The transition from state socialism toward market capitalism has led to an almost endless supply of new laws and legal institutions. Industrial enter, prises need to adapt to this new institutional regime. In-house lawyers are well placed to be agents of change in facilitating this adjustment. Using survey data from 328 Russian enterprises, the article examines the role of company lawyers, asking whether they have fulfilled this potential. Legal expertise is not in short supply, but lawyers are marginalized within the enterprise. They focus on established, routine tasks, such as handling labor relations or drafting form contracts, rather than on shaping enterprise strategies in the newer areas created by the transition, such as corporate governance or securities law. The failure of in-house lawyers to emerge as agents of change in Russia reflects a continuation of their low status during the Soviet era and the lack of professional identity among these company lawyers.

The transition from plan to market provides a rare opportunity for insight into the endogenous development of economic institutions. Economic activities during the Soviet regime were coordinated by a central authority. These coordinating mechanisms were disrupted during the transition period, leading to an increase in the transaction costs for firms. Blanchard and Kremer (1997), among others, emphasize the negative impact of this “disorganization” on output behavior at the beginning of transition. Though this argument is correct, we believe that this and similar works stop short of a fuller characterization of transition by concentrating only on the disruptive effects of the reform process. This paper begins where the former works end by examining one of the key institutions that have emerged spontaneously in response to the challenges of transition: business associations. Its main contribution is to provide empirical evidence that institutions that help coordinate production and trade spontaneously emerge in an environment characterized by widespread “disorganization”. Using a largely unexplored, firm-level data set, we document the emergence of business associations at the beginning of transition and provide evidence that these new coordinating institutions mitigated the initial output decline. Building on the growing literature on transaction costs and complexity, we interpret the emergence of these informal institutions as the firms’ rational response to coordinate activities in a decentralized economy.

The transition from plan to market provides a rare opportunity for insight into the endogenous development of economic institutions. Economic activities during the Soviet regime were co-ordinated by a central authority. These co-ordinating mechanisms were disrupted during the transition period, leading to an increase in the transaction costs for firms. Blanchard and Kremer (1997), among others, emphasise the negative impact of this "disorganisation" on output behaviour at the beginning of transition. Though this argument is correct, we believe that this and similar works stop short of a fuller characterisation of transition by concentrating only on the disruptive effects of the reform process. This paper begins where the former works end by examining one of the key institutions that have emerged spontaneously in response to the challenges of transition: business associations. Its main contribution is to provide empirical evidence that institutions that help co-ordinate production and trade spontaneously emerge in an environment characterised by widespread "disorganisation". Using a largely unexplored, firm-level data set, we document the emergence of business associations at the beginning of transition and provide evidence that these new co-ordinating institutions mitigated the initial output decline. Building on the growing literature on transaction costs and complexity, we interpret the emergence of these informal institutions as the firms' rational response to co-ordinate activities in a decentralised economy.

We examine how Russian enterprises do business with one another, focusing on the strategies used to obtain efficiency and predictability in their transactions. Using survey data, the paper analyzes the relative importance of relational contracting, self-enforcement, enterprise networks, private security firms, administrative institutions, and courts. Enterprise-to-enterprise negotiations are preferred, but courts are used when disputes resist resolution through negotiation. Consistently, little evidence suggests enterprises resort to private enforcement, indicating overstatement in the supposed connection between weakness in law and the mafia's rise. Legacies of the old administrative enforcement mechanisms are few, although enterprise networks from Soviet days remain resilient.

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.

