engleski

Institutional Change in Transition Economies: Analysis of the Croatian Business Environment

At the end of the 1980s, events in the post- communist countries triggered the research on institutions as introducing the new and changing the existing institutions was deemed essential for the transformation to markets and democracy. Although the state-planned and self- managed economies were well researched and understood, their legacy for subsequent events was underestimated. It has been shown that the claim on the linear trajectory from planned towards market economy was misleading. Over a long period of time, the focus has been on laws, rules and other formal institutions. This was mainly done under the neoliberal approach umbrella that was supposed to ensure a fast shift of post-communist countries to functioning market economies. Besides neglecting the distinctiveness of the transition of every single country and region, the factors like culture, values, and tradition were mostly denied, too. This predominantly led to a uniform approach that undervalued local conditions and could neither predict nor address the divergence of countries’ development and evolution of their business systems. Croatia is an interesting case of a country that had very favourable initial transition conditions. Yet, more than twenty years after the beginning of transition, it can be considered one of the laggards among Central and East European postcommunist societies. Croatian business environment as a platform for vital post-communist transformation reforms reflects the exogenous and the endogenous factors of those large-scale changes. In this study, despite the emphasis on economic transformation, it is apparent that wider socio-political context needs to be explored in order to explain the legacy, the existing issues and perspectives. Institutional analysis proved to be a very adequate tool for the exploration of transition. It has particularly verified its applicability through the research of the persistence of informal constraints and their interaction with the formal ones. Certain trends and findings from New Institutional Economics and New Economic Sociology show their convergence as particularly useful for the observation of reforms in transition countries. Analysis of interaction between formal and informal institutions in the business environment in Western European and transition countries proved that large power distance and high uncertainty avoidance are negatively correlated with business friendliness whereas individualism and indulgence in society are positively correlated with it. As assumed, ease of doing business and competitiveness show strong positive correlation, yet part of their relation is explained by cultural dimensions. Further analysis indicates that the level of country’s economic development partly explains the connection between ease of doing business and cultural dimensions. The findings of this dissertation are in line with “institutions matter” stream ; more specifically they also deepen the understanding of “culture matters” and intrinsically “history matters” stream. It is apparent that Croatia, like most of the transition countries, has informal institutions that are not supportive to a favourable business environment. Moreover, most of the main actors of its institutional change show either the inability or unwillingness to initiate and implement the necessary moves. This leads to a trap in which foreign ready-made solutions are mainly rejected by domestic informal institutions and domestic, organically developed formal institutions are usually missing.

business environment ; transition ; institutional change

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