The changing role of personal networks during Russian transformation: challenges for Russian management

Abstract

PurposeThis paper aims to discuss the important and changing role of personal networks for transformation in Russia, and the related challenges for management. Formal institutions supporting the transformation to a market economy have been weak and Russian managers still tend to rely on personal networks. While these networks are important in all economies, they play a different role in full‐fledged market economies than in planned economies.Design/methodology/approachThe paper is conceptual and is based on literature on the nature of markets, the Soviet planned economy, and the transformation process in Russia. A business network approach is used to understand markets and focus on the dynamics of overlapping business and personal networks.FindingsOverlapping between business networks involving non‐Russian networks and between personal and business networks are important drivers of transformation. The challenges for management in Russia are both organizational and strategic, and transformation implies substantial changes in the network structures.Research limitations/implicationsThe authors recommend further empirical analysis of the role that the overlapping of business and personal networks plays in transformation, as well as its managerial implications.Practical implicationsThis paper shows why firms must build business relationships during transformation that are integrated in nature and in which personal relations support the technical, logistical, financial, and knowledge exchange dimensions.Originality/valueThis paper challenges the dominating view of transformation, which says that market exchange is transactional, impersonal, and competition‐driven. The paper analyzes transformation in Russia as a network overlapping process in which the role of personal relations changes.