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The Strategies of Foreign and Foreign-Assisted Firms in the Russian Far East: Alternatives to Missing Infrastructure

Author

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  • Judith Thornton

    (University of Washington)

  • Nadezhda N Mikheeva

    (Russian Academy of Sciences)

Abstract

Interviews with American and Russian partners in foreign-assisted firms in Russia indicate that they still face serious deterrents to investment. The obstacles they cite reflect missing institutional infrastructure, high levels of political uncertainty, and perverse regulations. Businesses operating in this environment rely on reputation mechanisms and self-enforcing agreements to reduce uncertainty. Russian partners contribute relationship capital. American partners provide access to offshore capital markets and financial infrastructure. However, agency problems abound. Investors commit resources when there are high short-run returns or when they attempt to hold an option to invest in the future. Russian firms gain access to the world market if their American partner can vouch for the quality of their performance.

Suggested Citation

  • Judith Thornton & Nadezhda N Mikheeva, 1996. "The Strategies of Foreign and Foreign-Assisted Firms in the Russian Far East: Alternatives to Missing Infrastructure," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 38(4), pages 85-119, December.
    • Handle: RePEc:pal:compes:v:38:y:1996:i:4:p:85-119
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    Cited by:

    1. Meyer, Klaus E., 2002. "Management challenges in privatization acquisitions in transition economies," Journal of World Business, Elsevier, vol. 37(4), pages 266-276, January.
    2. Vladimir Dvoracek, 2009. "Vertical Integration and Sunk Capital in Transition Economies," Oxford Development Studies, Taylor & Francis Journals, vol. 37(1), pages 19-32.
    3. Berkowitz, Daniel & Li, Wei, 2000. "Tax rights in transition economies: a tragedy of the commons?," Journal of Public Economics, Elsevier, vol. 76(3), pages 369-397, June.
    4. Sels, A.T.H., 2006. "Foreign direct investment as an entry mode. An application in emerging economies," Other publications TiSEM 583ca9b5-1691-425d-8f77-0, Tilburg University, School of Economics and Management.

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