Entrepreneurship in Transition Economies:The Role of Institutions and Generational Change

The transition economies have lower rates of entrepreneurship than are observed in mostdeveloped and developing market economies. The difference is even more marked in thecountries of the former Soviet Union than those of Central and Eastern Europe. We link thesedifferences partly with the legacy of communist planning, which needs to be replaced withformal market-supporting institutions. But many of these developments have now takenplace, yet entrepreneurial activity still remains low in many places. To analyse this longerterm issue, we highlight the necessarily slow pace of development of new informal institutionsand the corresponding social attitudes, notably rebuilding the generalised trust. We arguethat changes are even slower in the former Soviet Union than Central and Eastern Europebecause communist rule was much longer, leading to a lack of institutional memory. We positthat changes in informal institutions may be therefore delayed until after full generationalchange....