The transition from plan to market provides a rare opportunity for insight into the endogenous development of economic institutions. Economic activities under the Soviet regime were coordinated by a central authority. Soviet coordinating mechanisms were disrupted during the transition period, leading to an increase in firms'transactions costs. Blanchard and Kremer (1997), among others, emphasize the negative impact of thisdisorganizationon output behavior at the beginning of the transition. Although their argument is correct, the authors believe that their work and similar analyses stop short of fully characterizing the transition by concentrating only on reform's disruptive effects. The authors start where the earlier work ends, examining the business associations that emerged spontaneously in response to the transition's challenges. They provide empirical evidence that institutions that help coordinate production and trade emerge spontaneously in a widelydisorganizedenvironment. Using a largely unexplored set of firm-level data, they document the emergence of business associations at the beginning of the transition and provide evidence that these new coordinating institutions mitigated the initial decline in output. Building on the growing literature on complexity and transaction costs, they interpret the emergence of these informal institutions as the firms'rational attempt to coordinate activities in a decentralized economy. In other words, the creation of complex organizations such as associations is the spontaneous result of a natural tendency in every system to create order at the edge of chaos. Business associations are more likely to emerge where there is disorder to provide their members with stability, coordination, and the information needed to improve performance.

We examine whether Galanter's repeat player (RP) concept helps in deciphering the law-related behavior of Russian enterprises. We adapt the RP concept to the Russian context defining the Russian repeat player (RRP). Using data from 328 enterprises, we examine whether RRP-ness explains the use of protokols of disagreement, petitioning to freeze assets, contractual prepayment, and litigation activity. RRPs are very different from Galanter's RPs, generally exhibiting less aggression and innovativeness, but suing other RRPs frequently. Examination of factors other than RRP-ness suggests the presence of lawyers is important in determining law-related activity, a result not necessarily expected in Russia.

to the Center on Institutional Reform and the Informal Sector (IRIS). The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the World Bank, its Executive Directors, or the countries they represent.

This article inquires into the attitude of Russian enterprises toward law and legal institutions within the context of conflict resolution. The authors examine the regional variation in how Russian enterprises do business with one another, focusing on specific strategies used to resolve conflict. Contrary to popular belief, the Russian business world is not exactly a "Wild East" where the enforcement of commercial obligations must be done through dubious means. Litigation and the use of the law are seen as options, thus indicating a certain level of legitimacy conferred on the legal sphere. At the same time, however, enterprises seem to favour informal avenues of conflict resolution. The present analysis is grounded in a survey of industrial enterprises in six Russian cities. The authors compare the use and the effectiveness of various strategies across regions, including relational contracting, self-enforcement, enterprise networks, private enforcers, administrative agencies, and courts. The differences are evaluated to determine whether regions emerge as a significant causal factor. While the data show variation, it is less than expected. With the exception of Moscow and to a certain extent Bamaul, few patterns emerge despite the variation among the regions in the use of strategies by the surveyed enterprises. The authors' research shows little support for the use of private force in contractual relations. The authors call for a reevaluation of the popular view that economic reform has been thwarted by the absence of viable mechanisms for enforcing contracts and other property rights. Cet article s'intdresse a 'attitude des entreprises russes face au droit et aux institutions judiciaires dans le contexte de r6solution de conflit. Les auteurs examinent ]a variation r6gionale dans la mani~re dont les entreprises russes font affaire entre elles, en se concentrant sur les strat6gies particulires employdes pour r.soudre tout conflit. Contrairement At ce que l'on croit, le monde des affaires russe n'est pas un monde ott l'exdcution d'obligations commerciales doit 8tre faite par des moyens douteux. Le litige et le recours au droit sont pergus comme 6tant des options, indiquant ainsi qu'un certain niveau de 16gitimit6 a 6t6 conf&6 A la sphee juridique. Cependant, en m.me temps, les entreprises semblent prdfdrer des voies informelles de r~solution de conflit. L'analyse est fondde sur une 6tude d'entreprises industrielles dans six villes russes. Les auteurs comparent 'emploi et l'efficaciti de diverses stratgies ii travers les rdgions, incluant les relations contractuelles, 'auto-exdcution, les r6seaux d'entreprises, les agents privds d'exdcution, les agences administratives et les tribunaux. Les diffdrences furent 6valu.e.s pour ddterminer si les rdgions constituent un facteur de causalit6 important. Les donndes montrent une variation, mais celle-ci est moins marqude que prdvu. Ave l'exception de Moscou etjusqu'h un certain point Bamaoul, peu de modules 6mergent, malgrd la variation rdgionale dans 'emploi de stratdgies. La recherche des auteurs ddmontre qu'il existe peu d'appui pour 'emploi d'une force privde dans les relations contractuelles et les auteurs pr8nent une r66valuation de Ia perception populaire dictant que I'absence de rdforme &eenomique est due A I'absene de mdcanismes viables pour exdcuter les contrats et autres droits de propridt6.

