Institutional Economic Theory Research Articles

NETWORK APPROACH IN SOCIAL ENTREPRENEURSHIP:PRELIMINARY RESULTSOF EMPIRICAL RESEARCH

The purpose of this article is to illustrate the possibilities of using network approach in social entrepreneurship as one of the key tools for the sustainability of social enterprises. The authors first consider the approaches to determine the nature of social entrepreneurship in general, as well as the prerequisites for applying network approach in social entrepreneurship in particular. Such a preliminary theoretical review is important, since despite the popularity of the concept “social entrepreneurship”, at the same time we observe great uncertainty and fragmentation in the theory of social entrepreneurship, in matters of legislative regulation and state support in this area. Defining the essence of social entrepreneurship through the prism of institutional analysis is most relevant, since it is an approach that makes it possible to correlate the benefits and costs of a particular form of organization at a fundamental level, to cover the phenomenon at large, and not just individual manifestations of its features. The effectiveness of the application of the network approach in various forms of organizations has long been proven both in the new institutional economic theory and in various management concepts. The application of network approach in social entrepreneurship is also relevant. The article considers certain implications in applying this form of organization of economic interaction in the field of social entrepreneurship. The paper presents the results of an empirical study conducted in February-April 2022 among Russian entrepreneurs while preparing for the interregional expert session «Entrepreneurial networks as a factor in the sustainable development of the territory». The survey conducted by the method of questioning, including closed and open questions involved 115 people from 30 regions of Russia - owners and founders of small and medium-sized businesses. The paper concludes with presenting possible ways of applying the results of empirical research for the development of network forms of organization in social entrepreneurship.

FOUNDATIONS OF CONTEMPORARY ECONOMICS: NEW INSTITUTIONAL ECONOMICS VS. NEW ECONOMIC SOCIOLOGY – THE GRANOVETTER-WILLIAMSON DEBATE

FOUNDATIONS OF CONTEMPORARY ECONOMICS: NEW INSTITUTIONAL ECONOMICS VS. NEW ECONOMIC SOCIOLOGY – THE GRANOVETTER-WILLIAMSON DEBATE

Identifying production costs of cut roses: An institutional economics perspective

In institutional economic theory, transaction costs are one of the main focuses of discussion. Transaction costs create inefficiencies in production. Roses are one of the main commodities produced by Batu City. This research aims to identify transaction costs that are borne by cut rose farmers in Batu City. Transaction costs result in higher production costs, thereby reducing farmers’ profits. This study uses a descriptive qualitative approach. Research data was obtained through interview techniques with cut rose farmers. The research results show that there are six types of transaction costs that are borne by farmers. Based on the calculation results, farmer transaction costs for 1 planting season are around IDR 7,040,433.00. These transaction costs result in decreased farmer’s profit of cut rose selling because the production cost raise.

Nonlinear effects of climate change on tourism development: evidence from China

Purpose The purpose of this paper is to have a deeper understanding of the nonlinear relationship between the impact of climate change on tourism development. Current studies on the effects of climate change on tourism development primarily rely on linear correlation assumptions. Design/methodology/approach Based on the New Institutional Economics theory, the institutional setting inherently motivates and ensures the growth of the tourism industry. For a precise evaluation of the nonlinear consequences of climate change on tourism, this paper concentrates on Chinese cities between 2011 and 2021, methodically analyzing the influence of climate change on tourism. Findings The study findings suggest that there is an “inverse U”-shaped nonlinear relationship between climate change and tourism development, initially strengthening and subsequently weakening. Based on these findings, the research further delves into how institutional contexts shape the nonlinear association between climate change and tourism growth. It was found that in a higher institutional backdrop, the “inverse U” curve tends to flatten and surpass the curve adjusted for a lesser institutional context. Upon deeper mechanism analysis, it was observed that cities with more advanced marketization, improved industrial restructuring and enhanced educational growth exhibit a more evident “inverse U”-shaped nonlinear connection between climate change and tourism evolution. Originality/value First, previous studies on climate change and tourism development largely rely on questionnaire data (Hu et al., 2022). In contrast to these studies, this paper uses dynamic panel data, which to some extent overcomes the subjectivity and difficulty of causality identification in questionnaire data, making our research conclusions more accurate and reliable. Second, this study breaks through the linear relationship hypothesis of previous literature regarding climate change and tourism development. By evaluating the nonlinear relationship of climate change to tourism development from the institutional pressure perspective, it more intricately delineates their interplay mechanism, expanding and supplementing the research literature on the relationship mechanism between climate change and tourism development. Thirdly, the conclusions of this study are beneficial for policymakers to better understand and assess the scope of climate change impacts. It also aids relevant departments in clarifying the direction of institutional environment optimization to elevate the level of tourism development when faced with adverse impacts brought about by climate change.

