enlargement and the Restructuring of Welfare State in East Central Europe. (Working Paper Series 01.2). Cambridge, MA: Centre for European Studies Program for the Study of Germany and Europe, Harvard University.
Liebowitz, S. J., & Margolis, S. E. (1995). Path Dependence, Lock-In, and History. Journal of Law, Economics, & Organization, 11(1).
Mankiw, N. G. (2006). The Macroeconomist as Scientist and Engineer. Journal of Economic Perspectives, 20(4). http://dx.doi.org/10.1257/jep.20.4.29.
Mills, C. W. (2000). The Power Elite. New York. NY: Oxford University Press.
Mokyr, J. (2013). Cultural entrepreneurs and the origins of modern economic growth. Scandinavian Economic History Review, 61(1). http://dx.doi.org/1 0.1080/03585522.2012.755471.
Mueller, K. (2010). How culture shapes the post-communist transformations. EMECON: Employment and Economy in Central and Eastern Europe, 1. Retrieved December 10, 2011, Retrieved from: http://www.emecon.eu/fileadmin /articles/1_2010/emecon%201_2010%20M%C3%BCller.pdf.
Murrell, P. (1991a). Can Neoclassical Economics Underpin the Reform of Centrally Planned Economies?. Journal of Economic Perspectives, 5(4).
Nee, V., & Cao, Y. (1999). Path Dependent Societal Transformation: Stratification in Hybrid Mixed Economies. Theory and Society, 28(6).
Neuber, A. (1993). Towards a Political Economy of Transition in Eastern Europe. Journal of International Development, 5(5).
North, D. C. (2005). Understanding the Process of Economic Change. Princeton, NY: Princeton University Press.
North, D. C. (2008). Institutions, Institutional Change and Economic Performance. New York, NY: New York University Press.
Nye, J. (2008). Institutions and Institutional Environment. In: E. Brousseau & J-M. Glachant (Eds.). New Institutional Economics ? A Guidebook. Cambridge: Cambridge University Press.
Pejovich, S. (2003a). Understanding the Transaction Costs of Transition: It?s the Culture, Stupid. Forum Series on the Role of Institutions in Promoting Economic Growth. Mercatus Center, George Mason University, Washington, D.C., USA.
Pejovich, S. (2008). Law, Informal Rules and Economic Performance: The Case for Common Law. Cheltenham, UK: Edward Elgar Publishing Limited.
Podkaminer, L (2013). Development Patterns of Central and East European Countries (in the course of transition and following EU accession). Research Report No. 388. Vienna: The Vienna Institute for International Economic Studies. Retrieved from: http://wiiw.ac.at/development-patterns-of-central-and-east-european-countries-in-the-course-of-transition-and-following-eu-accession--p-2985.html (15.10.2013).
Rodrik, D. (1996). Understanding Economic Policy Reform. Journal of Economic Literature, 34(1).
Roland, G. (2000). Transition and Economics: Politics, Markets, and Firms. Cambridge, MA: The MIT Press.
Roland, G. (2001). Ten Years After?Transition and Economics. IMF Staff Papers. 48 (Special Issue).
Roland, G. (2002). The Political Economy of Transition. The Journal of Economic Perspectives, 16(1). http://dx.doi.org/10.1257/0895330027102.
Roland, G. (2004). Understanding Institutional Change: Fast-Moving and Slow-Moving Institutions. Studies in Comparative International Development, 38(4), 109-131. http://dx.doi.org/10.1007/BF02686330.
Roland, G. (2012). The Long-Run Weight of Communism or the Weight of Long-Run History? In G. Roland (Ed.). Economies in Transition: The Long-Run View. United Nations University ? World Institute for Development Economics Research. Basingstoke, UK: Palgrave Macmillan.
Shleifer, A., & Vishny, R. W. (1999). The Grabbing Hand: Government Pathologies and Their Cures. Cambridge, MA: Harvard University Press.
Stark, D. (2001). Recombinant Property in East European Capitalism. In: M. Granovetter & R. Swedberg (Eds.). The Sociology of Economic Life. Cambridge, MA: Westview Press.
