When entering Russian business networks, foreigners must anticipate that their welcome will depend strongly on the effects of their presence on rent extraction capacities of existing enterprises' managers. Entrance costs into Russian producer networks are high, since time is needed to understand the highly complex internal structures. Russian partners may fail to make mutually favorable agreements and fail to show flexibility due to internal power considerations. Given this internal structure and the interests of those involved there are possibilities, not only that Russian networks will remain relatively secluded from European networks, but also that the existing network structures become an instrument for preserving the institutional status quo in Russia. We argue that these networks rise out of the interests that evolve in specific cultural, historical, and institutional environments and are subject to continuous evolutionary change.
Networks minimize transaction costs and lock partners into the relationship.
In general, business networks have been documented in industries where high flexibility is needed due to rapidly developing markets, substantial capital requirements, or when producers have found innovative ways to upgrade standardized products by linking themselves to upstream enterprises through creation of limited asset specificity. The Particularities of Transition Economies and Their Impact on Networks 2.1. In the socialist economy, although planners were highly sensitive to the role of spillovers across regions and industries in industrial development, co-ordination on a macro level relied excessively on hierarchical elements. Prices as means of an information generating device did not exist. In contrast to the networks in mature market economies, relationships in socialist production were based exclusively on quantities that needed to be produced.