Потенциал применения институционализма в качестве теоретической основы государственного управления

State management of the socio-economic development of Russian society is carried out in the context of unprecedented anti-Russian sanctions, which necessitates a rethinking of approaches to economic analysis, which is the theoretical basis for the development of long-term forecasts of socio-economic development and socio-economic policy of the state. In the process of economic analysis in the emerging conditions of public administration, along with economic ones, it is necessary to take into account other significant social phenomena and processes, including the political and legal systems, social values immanent in Russian society, which is possible through the application of institutional economic theory based on an interdisciplinary approach to economic analysis. However, firstly, the founders of institutionalism are American scientists who analyze the American political and legal system and the culture of the American people, which excludes the direct use of institutionalism for the analysis of Russian political and legal reality and, secondly, to date, institutionalism has not been incorporated into a unified economic theory. formed. Based on the fact that institutionalism is recognized as a promising direction in the development of economic theory, the article points out the need for its adaptation to the socio-economic conditions of the development of Russian society, for which, first of all, it is necessary to develop common approaches to the definition of such basic concepts used in Russian institutionalism, as "institutional structure", "institutional environment". The analysis of the approaches of American and Russian scientists to the definition of the concept of the analyzed terms is carried out, on the basis of which, taking into account the Russian political and legal system, the author's definitions of the concept of "institutional structure" and "institutional environment" are proposed. The conclusion is substantiated that the use of these concepts in the proposed interpretation in the course of institutional analysis corresponds to an interdisciplinary approach to economic analysis, immanent institutionalism, is aimed at establishing institutionalism as a unified economic theory adapted to the realities of Russian society, capable of acting as a theoretical basis for effective public administration.

Conditions of institutionalism application as a theoretical basis for economic analysis

Russian society is a complex social system, the functioning of which is conditioned by socio-economic policy, the development process of which requires a comprehensive economic analysis of virtually all spheres of social interaction. The interdisciplinary scientific approach to economic analysis, which makes it possible to consider the impact on socio-economic development of various aspects of the state and society functioning, is inherent in institutional economic theory. However, the problem of its application to the Russian state and society analysis is that institutionalism developed by American scientists is based on analyzing the political and legal system of the United States of America, which differ significantly from the political and legal system of Russia. The purpose of the study is to determine the conditions for institutionalism application in the process of economic analysis of political and economic subsystems of Russian society and socio-economic policy development that meets the requirements of the time. The relevance of the study is conditioned by the impossibility of applying the neoclassical economic paradigm to conduct a comprehensive economic analysis of the social system, as well as by the institutionalism dynamic development, which applies an interdisciplinary approach to economic analysis. The study proposes measures aimed at adapting institutionalism to the conditions of Russia and its population development, formulates the author’s approach to the universal definition of its basic concepts. The study contributes to institutionalism development, promotes a unified institutional economic theory creation and the conditions for its application for the interdisciplinary economic analysis of various aspects of the Russian society development as a complex social system.

Development of small businesses producing cereals, legumes, and sunflower seeds in wartime conditions

Small businesses producing cereals, legumes, and sunflower seeds contribute to the country’s food security and environmental protection potential. The purpose of this study was to substantiate the social, economic, and conceptual foundations of small business entities’ activities in the production of cereals, legumes, and sunflower seeds in modern conditions. The methodological framework of the study included the provisions of institutional economic theory and functional analysis. To generalise the results, the study employed analysis, graphic, and abstract-logical methods, and approaches of generalisation of results. The motivational orientation of the functioning of small businesses engaged in the production of cereals, legumes, and sunflower seeds and their place in production and consumption were determined. The study found that in 2023, the company achieved a record grain yield of 51.8 100 kg/ha, which was driven by favourable weather conditions. It was substantiated that the cost of crop production has increased due to lower prices for agricultural products (maize by -41%; sunflower by -35%; wheat by -37%) and an almost twofold increase in the cost of plant protection products and fuel. It was proved that in 2017-2022, 91.79% of the variation in net profit is explained by the variation in the level of grain, legumes, and sunflower seeds sold by small businesses. It was found that the disruption of the sales system of small businesses producing cereals, legumes, and sunflower seeds, the low level of purchase prices and the considerable increase in prices for material and technical sources of survival and fertilisers due to the hostilities make production inefficient. The development of small businesses and family farming stays one of the priority areas of regional policy. The information and analytical material can be considered when creating regional programmes for the development of agrarian entrepreneurship.