Szelenyi, I. & Szelenyi, S. (1995a). A Circulation or Reproduction of Elites during the Postcommunist Transformation of Eastern Europe. Theory and Society, Special Issue on Circulation vs. Reproduction of Elites during the Postcommunist Transformation of Eastern Europe. 24(5).
Szelenyi, I. & Szelenyi, S. (1995b) A Circulation or Reproduction of Elites during the Postcommunist Transformation in Russia and Eastern Europe. Washington, DC: The National Council for Soviet and East European Research. Retrieved from: http://www.ucis.pitt.edu/nceeer/1995-806-29-Szelenyi.pdf (10.10.2013).
Šimić Banović, R. (2012). Interviews for the PhD dissertation and related research ?Institutional Change in Transitional Economies: Analysis of the Croatian Business Environment?. Faculty of Economics, University of Ljubljana.
Šimić Banović, R. (2015). Cutting red ribbon, but not the red tape: the failure of a business environment reform in Croatia. Post-Communist Economies. 27(1).
Tabellini, G. (2010). Culture and Institutions: Economic Development in the Regions of Europe. Journal of the European Economic Association, 8(4). http://dx.doi.org/10.1111/j.1542-4774.2010.tb00537.x.
Upchurch, M. & Marinkovic, D. (2011). Wild capitalism, privatisation and employment relations in Serbia. Employee Relation,. 33(4).
Uvalic, M. (2012). Transition in Southeast Europe. Understanding Economic Development and Institutional Change. In: G. Roland (Ed.). Economies in Transition: The Long-Run View. United Nations University ? World Institute for Development Economics Research. Basingstoke, UK: Palgrave Macmillan.
Williamson, J. (1992). The Eastern Transition to a Market Economy: A Global Perspective. London School of Economics and Political Science: Centre for Economic Performance. Retrieved October 5, 2011, Retrieved from: http://eprints.lse.ac.uk/21055/1/The_Eastern_Transition_to_a_Market_Economy_A_Global_Perspective.pdf.
Williamson, O. (2000). The New Institutional Economics: Taking Stock, Looking Ahead. Journal of Economic Literature, 38(3). http://dx.doi.org/10.1257 /jel.38.3.595.
Županov, J. (2002). Od komunističkog pakla do divljeg kapitalizma. Zagreb: Hrvatska sveučilišna naklada.
Aligicia, P. D. (2006). Learning in time: new institutionalism and the Central and Eastern European economic reform experience. Global Business and Economics Review, 8(1/2).
Aoki, M. (2011). Institutions as cognitive media between strategic interaction and individual beliefs. Journal of Economic Behavior and Organization, 79(1-2). doi:10.1016/j.jebo.2011.01.025.
Banks, J. A. (1998). The Lives and Values of Researchers: Implications for Educating Citizens in a Multicultural Society. Educational Researcher, 27(7).
Boettke, P. J., Coyne, C. J., & Leeson, P. J. (2008). Institutional Stickiness and the New Development Economics. American Journal of Economics and Sociology, 67(2). http://dx.doi.org/10.1111/j.1536-7150.2008.00573.x.
Borocz, J. & Akos, R. (1995). Small Leap Forward. Emergence of New Economic Elites. Theory and Society, 24(5).
Chavez, C. (2008). Conceptualizing from the inside: Advantages, complications, and demands on insider positionality. Qualitative Report, 13(3).
Delić, M., Singer, S., & Alpeza, M. (2011). The Role of Think Tanks in Shaping SME Business Environment in Croatia ? The Case of CEPOR. The Ninth International Conference: ?Challenges of Europe: Growth and Competitiveness ? Reversing the Trends?. Faculty of Economics, University of Split, Croatia.
Elster, J., Offe, C., & Preuss, U. (1998). Institutional Design in Post-Communist Societies: Rebuilding the Ship at Sea. Cambridge: Cambridge University Press.
Fligstein, N. (1996). The Economic Sociology of the Transitions from Socialism. American Journal of Sociology, 101(4).
Greif, A. (1994). Cultural Beliefs and the Organization of Society: A Historical and Theoretical Reflection on Collectivist and Individualist Societies. Journal of Political Economy, 102(5).
