Industrial Defense Enterprises in the Russian Transition to a Capitalist System: Institutional Restrictions on Development

The author develops the concept of 'clan capitalism' that has emerged in Russia during a period of transition. Clan capitalism has led to certain institutional restrictions on business activity: informal rules becoming more important than formal norms, etc. As well as establishing the limits for growth; such restrictions also prevent the widespread uptake of effective business strategies. The author studied the consequences of clan capitalism in Russia; citing the case of the industrial defense enterprises and analyzing trends in their performance over the last decade through a longitudinal survey of top managers. This paper describes the current development in this sector as contradictory growth due to the lack of investment and innovation but caused by a rise in the state order. The author explains the peculiarities of this growth by illustrating restrictions within the system of clan capitalism.