Transition provides a rare opportunity for insight into the endogenous development of market institutions. Production activities during the Soviet regime were highly coordinated and organized by the central authority. These coordinating mechanisms were disrupted during the transition period leading to an increase in the transaction costs for firms. Blanchard and Kremer (1997), among others, emphasize the negative impact of this “disorganization” on output behavior at the beginning of transition. Though this argument is correct, we believe that this and similar works stop short of a fuller characterization of transition by concentrating on the disruptive effects of the reform process. This paper begins where the former works end by examining one of the key institutions that have emerged spontaneously in response to the challenges of transition: business associations. Its main contribution is to provide empirical evidence that “institutions”, which help coordinate production and trade, spontaneously emerge in an environment characterized by widespread “disorganization”. sing a largely unexplored, firm-level data set, we document the emergence of business associations at the beginning of transition and provide evidence that these new coordinating institutions mitigated the initial output decline. Building on the recent advance of the science of complexity, we interpret the emergence of these informal institutions as the firms’ spontaneous attempt to coordinate activities in a decentralized economy.

Four specialists on the Russian economy analyze the extent to which enterprises use law and legal institutions in structuring exchange relations. The analysis uses the responses from questionnaires administered to sixty officials of fifteen enterprises in Moscow and Yekaterinburg during May-June 1996, supplemented by interviews in enterprises and within arbitrazh courts. Their results indicate that enterprises make little use of law and consider legal institutions to be ineffective. Other than ties based on historic business relations, there is an absence of social and economic networks that might function as substitutes for law. The underdevelopment of institutions to foster impersonal relations between firms slows restructuring and growth. Journal of Economic Literature, Classification Numbers: P51, P11, K1.