Blockchain: The Economic and Financial Institution for Autonomous AI?

This paper examines how the combination of artificial intelligence (AI) and blockchain technology can enable autonomous AI agents to engage and execute economic and financial transactions. We critically examine the constraints on AI agents in achieving predefined objectives independently, especially due to their limited access to economic and financial institutions. We argue that AI’s access to these institutions is vital in enhancing its capabilities to augment human productivity. Drawing on the theory of institutional economics, we propose that blockchain provides a solution for creating digital economic and financial institutions, permitting AI to engage with these institutions through the management of private keys. This extends AI’s capabilities to form and execute contracts, participate in marketplaces, and utilize financial services autonomously. The paper encourages further research on AI as a general-purpose technology and blockchain as an institutional technology that can unlock the full capabilities of autonomous AI agents.

Institution as Principle Notion of Institutionalism: Definition Problems

The article analyzes approaches to defining institution being a central notion of institutionalism. It is clear that the term ‘institution’ is used by Russian economics in different meaning and the same is true for other humanitarian and social sciences, which points to inter-disciplinary nature of the notion. Apart from this, in institutionalism itself, due to different academic approaches to institutional economic theory there are various approaches to defining the notion ‘institution’, which, according to the author, hinders the dynamic development of institutionalism and thus requires correction. According to D. Nort, institution means norms of law, whose influence on economic development was studied in view of the Anglo-Saxon system of law and it is unacceptable within the frames of inter-disciplinary analysis of Russian economics. By analyzing definitions of the notion ‘institution’ put forward by Russian institutionalism researchers and their comparing with D. Nort’s approach a conclusion was drawn that the majority of Russian scientists in line with D. Nort define institution in broad and various wording and formal institutions are interpreted as norms of law formalized in enactments. Through analyzing tasks conferred on institution comprehension of institution in different types of institutionalism with due regard to inter-disciplinary nature of the notion and Russian economic and legal reality the author proposes a unique definition of institution as a central notion of institutionalism, which can foster the development of institutional economic theory used for the analysis of Russian economy, synthesis of social and humanitarian sciences and economic analysis of effective and new legal norms in the field of economic activity.

Calculation in the Agro-Industrial Complex: The Institutional Aspect

The purpose of the article is to study the application of an institutional approach to product calculation to study the asymmetry of information on production costs at enterprises of the agro-industrial complex (AIC). This problem is formulated in the context of the categories “uncertainty, rational choice, opportunism”; sources of asymmetry for the crop industry are identified in the form of uncertainty of cost elements, irrationality of using methods of production accounting and choosing distribution bases, causes of opportunism of accounting staff. Within the framework of the study, the improvement of cost calculation is based on the application of the provisions of the theory of institutional economics, a systematic analysis of economic processes in the field of agriculture and AIC, the theory of accounting for production costs and calculation. The author has established that at different historical stages of the development of accounting, the calculation methodology was improved under the influence of the prevailing economic system, determined by the regulator and routines. Such criteria as the type of uncertainty, the nature of the impact on costs, the institutions formed, and the management of uncertainty reduction are substantiated and proposed as criteria determining the institutional approach to the study of calculation. In the course of the work, dialectical and logical general scientific methods were used — analysis, synthesis, abstraction, generalization, induction, deduction, analogy. We believe that the results of the study and the author’s recommendations will be useful to specialists of the Ministry of Finance of the Russian Federation and the Ministry of Agriculture of the Russian Federation, and will also find application in educational institutions in the training of economists for agriculture.

The Plausibility Check of Governmental and Legal Intervention to the Free Market System

The notion that the market plays a significant role in empowering national economies has been consistently supported by several academic studies and corroborated by historical evidence. However, the process of achieving sustainable and inclusive economic development necessitates more than just relying on the free market system as the sole driving force. This study employs a literature review as the research methodology to initially examine the advantages of the market in terms of economic development. Additionally, it delves deeper into investigating the potential adverse consequences resulting from unrestricted market freedom. In the absence of government intervention, the free market may succumb to the influence of the affluent, ultimately diminishing its capacity to stimulate economic growth. This paper draws upon the principles of microeconomic theories, institutional economic theories, and economic law theories to argue that the activities of economic agents in the free market should be subject to institutional regulations in the form of rules and laws. Such regulations are necessary to ensure that the free market can have a positive impact on both the economy and the welfare of the nation's citizens.

