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Cambridge Journal of Economics Advance Access originally published online on March 16, 2006
Cambridge Journal of Economics 2006 30(6):923-939; doi:10.1093/cje/bej004
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© The Author 2006. Published by Oxford University Press on behalf of the Cambridge Political Economy Society. All rights reserved.

Article

Transition economies and trust building: a network perspective on EU enlargement

Hans van Ees and Reinhard Bachmann*

* University of Groningen and University of London, respectively

Address for correspondence: Reinhard Bachmann, Birkbeck, University of London, Department of Management, Malet Street, Bloomsbury, London WC1E 7HX, UK; email: r.bachmann{at}bbk.ac.uk

Abstract

Many transition economies are characterised by a relatively rudimentary institutional framework. Weak legislative structures and the absence of effective market regulation and property right enforcement rules diminish the chance of mutually profitable business transactions and—more generally—restrict the chances for innovation and sustainable growth. Against this background, we analyse the extent to which more efficient governance mechanisms can contribute to a more favourable business environment. In doing so, we adopt a network perspective. We argue that both in developed market economies as well as in centrally planned economies much of economic exchange takes place in networks. However, the characteristics of these networks, in particular the concept of trust, can differ significantly. This leads us to conclude that the real challenge of the process of economic transition is connected to building new economic exchange networks. In this paper, we discuss this argument and analyse how the current enlargement of the EU into Eastern Europe may favourably affect this process of institutional change in the accession countries.

Key Words: Governance mechanisms • Institutional change • Organisational networks • Organisational resources • Transition economies

JEL classifications: D23, D21, L14, P21, P31, P42

Manuscript received November 15, 2004; final version received August 24, 2005.


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