Disorganization or self-organization : the emergence of business associations in a transition economy
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 this"disorganization"on 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 widely"disorganized"environment. 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.
|Date of creation:||31 Jan 2001|
|Date of revision:|
|Contact details of provider:|| Postal: 1818 H Street, N.W., Washington, DC 20433|
Phone: (202) 477-1234
Web page: http://www.worldbank.org/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Commander, Simon & Coricelli, Fabrizio, 1992. "Output decline in Hungary and Poland in 1990-91 : structural change and aggregate shocks," Policy Research Working Paper Series 1036, The World Bank.
- Blanchard, Olivier & Kremer, Michael R., 1997.
3659691, Harvard University Department of Economics.
- Olivier Blanchard & Michael Kremer, 1997. "Disorganization," William Davidson Institute Working Papers Series 38, William Davidson Institute at the University of Michigan.
- Blanchard, O & Kremer, M, 1996. "Disorganization," Working papers 96-30, Massachusetts Institute of Technology (MIT), Department of Economics.
- Ickes, B.W., 1995. "The Organization of Markets and Its Role in Macroeconomic Stabilization During Transition," Papers 11-95-8, Pennsylvania State - Department of Economics.
- John Haltiwanger & Michael Waldman, 1985.
"Rational Expectations in the Aggregate,"
UCLA Economics Working Papers
327, UCLA Department of Economics.
- Diamond, Peter A, 1982.
"Aggregate Demand Management in Search Equilibrium,"
Journal of Political Economy,
University of Chicago Press, vol. 90(5), pages 881-94, October.
- Clay, Karen, 1997. "Trade, Institutions, and Credit," Explorations in Economic History, Elsevier, vol. 34(4), pages 495-521, October.
- Enrico C. Perotti & Stanislav Gelfer, 1998.
"Investment Financing in Russian Financial-Industrial Groups,"
William Davidson Institute Working Papers Series
242, William Davidson Institute at the University of Michigan.
- Enrico C. Perotti & Stanislav Gelfer, 1998. "Investment Financing in Russian Financial-Industrial Groups," Tinbergen Institute Discussion Papers 98-053/2, Tinbergen Institute.
- John McMillan & Christopher Woodruff, 1998.
"Interfirm Relationships and Informal Credit in Vietnam,"
William Davidson Institute Working Papers Series
132, William Davidson Institute at the University of Michigan.
- John McMillan & Christopher Woodruff, 1999. "Interfirm Relationships and Informal Credit in Vietnam," The Quarterly Journal of Economics, Oxford University Press, vol. 114(4), pages 1285-1320.
- McMillan, John & Woodruff, Christopher, 1998. "Inter-Firm Relationships and Informal Credit in Vietnam," CEPR Discussion Papers 2036, C.E.P.R. Discussion Papers.
- Alberto Alesina & Eliana La Ferrara, 1999.
"Participation in Heterogeneous Communities,"
NBER Working Papers
7155, National Bureau of Economic Research, Inc.
- de Melo, Martha & Denizer, Cevdet & Gelb, Alan, 1996. "From plan to market : patterns of transition," Policy Research Working Paper Series 1564, The World Bank.
- Greif, Avner, 1994. "Cultural Beliefs and the Organization of Society: A Historical and Theoretical Reflection on Collectivist and Individualist Societies," Journal of Political Economy, University of Chicago Press, vol. 102(5), pages 912-50, October.
- Anders Åslund & Peter Boone & Simon Johnson, 1996. "How to Stabilize: Lessons from Post -communist Countries," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(1), pages 217-314.
- Ickes, B. & Ryterman, R. & Tenev, S., 1995. "On Your Marx, Get Set, Go: The Role of Competition in Enterprise Adjustment," Papers 11-95-9, Pennsylvania State - Department of Economics.
- Brown, A.N. & Ickes, B. & Ryterman, R., 1993. "The Myth of Monopoly: A New View of Industrial Structure in Russia," Papers 10-93-5, Pennsylvania State - Department of Economics.
- Paul R. Milgrom & Douglass C. North & Barry R. Weingast, 1990. "The Role Of Institutions In The Revival Of Trade: The Law Merchant, Private Judges, And The Champagne Fairs," Economics and Politics, Wiley Blackwell, vol. 2(1), pages 1-23, 03.
- Greif, Avner & Milgrom, Paul & Weingast, Barry R, 1994. "Coordination, Commitment, and Enforcement: The Case of the Merchant Guild," Journal of Political Economy, University of Chicago Press, vol. 102(4), pages 745-76, August.
- Johnson, Simon & McMillan, John & Woodruff, Christopher, 1999.
"Contract Enforcement in Transition,"
CEPR Discussion Papers
2081, C.E.P.R. Discussion Papers.
- William N. Evans & Robert M. Schwab, 1995. "Finishing High School and Starting College: Do Catholic Schools Make a Difference?," The Quarterly Journal of Economics, Oxford University Press, vol. 110(4), pages 941-974.
When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:2539. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi)
If references are entirely missing, you can add them using this form.