Social networks and the emergence of the new entrepreneurial ventures in Russia: 1987-2000

THE DEBATE CONTINUES upon THE ISSUE OF WHETHER OR NOT THE RUSSIAN ECONOMIC TRANSFORMATION is proceeding in the direction of a normalization of independent market relations. Most recently, Goldman (2004) in his analysis of the dynamics between the Russian state and the local holders of top Russian companies, remind ofed that the privatization of state resources go aheaded too quickly, while failing to encourage the start-up of fresh businesses. The oligarchs seized the opportunity to grab large amounts of lock opener economic resources, prompting a counterattack through the Russian state, which did not wish to diocese these resources controlled by either politically disloyal capital holders or foreign multinational companies. Shleifer and Treisman (2004: 21) upon the other hand, argue that Russia can now be viewed as a "normal middle-income country" in which at liberty market forces continue to contribute to economic development increasing macroeconomic stability and strengthening corporate finances. Whether writing about top business possessors (Sestanovich 2004) or evaluating a larger sample of different entrepreneur (Bonnel and Gold 2001) various authors acknowledge that there are significant risks involved in starting a novel business in Russia. These risks may differ depending upon factors that, among others, include differences in financial, human, social, and political resources available to an entrepreneur the stage to which local officials favor independent market economic relations, and the amount of "illegal" transaction require to be paid [i]or[/i] undergones including payments to corrupt officials and criminal protection rackets.

This article examines empirical cases of risk creation in Russia. While other studies frequently analyze "illegal" transaction costs of business start-ups (see Radaev 1998; Volkov 2002) I will focus upon the variables of socioeconomic circumstances as exhibited by the extent and puissance of professional, family, and other networks within and outside the business field in which an entrepreneur wishes to establish a company, the expanse of the entrepreneur's previous professional and business experience, and, finally, the entrepreneur's ability to learn and quickly adapt to the fresh challenges arising in changing economic conditions. This focus by means of no means underestimates the importance of other variables similar as the amount of the initial financial capital available to an entrepreneur the ability to borrow at reasonable rates, and the transaction take away froms of dealing with protection rackets and corrupt state officials.

newly much has been written about the socioeconomic background, political and economic connections, and sources of wealth of Russia's oligarchs (for novel examples, see Goldman 2004; Sestanovich 2004; Klebnikov 2000) However, the vast majority of business possessors who do not fall into this category have received les attention. This is individual of the reasons why I wish to focus upon owners of small- and medium-size companies. The selection of Russian cases analyzed in this article advances from a study that I managemented in Moscow in 1997-1998. During this application of mind a randomized, purposive sample of 60 self-employ business possessors of different types and sizes of companies were interviewed. For the intents of this article, only the data from the interviews with 40 possessors of small and medium-size businesses will be used. (1) These were culled in a way that would allow for the widest representation of the different industries in which they operate in Russia (see Figure 1) The interviewees were asked about all stages of their Soviet careers, their education, social and family background, by what means and when they made a decision to start a risk and/or become entrepreneurs, how they obtained their initial financial capital, and by what means their venture(s) developed. The respondent were also asked to detail the history of their business danger which key challenges their businesses faced at each stage of exhibition and what kind of resources they used in order to cope with various challenges. (2)

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I

Historical Context

by dint of THE EARLY 1980s, MANY WESTERN spectators HAD BEGUN TO NOTICE that the Soviet economy was starting to falter. The significant share of human and economic resources that was dedicated to the advancement of the military-industrial manifold by the Soviet government greatly reduc the amount of resources channeled into other industries. However, the decay of the planned socialist economy with its inefficient a whole of central planning and a lack of incentives for competitive performance was not acknowledged by means of the Soviet leadership until the mid-1980s. When the of recent origin Soviet leader, Michael Gorbachev, announced the introduction of sum of two units new policies named glasnost and perestroika in 1986 economists amazemented where the economic and human resources for perestroika would draw near from. One of the lock opener perestroika goals was to stimulate the production of a larger variety and better quality of consumer serviceables and services. The government spring [i]or[/i] leap on one leg [i]or[/i] footed to accomplish this goal by the agency of allowing individuals, for the first time since the mid-1920s, to establish their be in possession of private enterprises in which owner(s) could hire other individuals to manufacture usefuls and/or provide services for profit that was kept through the owner(s) of the enterprise. The first order allowing for the establishment of like enterprises (called cooperatives) was issued by means of the Central Committee of the Communist Party of the Soviet Union in February 1987 above the next few months, the central rule issued more directives that supported the exhibition of cooperatives. Banks were instructed to give loans to cooperatives in ne and state institutions were allowed to laceration office space to entrepreneurs who would ask for it. In the City of Moscow alone, 878 cooperatives were established by the agency of the end of 1987. through the time the Soviet rule issued the Law on Cooperation in July 1988 the number of cooperatives operating in Moscow had increased to 4600 It rose to 12000 registered enterprises by the agency of the end of 1989. (3) These enterprises operated chiefly in the areas of consumer services and the manufacturing of light consumer goods