Overlapping of networks during transformation of the Russian economy

This chapter focuses on the changing networks during the transformation from a centrally planned economy to a market economy in Russia, and more specifically on the role of overlapping between business networks and personal networks, referring also to overlapping between business networks and political networks. Our analysis builds on the notion of overlapping between networks: if one actor in one network develops a relationship with another actor in another network, a connection is created and the two networks overlap and might increasingly do so due to such overlapping processes. We apply the general idea of overlapping to the Russian context as a conceptual tool to describe and analyze not only transformation but market dynamics in general. Taking the markets-as-networks view and focusing on the dynamics of business relationships, we present two major arguments in our analysis of transformation in Russia. First, interpersonal (social) interaction is an integral part of economic activities but its role is changing during transformation to a market economy. Second, an important characteristic of a market economy is the existence of full-fledged dynamic business relationships. Creation of these has been the key challenge for Russian managers, for which they need organizational capabilities and network strategies. We argue that international business has an important role in the transformation owing to its dynamic effect on social and business networks in Russia, and that the necessary learning and diffusion of essential ‘market economy behavior’ in terms of both competition and cooperation between business firms is promoted by the development of business relationships between Russian and Western firms.