Guiso, L., Sapienza, P., & Zingales, L. (2006). Does Culture Affect Economic Outcomes? Journal of Economic Perspectives, 20(2), 23-48. http://dx.doi.org/ 10.1257/jep.20.2.23.
Hofstede (2013). Dimension Data Matrix. Retrieved from: http://www.geerthofsted e.nl/research--vsm (15.10.2013).
Hofstede, G., Hofstede, G. J., & Minkov, M. (2010). Cultures and Organizations: Software of the Mind: Intercultural Cooperation and Its Importance for Survival . New York: McGraw Hill
Jellema, J., & Roland, G. (2011). Institutional clusters and economic performance. Journal of Economic Behavior and Organization, 79(1-2). http://dx.doi.org /10.1016/j.jebo.2011.04.003.
King, L. (2002). Postcommunist Divergence: A Comparative Analysis of the Transition to Capitalism in Poland and Russia. Studies in Comparative International Development, 37(3). http://dx.doi.org/10.1007/BF02686229.
Kornai, J. (2000). What the Change of System From Socialism to Capitalism Does and Does Not Mean. Journal of Economic Perspectives. 14(1). http://dx.doi. org/10.1257/jep.14.1.27.
Kušić, S. (2007). Institucionalni i evolucijski aspekti privatizacije u srednjoj i istočnoj Europi. Ekonomski pregled, 58(1/2).
Kušić, S. (2009). Neue Wirtschaftseliten, Schumpeter und der Transformationsprozess in Suedosteuropea. Ekonomski pregled, 60(11).
Lemke, C. (2001). Social Citizenship and Institutions Building: EU-Enlargement and the Restructuring of Welfare State in East Central Europe. (Working Paper Series 01.2). Cambridge, MA: Centre for European Studies Program for the Study of Germany and Europe, Harvard University.
Liebowitz, S. J., & Margolis, S. E. (1995). Path Dependence, Lock-In, and History. Journal of Law, Economics, & Organization, 11(1).
Mankiw, N. G. (2006). The Macroeconomist as Scientist and Engineer. Journal of Economic Perspectives, 20(4). http://dx.doi.org/10.1257/jep.20.4.29.
Mills, C. W. (2000). The Power Elite. New York. NY: Oxford University Press.
Mokyr, J. (2013). Cultural entrepreneurs and the origins of modern economic growth. Scandinavian Economic History Review, 61(1). http://dx.doi.org/1 0.1080/03585522.2012.755471.
Mueller, K. (2010). How culture shapes the post-communist transformations. EMECON: Employment and Economy in Central and Eastern Europe, 1. Retrieved December 10, 2011, Retrieved from: http://www.emecon.eu/fileadmin /articles/1_2010/emecon%201_2010%20M%C3%BCller.pdf.
Murrell, P. (1991a). Can Neoclassical Economics Underpin the Reform of Centrally Planned Economies?. Journal of Economic Perspectives, 5(4).
Nee, V., & Cao, Y. (1999). Path Dependent Societal Transformation: Stratification in Hybrid Mixed Economies. Theory and Society, 28(6).
Neuber, A. (1993). Towards a Political Economy of Transition in Eastern Europe. Journal of International Development, 5(5).
North, D. C. (2005). Understanding the Process of Economic Change. Princeton, NY: Princeton University Press.
North, D. C. (2008). Institutions, Institutional Change and Economic Performance. New York, NY: New York University Press.
Nye, J. (2008). Institutions and Institutional Environment. In: E. Brousseau & J-M. Glachant (Eds.). New Institutional Economics ? A Guidebook. Cambridge: Cambridge University Press.
Pejovich, S. (2003a). Understanding the Transaction Costs of Transition: It?s the Culture, Stupid. Forum Series on the Role of Institutions in Promoting Economic Growth. Mercatus Center, George Mason University, Washington, D.C., USA.
Pejovich, S. (2008). Law, Informal Rules and Economic Performance: The Case for Common Law. Cheltenham, UK: Edward Elgar Publishing Limited.
Podkaminer, L (2013). Development Patterns of Central and East European Countries (in the course of transition and following EU accession). Research Report No. 388. Vienna: The Vienna Institute for International Economic Studies. Retrieved from: http://wiiw.ac.at/development-patterns-of-central-and-east-european-countries-in-the-course-of-transition-and-following-eu-accession--p-2985.html (15.10.2013).