The World EconomyVolume 17, Issue 3 p. 293-322 Departures from the Ruble Zone: The Implications of Adopting Independent Currencies Linda S. Goldberg, Linda S. Goldberg LINDA S. GOLDBERG is from the Department of Economics, New York University and NBER. BARRY W. ICKES is from the Department of Economics, the Pennsylvania State University. RANDI RYTERMAN is from the World Bank, Washington DC. They are grateful to Barry Eichengreen, Andre Sapir, Wolfram Schrettl, and Kaz Stanczak and anonymous reviewers for comments on an earlier draft of this paper. Linda Goldberg is grateful for the research support provided by the CV Starr Center for Applied Economics, the National Science Foundation, and the Social Science Research Council. Barry Ickes and Randi Ryterman appreciate the financial support from the National Council for Soviet and East European Research, IRIS, and the World Bank.Search for more papers by this authorBarry W. Ickes, Barry W. Ickes LINDA S. GOLDBERG is from the Department of Economics, New York University and NBER. BARRY W. ICKES is from the Department of Economics, the Pennsylvania State University. RANDI RYTERMAN is from the World Bank, Washington DC. They are grateful to Barry Eichengreen, Andre Sapir, Wolfram Schrettl, and Kaz Stanczak and anonymous reviewers for comments on an earlier draft of this paper. Linda Goldberg is grateful for the research support provided by the CV Starr Center for Applied Economics, the National Science Foundation, and the Social Science Research Council. Barry Ickes and Randi Ryterman appreciate the financial support from the National Council for Soviet and East European Research, IRIS, and the World Bank.Search for more papers by this authorRandi Ryterman, Randi Ryterman LINDA S. GOLDBERG is from the Department of Economics, New York University and NBER. BARRY W. ICKES is from the Department of Economics, the Pennsylvania State University. RANDI RYTERMAN is from the World Bank, Washington DC. They are grateful to Barry Eichengreen, Andre Sapir, Wolfram Schrettl, and Kaz Stanczak and anonymous reviewers for comments on an earlier draft of this paper. Linda Goldberg is grateful for the research support provided by the CV Starr Center for Applied Economics, the National Science Foundation, and the Social Science Research Council. Barry Ickes and Randi Ryterman appreciate the financial support from the National Council for Soviet and East European Research, IRIS, and the World Bank.Search for more papers by this author Linda S. Goldberg, Linda S. Goldberg LINDA S. GOLDBERG is from the Department of Economics, New York University and NBER. BARRY W. ICKES is from the Department of Economics, the Pennsylvania State University. RANDI RYTERMAN is from the World Bank, Washington DC. They are grateful to Barry Eichengreen, Andre Sapir, Wolfram Schrettl, and Kaz Stanczak and anonymous reviewers for comments on an earlier draft of this paper. Linda Goldberg is grateful for the research support provided by the CV Starr Center for Applied Economics, the National Science Foundation, and the Social Science Research Council. Barry Ickes and Randi Ryterman appreciate the financial support from the National Council for Soviet and East European Research, IRIS, and the World Bank.Search for more papers by this authorBarry W. Ickes, Barry W. Ickes LINDA S. GOLDBERG is from the Department of Economics, New York University and NBER. BARRY W. ICKES is from the Department of Economics, the Pennsylvania State University. RANDI RYTERMAN is from the World Bank, Washington DC. They are grateful to Barry Eichengreen, Andre Sapir, Wolfram Schrettl, and Kaz Stanczak and anonymous reviewers for comments on an earlier draft of this paper. Linda Goldberg is grateful for the research support provided by the CV Starr Center for Applied Economics, the National Science Foundation, and the Social Science Research Council. Barry Ickes and Randi Ryterman appreciate the financial support from the National Council for Soviet and East European Research, IRIS, and the World Bank.Search for more papers by this authorRandi Ryterman, Randi Ryterman LINDA S. GOLDBERG is from the Department of Economics, New York University and NBER. BARRY W. ICKES is from the Department of Economics, the Pennsylvania State University. RANDI RYTERMAN is from the World Bank, Washington DC. They are grateful to Barry Eichengreen, Andre Sapir, Wolfram Schrettl, and Kaz Stanczak and anonymous reviewers for comments on an earlier draft of this paper. Linda Goldberg is grateful for the research support provided by the CV Starr Center for Applied Economics, the National Science Foundation, and the Social Science Research Council. Barry Ickes and Randi Ryterman appreciate the financial support from the National Council for Soviet and East European Research, IRIS, and the World Bank.Search for more papers by this author First published: May 1994 https://doi.org/10.1111/j.1467-9701.1994.tb00826.xCitations: 5AboutPDF ToolsRequest permissionExport citationAdd to favoritesTrack citation ShareShare Give accessShare full text accessShare full-text accessPlease review our Terms and Conditions of Use and check box below to share full-text version of article.I have read and accept the Wiley Online Library Terms and Conditions of UseShareable LinkUse the link below to share a full-text version of this article with your friends and colleagues. Learn more.Copy URL Share a linkShare onEmailFacebookTwitterLinkedInRedditWechat Citing Literature Volume17, Issue3May 1994Pages 293-322 RelatedInformation

Two American specialists on Soviet and East European economies examine the relationship between inter-enterprise payments for goods and services and economic reform in Russia. Based on extensive interviews with Russian governmental officials and enterprise directors, as well as unpublished documents, the authors trace and discuss the unsuccessful policies of the government and Central Bank of Russia to eliminate arrears during 1992-93. They also explain why financial underdevelopment poses a serious obstacle to economic reform, and why an effort to sharply tighten credit in 1993-94 could lead to cascading enterprise failures. The analysis includes references to the change after October 1993. Journal of Economic Literature Classification Numbers: P21, O17, G20.