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Is Culture an Underpinning or Undermining Factor in the Business Environment of the Transitional Countries?

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Book cover Economic Development and Entrepreneurship in Transition Economies

Abstract

The interplay of formal (laws, regulations) and informal institutions (culture, tradition, norms of behaviour) has showed to be initially underestimated in the recent economic, political, and social transformation of Central and Eastern European countries. This predominantly led to a uniform approach that undervalued intangible legacy and consequently could neither predict nor address the divergence of countries’ development and evolution of their business systems.

Dominant national culture has been recognized as a very influential factor of the institutional change. Considering that favourable business environment is vital for economic progress, “institutional stickiness” of business-related laws and regulations and culture is thoroughly researched. It is further linked with overall quality of the business environment and level of economic development. This article suggests that favourable business environment is expected to be found in societies characterised by weak power distance, high individualism, low uncertainty avoidance and indulgence instead of restraint. Yet, opposite characteristics are found in numerous transition countries. The findings also suggest lesser likelihood of successful institutional import from Western to Eastern European societies.

The initial research on the topic was conducted for the Doctoral Dissertation “Institutional Change in Transition Economies: Analysis of the Croatian Business Environment” defended at the Faculty of Economics, University of Ljubljana in December 2012. The extended version of this chapter was published as a Journal paper “Institutional Interaction in the Business Environment: Eastern European Versus Western European Countries”

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Notes

  1. 1.

    Some authors have recently started using the term ‘post transition countries’ for the group of countries that started their post-socialist transformation at the end of 1980s/beginning of 1990s. Hereinafter ‘transition countries’ will be used for that group of countries. This choice of wording was additionally encouraged by the same term used by established scholars in numerous works, most recently in the volume “Economies in Transition: The Long-Run View” edited by Roland (2012).

  2. 2.

    The researchers usually use four dimensions (IDV, PDI, MAS, UAI) that were initially created by Hofstede. In this research IVR is included as well. This is an additional dimension created by M. Minkov and included in Hofstede’s main work. The sixth dimension (LTO) is not used because it still needs to be scientifically confirmed (Schachner, personal communication, 2012) and the data are in the fine tuning stage due to large (methodological and consequently numerical) differences.

  3. 3.

    The lines of the quadrants are not drawn in the graph. Hereinafter the positions of the quadrants are considered according to the common practice and following wording is used: first quadrant—upper left, second quadrant—upper right, third quadrant—lower left, fourth quadrant—lower right.

  4. 4.

    In C. Williamson’s (2009, p. 377) work Singapore as an obvious outlier was a very similar case.

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Author information

Authors and Affiliations

  1. Faculty of Law, Department of Economics, University of Zagreb, Zagreb, Croatia

    Ružica Šimić Banović

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  1. Ružica Šimić Banović
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Correspondence to Ružica Šimić Banović .

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Editors and Affiliations

  1. Faculty of Economics, University of Banja Luka, Banja Luka, Bosnia and Herzegovina

    Jovo Ateljević

  2. Faculty of Economics, University of Banja Luka, Banja Luka, Bosnia and Herzegovina

    Jelena Trivić

Appendix

Appendix

The extended version of this paper including Appendix (covering research data analysis) is published as a Journal article: Šimić Banović, R. (2015). Institutional Interaction in the Business Environment: Eastern European Versus Western European Countries. Zbornik Pravnog fakulteta u Zagrebu. 65(3–4).

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Šimić Banović, R. (2016). Is Culture an Underpinning or Undermining Factor in the Business Environment of the Transitional Countries?. In: Ateljević, J., Trivić, J. (eds) Economic Development and Entrepreneurship in Transition Economies . Springer, Cham. https://doi.org/10.1007/978-3-319-28856-7_2

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