Rodrik, D. (1996). Understanding Economic Policy Reform. Journal of Economic Literature, 34(1).
Roland, G. (2000). Transition and Economics: Politics, Markets, and Firms. Cambridge, MA: The MIT Press.
Roland, G. (2001). Ten Years After?Transition and Economics. IMF Staff Papers. 48 (Special Issue).
Roland, G. (2002). The Political Economy of Transition. The Journal of Economic Perspectives, 16(1). http://dx.doi.org/10.1257/0895330027102.
Roland, G. (2004). Understanding Institutional Change: Fast-Moving and Slow-Moving Institutions. Studies in Comparative International Development, 38(4), 109-131. http://dx.doi.org/10.1007/BF02686330.
Roland, G. (2012). The Long-Run Weight of Communism or the Weight of Long-Run History? In G. Roland (Ed.). Economies in Transition: The Long-Run View. United Nations University ? World Institute for Development Economics Research. Basingstoke, UK: Palgrave Macmillan.
Shleifer, A., & Vishny, R. W. (1999). The Grabbing Hand: Government Pathologies and Their Cures. Cambridge, MA: Harvard University Press.
Stark, D. (2001). Recombinant Property in East European Capitalism. In: M. Granovetter & R. Swedberg (Eds.). The Sociology of Economic Life. Cambridge, MA: Westview Press.
Szelenyi, I. & Szelenyi, S. (1995a). A Circulation or Reproduction of Elites during the Postcommunist Transformation of Eastern Europe. Theory and Society, Special Issue on Circulation vs. Reproduction of Elites during the Postcommunist Transformation of Eastern Europe. 24(5).
Szelenyi, I. & Szelenyi, S. (1995b) A Circulation or Reproduction of Elites during the Postcommunist Transformation in Russia and Eastern Europe. Washington, DC: The National Council for Soviet and East European Research. Retrieved from: http://www.ucis.pitt.edu/nceeer/1995-806-29-Szelenyi.pdf (10.10.2013).
Šimić Banović, R. (2012). Interviews for the PhD dissertation and related research ?Institutional Change in Transitional Economies: Analysis of the Croatian Business Environment?. Faculty of Economics, University of Ljubljana.
Šimić Banović, R. (2015). Cutting red ribbon, but not the red tape: the failure of a business environment reform in Croatia. Post-Communist Economies. 27(1).
Tabellini, G. (2010). Culture and Institutions: Economic Development in the Regions of Europe. Journal of the European Economic Association, 8(4). http://dx.doi.org/10.1111/j.1542-4774.2010.tb00537.x.
Upchurch, M. & Marinkovic, D. (2011). Wild capitalism, privatisation and employment relations in Serbia. Employee Relation,. 33(4).
Uvalic, M. (2012). Transition in Southeast Europe. Understanding Economic Development and Institutional Change. In: G. Roland (Ed.). Economies in Transition: The Long-Run View. United Nations University ? World Institute for Development Economics Research. Basingstoke, UK: Palgrave Macmillan.
Williamson, J. (1992). The Eastern Transition to a Market Economy: A Global Perspective. London School of Economics and Political Science: Centre for Economic Performance. Retrieved October 5, 2011, Retrieved from: http://eprints.lse.ac.uk/21055/1/The_Eastern_Transition_to_a_Market_Economy_A_Global_Perspective.pdf.
Williamson, O. (2000). The New Institutional Economics: Taking Stock, Looking Ahead. Journal of Economic Literature, 38(3). http://dx.doi.org/10.1257 /jel.38.3.595.
Županov, J. (2002). Od komunističkog pakla do divljeg kapitalizma. Zagreb: Hrvatska sveučilišna naklada.
Downloads
Published
2015-03-31
How to Cite
Banovic, R. S. (2015). (Former) informal networks as a reflection of informal institutions in East European transitional societies: legacy or opportunism?. Equilibrium. Quarterly Journal of Economics and Economic Policy, 10(1), 179–205. https://doi.org/10.12775/EQUIL.2015.009
Issue
Section
Varia
