The Role of Social Capital in Developing Czech Private Business

The development of new private business has both economic and social significance for the post-communist transition. New business firms offer industrial dynamism and flexibility to former command economies typically dominated by gigantic monopolies, while, unlike privatised enterprises, not reproducing formerly institutionalised practices. They further presage the rise of new social groups and values with direct implications for civic, social and political renewal. The author argues that conventional economic theories of business foundation, which presume the stable institutional conditions of Western-style capitalism, are by themselves poor explanations of the development of private business in transitional conditions. The paper proposes instead a social-institutional approach, in which small firms are examined as a socially constructed process undertaken by business founders within ambiguous institutional circumstances characterised by historical legacies and simultaneous discontinuities. The empirical findings allow the exploration of the process of business founding by former nomenklatura. Their stock of inherited social capital gave them a privileged position in the contest to construct new firms and thereby access to the legitimate accumulation of economic capital, which completed their personal assimilation to the emergent form of market-economic capitalism. The paper concludes by assessing the social implications of these observations.