Industrial Associations as a Channel of Business-Government Interactions in Imperfect Institutional Environment: The Russian Case

Abstract:     
International lessons from emerging economies suggest that business associations may provide an effective channel of communication between the government and the private sector. This function of business associations may become still more important in transition economies, where old mechanisms for coordination of enterprise activities have been destroyed, but the new ones have not been established yet. In this context, Russian experience is a matter of interest, because Russia was regarded for a long time as a striking example of state failures and market failures. Consequently, the key point of our study was a description of the role and place of business associations in the present-day Russian economy and their interaction with member companies and bodies of state administration.

Relying on the survey data of 957 manufacturing firms, conducted in 2009 we found that business associations are more frequently joined by larger companies, firms located in regional capital cities, and firms active in investment and innovation. By contrast, business associations tend to be less frequently joined by business groups’ subsidiaries and firms that were non-responsive about their respective ownership structures. Our regression analysis has also confirmed that business associations are a component of what Frye (2002) calls an “elite exchange” – although only on regional and local levels. These “exchanges” imply that members of business associations, on the one hand, more actively assist regional and local authorities in social development of their regions, and on the other hand, they more often receive support from authorities. However, this effect is insignificant in terms of support from the federal government.

In general, our results allow us to believe that at present, business associations (especially the industry-wide and “leading” ones) consolidate the most active, advanced companies and act as collective representatives of their interests. For this reason, business associations can be regarded as interface units between the authorities and businesses and as a possible instrument for promotion of economic development.

Number of Pages in PDF File: 34

Keywords: business associations, Russia, imperfect institutions

JEL Classification: L31, O02, O17

working papers series