The effectiveness of emerging markets' legal structure in explaining financial development.

This article examines the role of legal structure in explaining financial development in twenty-three emerging markets, which has not been explored in institutional economics literature before. This study relied on Pedroni, and Kao cointegration tests, which is followed by the renowned panel cointegration technique. The results of the Pedroni and Kao cointegration tests show that the variables understudy is cointegrated in the long-run. These findings are confirmed by the panel cointegration showing that legal structure (LS) has positive impact on financial development (FIND) in long-run that support Law and Finance, and New Institutional Economics theories in emerging markets. This study is the first to directly examine the long-run impact of LS on FIND in emerging markets, and the result remains consistent across alternative measure of FIND. The findings of this study have important policy implications for emerging markets. Policymakers should focus on creating a legal environment that is conducive to financial development. This includes strengthening the legal framework, improving regulatory regimes, and promoting market autonomy. Additionally, policymakers should work to attract foreign investment, which can help spur economic growth and development in emerging markets. The findings of the study are consistent across battery of robustness testing.

INSTITUTIONALIZATION OF INTERESTS IN THE NATIONAL ECONOMY: ECONOMIC AND LEGAL ASPECTS OF THE MODERNIZATION OF THE CORPORATE SECTOR

The article summarizes the main approaches to the institutionalization of interests in the national economy, as well as the economic and legal aspects of the impact of institutionalization on the modernization of the corporate sector. The purpose of the work is to substantiate the concept of the "mechanism of institutionalization of interests" to describe the process of forming a new social order that meets the requirements of the information society. It is noted that the formation of the information society in Ukraine lags behind the leading countries of the world, which, in addition to the war, is largely connected with the low efficiency of the institutional structure of the national economy, which inhibits innovative development. Emphasis is placed on the fact that the slower institutional and cultural changes occur, the cheaper labor is. It is substantiated that the theoretical basis for solving the problem of defining the "mechanism of institutionalization of interests" is the institutional economic theory, the theory of corporate management, and the theory of economy. It is suggested that institutionalization should be understood as socio-economic processes that shape the organization of subjects, turning their interactions into an institutional system, the elements of which turn into a generally accepted practice, which is preserved in an unchanged form for a number of generations, being confirmed in the real behavior of people. It was concluded that the institutionalization of interests in the national economy provides a degree of subordination of individual interests to public interests and affects the modernization of all sectors of the national economy, including the corporate one. A peculiarity for the corporate sector is that the role of institutionalization in this sector is that it is a factor in reducing uncertainty and a basis for forecasting the behavior of business entities. At the same time, the result of the institutionalization of interests can be considered the creation of a clear institutional role structure of interests, approved by the majority of participants in socio-economic relations, in accordance with norms and rules. In this regard, it is emphasized that the mechanism of institutionalization of interests in the national economy is also related to the creation of organizations and institutions that organize the functioning of the relevant institute, management and control of its activities, which again affects the modernization of the corporate sector. Characteristic signs of institutionalization of interests in the national economy are summarized. According to the results of the generalization, it is indicated that one of the criteria for the degree of completeness of the process of institutionalization of interests can be the massive predictable behavior of the bearers of interests in accordance with institutional patterns of behavior. It was determined that the institutionalization of interests in the national economy can be studied in two contexts. First, as a historical process of birth and establishment of new institutions, which allows us to reveal the reasons and conditions for their emergence. And, secondly, as the functioning of institutions within the framework of the socio-economic system in connection with the process of adaptation of the interests of individuals, collectives, sectors, during which mechanisms are formed that ensure stability and sustainability of development. The types of mechanisms of institutionalization of coalitions of interests for the modernization of the corporate sector are systematized. Based on the results of the research, it was concluded that in the interests of the formation of the information society, a transition from strict state regulation to a policy of flexible stimulation of the development and modernization of the corporate sector of the national economy is necessary. At the same time, the state's activities should be aimed at implementing mechanisms and institutions that stimulate interest in innovation and investment in human capital, ensuring social justice and solidarity.

