Secure Property as a Bottom-Up Process: Firms, Stakeholders, and Predators in Weak States

Abstract

How do property rights become secure? How does rule of law take hold in an economy? I use an original survey of 516 firms in Russia and Ukraine, as well as interview-based case studies, to re-examine these fundamental issues of political economy. Most states in the developing world lack the requisite time horizons and institutional capacity to make credible commitments emphasized in the literature. In this context, I argue that firms can enforce their property rights without resort to mafias by forming alliances with stakeholders such as foreign actors, community residents, and labor. These stakeholders can impose costs on the potential aggressors through diverse political strategies, allowing firms to defend their property rights not only from private predators but also from the state. The article evaluates this “bottom-up” theory of secure property rights against existing state-based theorizing.

Keywords: Property Rights, Russia, Ukraine, Post-Communist Transition, Corporate Strategy, Corporate Governance

JEL Classification: P14, P16, P26, P20, P37, P52, P48, O17, O38, N40, N44, N80, K42, Z13, Z18, A14, D73, D78