Law Works in Russia: The Role of Legal Institutions in the Transactions of Russian Enterprises

Abstract

We use survey data to examine whether law and legal institutions add value to Russian transactions. Enterprises view legal institutions relatively benignly. Inter-enterprise contacts are important in resolving transactional problems, but courts are used when negotiations fail. Legal strategies affect transactional success, while the potential for hold-up reduces success and the nature of ownership and control affect the ability to sustain relationships. We conclude that law works in Russia because our results show that the economic and institutional environment rewards enterprises that invest effort in constructing contracts, that possess superior legal knowledge, and that orient legal work to new opportunities.

JEL Classification: K12, L14, K40, P50