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...

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Main Authors: Recanatini, Francesca, Ryterman, Randi
Format: Policy Research Working Paper
Language:English
en_US
Published: World Bank, Washington, DC 2014
Subjects:
Online Access:http://documents.worldbank.org/curated/en/2001/01/891733/disorganization-or-self-organization-emergence-business-associations-transition-economy
http://hdl.handle.net/10986/19713
id okr-10986-19713
recordtype oai_dc
spelling okr-10986-197132021-04-23T14:03:44Z Disorganization or Self-Organization : The Emergence of Business Associations in a Transition Economy Recanatini, Francesca Ryterman, Randi ACCESS TO INFORMATION BUSINESS ASSOCIATION BUSINESS ASSOCIATIONS CENTRAL PLANNING CENTRALLY PLANNED ECONOMIES CONTRACT ENFORCEMENT EMPIRICAL ANALYSIS EMPIRICAL EVIDENCE EQUILIBRIUM EXCESS SUPPLY GDP GOVERNMENT INSTITUTIONS GOVERNMENT SUBSIDIES INCOME INNOVATION INSTITUTIONAL ARRANGEMENTS INSTITUTIONAL DEVELOPMENT INTERNATIONAL TRADE MACROECONOMIC POLICY MANAGERS MARKET ECONOMY NETWORK EXTERNALITIES ORGANIZATIONAL STRUCTURE PRODUCT MARKETS PUBLIC SECTOR SOCIAL ACTIVITIES STRATEGIC COMPLEMENTARITIES TRANSACTION COSTS 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. 2014-08-26T20:02:36Z 2014-08-26T20:02:36Z 2001-01 http://documents.worldbank.org/curated/en/2001/01/891733/disorganization-or-self-organization-emergence-business-associations-transition-economy http://hdl.handle.net/10986/19713 English en_US Policy Research Working Paper;No. 2539 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research Europe and Central Asia Russian Federation
repository_type Digital Repository
institution_category Foreign Institution
institution Digital Repositories
building World Bank Open Knowledge Repository
collection World Bank
language English
en_US
topic ACCESS TO INFORMATION
BUSINESS ASSOCIATION
BUSINESS ASSOCIATIONS
CENTRAL PLANNING
CENTRALLY PLANNED ECONOMIES
CONTRACT ENFORCEMENT
EMPIRICAL ANALYSIS
EMPIRICAL EVIDENCE
EQUILIBRIUM
EXCESS SUPPLY
GDP
GOVERNMENT INSTITUTIONS
GOVERNMENT SUBSIDIES
INCOME
INNOVATION
INSTITUTIONAL ARRANGEMENTS
INSTITUTIONAL DEVELOPMENT
INTERNATIONAL TRADE
MACROECONOMIC POLICY
MANAGERS
MARKET ECONOMY
NETWORK EXTERNALITIES
ORGANIZATIONAL STRUCTURE
PRODUCT MARKETS
PUBLIC SECTOR
SOCIAL ACTIVITIES
STRATEGIC COMPLEMENTARITIES
TRANSACTION COSTS
spellingShingle ACCESS TO INFORMATION
BUSINESS ASSOCIATION
BUSINESS ASSOCIATIONS
CENTRAL PLANNING
CENTRALLY PLANNED ECONOMIES
CONTRACT ENFORCEMENT
EMPIRICAL ANALYSIS
EMPIRICAL EVIDENCE
EQUILIBRIUM
EXCESS SUPPLY
GDP
GOVERNMENT INSTITUTIONS
GOVERNMENT SUBSIDIES
INCOME
INNOVATION
INSTITUTIONAL ARRANGEMENTS
INSTITUTIONAL DEVELOPMENT
INTERNATIONAL TRADE
MACROECONOMIC POLICY
MANAGERS
MARKET ECONOMY
NETWORK EXTERNALITIES
ORGANIZATIONAL STRUCTURE
PRODUCT MARKETS
PUBLIC SECTOR
SOCIAL ACTIVITIES
STRATEGIC COMPLEMENTARITIES
TRANSACTION COSTS
Recanatini, Francesca
Ryterman, Randi
Disorganization or Self-Organization : The Emergence of Business Associations in a Transition Economy
geographic_facet Europe and Central Asia
Russian Federation
relation Policy Research Working Paper;No. 2539
description 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.
format Publications & Research :: Policy Research Working Paper
author Recanatini, Francesca
Ryterman, Randi
author_facet Recanatini, Francesca
Ryterman, Randi
author_sort Recanatini, Francesca
title Disorganization or Self-Organization : The Emergence of Business Associations in a Transition Economy
title_short Disorganization or Self-Organization : The Emergence of Business Associations in a Transition Economy
title_full Disorganization or Self-Organization : The Emergence of Business Associations in a Transition Economy
title_fullStr Disorganization or Self-Organization : The Emergence of Business Associations in a Transition Economy
title_full_unstemmed Disorganization or Self-Organization : The Emergence of Business Associations in a Transition Economy
title_sort disorganization or self-organization : the emergence of business associations in a transition economy
publisher World Bank, Washington, DC
publishDate 2014
url http://documents.worldbank.org/curated/en/2001/01/891733/disorganization-or-self-organization-emergence-business-associations-transition-economy
http://hdl.handle.net/10986/19713
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