Which types of contemporary Russian firms are most likely to use violence or corruption to resolve business disputes, and which types are most likely to utilize the law? Jordan Gans-Morse presented findings from an original survey of Russian businesses analyzing the relationships between firm-level characteristics and firm strategies relating to property rights.
Gans-Morse focused primarily on the types of firms, their access to resources, and the methods they used to resolve disputes over property rights. He found that firms which provided services and products whose quality is difficult to observe as well as firms operating in smaller markets are more likely to employ violence or corruption and less likely to rely on formal legal institutions. Furthermore, firms with longstanding relationships with business are less likely to utilize illegal strategies. Contrary to classic studies, these firms are also more likely to litigate. Firms engaging in illicit activities logically find that legal institutions are not open to them, but firms with wealthy and well-connected clientele are more likely to utilize strategies based upon corruption.
The original study, which included 90 interviews involving 56 businesses, 22 lawyers, 12 private companies over the course of summer 2010 in Moscow, relied upon questions phrased specifically to provide space for these entrepreneurs to divulge information without fear of reprisal and without implication of shame. They offered the researchers vignettes illustrating the landscape of business in modern Russia. They found that while legal trickery, aggressive tactics and raid still influence the overall business climate, private force and violence has declined in popularity as a business strategy. Instead, businesses are relying upon lawyers outside of court, with 54% more willing to go to court to solve their disputes. Nevertheless, small local markets are still more likely to rely upon using corrupt force.
Firms with long-term relationships are paradoxically more likely to go to court. Is it a violation of business norms to sue? Contrary to the West, Gans-Morse noted that suing is cheap in Russia, although it is often considered shameful because it demonstrates poor business and negotiation skills. Often such cases are settled out of court. While the study revealed a decided uptick in legal cases, it also offered a glimpse of the struggles inherent in modern Russian business. Many small firms which, for many reasons, operate extra-legally are compelled to use corrupt or private forces, while access to wealthier clientele and state enterprises almost invariably increases reliance on informal networks.
Praising the intuitive strategies behind Gans-Morse’s study, UW Political Science graduate student Nora Webb Williams offered her take on the findings. According to Webb Williams, demand for property rights protections and increased tax compliance in Russia were encouraging findings because this is evidence of respect for and the legitimacy of civil institutions. She theorized that perhaps enterprises select strategies for property rights protection based upon initial effectiveness.
Webb Williams contended that a potential explanation for the increase in civic judicial proceedings may be explained by the connections that the lawyers maintain, which would be like “two strategies in one semi-legal networking.” The lawyers would know the crooked cops and the open judges, maintaining their own informal network. Webb Williams suggested that firms most likely benefit from a “strategy portfolio” where they play several strategies simultaneously in order to get the best outcome.
Read the abstract for Guns, Gavels, and Bribes: Firm Strategies for Securing Property Rights in Contemporary Russia.
Jordan Gans-Morse is an Assistant Professor at Northwestern University researching property rights, rule of law, authoritarian institutions, informal institutions, predatory states, corruption and clientelism.