Entrepreneurship and institutional change in transition economies: The Commonwealth of Independent States, Central and Eastern Europe and China compared

Abstract

This paper examines the interrelationships between institutional change and entrepreneurship development in countries that until recently were operating under the rules of central planning. The evidence presented in the paper shows important differences in state-entrepreneurship relationships between former Soviet republics, where the slow pace of institutional change and major institutional deficiencies has constrained the development of productive entrepreneurship; Central European countries that are now part of the European Union (EU), where institutional changes associated with accession to the EU are associated with the state becoming an important agent of formal and informal institutional change; and China which presents something of a conundrum, since entrepreneurship has developed rapidly despite major formal institutional deficiencies. Yang's concept of double entrepreneurship is used to explain the so-called Chinese puzzle, where enterprise takes on a socio-political as well as a purely economic dimension. The paper demonstrates the complexity of institutional-entrepreneurship relationships, illustrated with examples of how entrepreneurs can influence institutional change even in hostile institutional environments.