Institutional responses to the challenges of the Russian agro-industrial complex

The work is devoted to the complex issues of the influence of the theoretical prerequisites of institutional and neo-institutional economic theory on the sustainable development of the agricultural sector. The purpose of the work is to substantiate the scientific theoretical foundations of institutional and neo–institutional economic theories as the basis for regulating the agricultural sector. The methodological basis of the study is an integrated approach, which examines the challenges facing the Russian agro-industrial complex and possible institutional solutions to emerging barriers. The conceptual foundations of the institutional movement at the first stage of its development and their relation to state regulation are shown. The main provisions of the theory of dirigisme and new industrial society are shown. The scientific foundations of the neo-institutional school of economic theory are formulated. It is shown that the main institutions require maximum attention from the state to ensure their functioning, sustainable long-term development of the economic system, and the social well-being of the country’s citizens. The main functions of the state, its boundaries and effectiveness conditions in the new institutional theory are defined. The main institutional mechanisms for improving institutions in the Russian agricultural sector to ensure long-term sustainable economic growth are identified: market institutions; national institutes of economic development; state institutions of economic growth in the agricultural sector; institutes for reducing volatility. The presented model allows, unlike traditional approaches, to be based on the historical development of the institutional environment, which allows to assess the justification for changing institutions in agriculture; allows to assess the compatibility of ongoing institutional changes with the established institutional environment.

The role of meso-institutions in the system of tariff regulation of energy and housing and public utilities markets

This article is aimed at expanding the applicability of meso-institutional concept in the markets of natural monopolies in the context of a new institutional economic theory. Within the framework of the considered concept the impact of the institutional environment level on evolutionary development of energy and housing and public utilities markets is evaluated alongside with modern approaches of digitalisation. In the first part of the current article the author describes theoretical foundations of the meso-institutional environment concept in respect to the energy and housing and public utilities markets. The definition of the concept and its usage domain are given. Besides, the goals difference of meso- and macro-institutions are analysed in detail. The theoretical part also covers approaches of A.E. Shastitko applied to the energy and housing and public utilities markets. Moreover, the hypothesis of conflict resolution between macro- and meso-institutions is described in framework of markets regulation mechanisms. Also, the regulation mechanisms of the two markets are analysed, including market power instruments of meso-institutions. In addition, the article covers the problem of maintaining a balance of market participants’ interests through these mechanisms. In conclusion, the author offers the concept of improving market mechanisms with the help of the meso-institutional development strategy. It is designed to solve the problem of maintaining a balance of market participants’ interests and predetermine the formation of a new improved institutional environment in the energy and housing and public utilities markets.

The Potential of Informal Institutions in Promoting Green Enterpreneurship (Ge) and Sustainable Socio-Economic Development

Abstract The continuity of the green environment, economy, and entrepreneur-ship is essential for sustainable development. Therefore, this research aims to explored the potential of informal institutions in promoting Green Enterpreneurship (GE) and sustainable socio-economic development. The method employed used microeconomic data rooted in local wisdom, social norms, and localized moral commitments from various regions of Indonesia. Data collection comprised surveys and structured interviews relevant to the research objectives. Quantitative data material was obtained by conducting a field survey of 150 household samples of green entrepreneurship respondents taken representatively in various regions using simple random sampling techniques. The design employed a two-stage mixed-method approach, including exploratory and explanatory designs. The result showed the significance of Green Enterpreneurship (GE) in mitigating the impacts of global climate change and economic crises, thereby contributing to the attainment of sustainable development goals. However, the main results of the research confirm that the capacity of formal institutions has not been able to navigate the complexity of these problems isssues is limited. Conversely, informal institutions, though capable of mitigating global climate change and advancing sustainable development, remained localized and lacked national and global integration and collaboration. Green Enterpreneurship (GE), as a form of social innovation, gave rise to new models of socio-economic solidarity within unique local communities. The research also underscored the pivotal role of informal institutions in facilitating these endeavors, thereby filling a void in high-quality new institutional economic theory

