Business-State Interaction in Russia: the depoliticization of institutionalization

This paper analyzes the potential of business associations as the key mediators in the relationship between business and the state in Russia. Business associations have traditionally been supposed to effectively represent and to defend the interests of business community members in their dialogue with state authorities and thus to resolve entrepreneurs’ problems. The pivotal issue to be addressed in this study lies in the current reluctance of small and medium enterprises to actively participate in business associations despite the existence and de jure functioning of these latter. This paper hypothesizes that modern business associations in Russia do not perform the role of institutionalization of business-state interaction as far as they do not create the conditions for the involvement of entrepreneurs in the formulation of economic policy on a long term basis. Associations are not considered to be an effective mechanism of protection of business interests due to the dominance of short-term planning horizon in small and medium business. The article presents an empirical test for the hypothesis in the form of extensive interviews that were arranged with small and medium businessmen, as well as with associations’ representatives to identify the most frequently used models of entrepreneurial behavior. The survey results revealed that small and medium-sized businesses do not consider business associations as potential or effectual institutions that can compensate for the limitations of the market and the state control system. Small and medium entrepreneurs as rational agents tend to use informal mechanisms to address emerging business problems. This is primarily due to the fact that entrepreneurs often expect associations to solve specific problems of a particular company (“particular perception” of business associations), and not to achieve "abstract" public goods for the whole society. Active participation in associations is more of a "force majeure" in nature and is mainly a result of changes in the "rules of the game" by the authorities (e.g. new law adoption).Proposed recommendations include adaptation of appropriate measures aimed at improving the business climate and increasing of entrepreneurial potential in Russia. In particular, it is necessary to improve the existing legislative regulation of entrepreneurial activity with the purpose of reduction of administrative barriers, as well as adaptation of the tax policy to the problems of small and medium enterprises.