The importance of being networked: The costs of informal networking in the Western Balkans region

This is the first study to measure the size and costs of informal networking, quizzing the premise that informal networks benefit individuals, households and entrepreneurs. On the basis of survey data from the Western Balkans (WB) and empirical analysis, we establish that informal networking, or use of personal contacts for getting things done, has a regular occurrence in the region and its economic cost is substantial. In the structure of networking costs, the costs of invested time dominate over money. Respondents who perceive networking as important and beneficial tend to invest more time and money to maintain their networks. Higher costs are associated with larger networks, which are predominantly built on strong ties. The informal networking costs are also higher for those with better education and income, and in particular for entrepreneurs. Consequently, individuals bear the high costs of informal networking not only for social and culturally determined reasons, but to a large extent for instrumental purposes. Our data suggest that both sociability and instrumentality drive informal networking, which makes it an outcome of both informal constraints (taboos, customs, traditions, and codes of conduct) and inefficient formal rules (constitutions, laws, property rights).