Policy complementarity and the paradox of carbon pricing

AbstractWe present an economics framework appropriate to the exceptionally broad scope of the climate change problem. This considers that economic and social processes, particularly those involved in purposive transitions of energy technologies and systems, involve the interplay between three distinct domains of decision-making and associated actors. The first concerns small-scale and often short-term decision-making, much of which reflects extensive ‘satisficing’ and habituation as identified in behavioural economics. Calculated economic optimization decisions, especially of companies in the energy and energy-intensive industries, then best reflect the core assumptions of neoclassical and welfare economics, including discrete market failures. Third, at the largest scale are strategic judgements made by big actors (e.g. governments, large multinational companies) relevant to transformation of complex systems over long periods—particularly concerning innovation and structural changes, for which lessons from theories of evolutionary and institutional economics are most relevant.Economically, these can be logically mapped in relation to the technology (or more accurately, ‘best practice’) frontier. Each has corresponding policy implications: most directly, respectively in terms of (i) standards and engagement to establish norms; (ii) competitive markets with the critical role of prices; and (iii) strategic investment in innovation and infrastructure. Each faces challenges of implementation and government failure, as observed, for example, with wholly inadequate carbon pricing to date, naïve and ineffective approaches to enhancing energy efficiency, or misdirected support to R&D. Based on the domain distinctions, we argue that the corresponding pillars of policy are naturally complementary, and can be mutually supportive: strong standards and norms on energy efficiency, for example, would enhance the political space for carbon pricing by reducing its direct consumer impacts, while carbon pricing has multiple positive two-way interactions with enhanced low-carbon innovation.From this we also posit a ‘carbon pricing paradox’: that adequate carbon prices, the central recommendation of most economists, are in most jurisdictions only feasible (or even optimal) if equal analytic and policy attention is devoted to the other pillars, and the wider context of macroeconomic and fiscal policies. Only these other aspects can reduce the absolute cost impact of carbon pricing (potentially turning into a gain) and offer consumers and businesses better lower-carbon alternatives, which are critical to establishing climate-compatible pricing structures across our economies.

On the coexistence of on-exchange and OTC segments in commodity markets

The introduction of exchange trade in Russia is one of the ways to form a competitive commodity price that can act as a benchmark for the over-the-counter (OTC) segment. However, the exchange price may be subject to distortions, which may cause faults in antitrust law. Using the international commodity exchange experience, we aim to identify the risks of exchange trade arising amid the coexisting on-exchange and OTC segments. Methodologically, the paper relies on industrial organization theory and new institutional economics theory. In the research, the case study method was applied and data on the practices of commodity exchange introduced in different countries were used. As a result of the study, we have identified the risks of violating regulatory mechanisms in the market and of distorting effects on national markets, the risks in the areas of infrastructure restrictions and violations of antitrust laws, as well as the risks of price manipulation and distortion of exchange prices. We have proven that in the context of the coexistence of on-exchange and over-the-counter market segments, these risks can emerge even in cases of the successful development of global exchange trading.

Strengthening personal data regulation in Russia: Economic implications and risks

The enormous personal data breach of recent years is pushing regulators to tighten control over big data. The paper aims to analyse changes in big data regulation in Russia, and its possible effects on the competitive environment and economic performance of digital markets. New institutional economics theory, as well as some elements of law economics and industrial organization theory constitute the theoretical framework of the study. The research methods include comparison of structural alternatives and economic and statistical analysis. The empirical evidence covers 2021 data by Russia’s Federal State Statistics Service (Rosstat). The results of the study demonstrate that strengthening regulation of personal data (1) will widely affect all businesses involved in big data processing in all sectors of the economy, (2) will reduce innovation activity and investment attractiveness of digital markets in the short term, (3) will have a negative impact on small and medium-sized businesses. The statistical analysis indicates that there is room for applying an industry-wide approach, primarily ‘framework’ regulation, to big data markets. The research findings can be used by the regulator when developing or altering big data legal standards to prevent adverse economic implications.

Parallel import in Russia’s software industry: Expected consequences

Amid the withdrawal of foreign software developers from the Russian market, policymakers continue to discuss the option of legalising software parallel import. The purpose of the article is to assess the expected effects of the software parallel import introduction. The methodological basis of the study is industrial organization theory and new institutional economics theory. Among the research methods are theoretical and mathematical modelling and comparative analysis. The empirical evidence includes publicly available data on the pirated content consumption retrieved from the web source I Know (iknowwhatyoudownload.com) and financial statements of Russian software developers (SPARK-Interfax database). The article presents a theoretical model describing the consumer’s choice between original and pirated versions of programs and analyses the situation, where the most popular software product gets inaccessible. Our analysis shows that when costs of piracy are low, users of ‘out-of-the-box’ programs will not switch to another software and prefer the pirated version of the previously used program. The results of the model are compared with data on the pirated software consumption in Russia. We have found that consumers prefer foreign software to Russian counterparts, which means that if parallel import is legalised, Russian software developers will fail to occupy the niche of home-use software, which remains an important reserve for the industry’s further development. Free access to foreign software distorts consumer incentives. The institution of parallel imports should be modified so that the consumer keeps paying the price of the original’s, the state guarantees such software is secure, and intellectual property violations are strictly controlled.