chapter  7
18 Pages

Lithuania: CSR on a wish list

ByRAMINTA P U CˇE

Following the collapse of the iron curtain and the accession of new member states into the EU in 2004, numerous attempts have been made to locate post-communist economies within the typology of ‘varieties of capitalism’ proposed by Hall and Soskice (2001) and Amable (2003). These have resulted in categorizing post-communist countries as closer to liberal market economies (Knell and Srholec 2007), with some of their features ascribed to the Mediterranean model of capitalism (McMenamin 2004). Moreover, the Baltic states have been differentiated from other postcommunist economies, such as the Visegrád countries, as being economically more liberal, less strongly dependent on transnational corporations and foreign direct investment and liable to apply ‘shock therapy’ when initiating and carrying out changes during the transition period (Bohle and Greskovits 2007; Nölke and Vliegenthart 2009). Some scholars go further by pinpointing considerable differences between Estonia, Latvia and Lithuania, characterizing in particular Estonia as a much more distinct version of neo-liberalism (Kuokštis 2011; Norkus 2008b). Lithuania is often labelled as a liberal market economy (LME), based on the criteria of a high degree of labour market flexibility, a lack of collective bargaining and agreements, a business attitude towards human resources as a cost rather than an asset and hence the dominance of a generalist system of education, short-term investment (Bohle and Greskovits 2009; Kuokštis 2011; Norkus 2008a), high job mobility (Coppin and Vandenbrande 2006) and weak employee commitment (Gruževskis et al. 2006). However, Lithuania’s business system differs from the LME model in several respects too. First, in the early years following regained independence in 1990, national businesses did not invest in research and development, but relied rather on unskilled labour-intensive export goods (Bohle and Greskovits 2009). The issue was addressed by government and foreign telecommunication companies’ investment in developing broadband internet since 2000, which has improved the country’s potential for innovation and has resulted in a high rate of ICT-based businesses since 2009. As a result, Lithuania’s position in the Global Innovation Index stands at 40 out of 142 states (Dutta 2012). Second, capital markets, in particular the stock market, are significantly underdeveloped and the financial system is dominated by foreign commercial banks (Kuokštis 2011: 7). The perceived limitation of capital availability to small and medium-sized enterprises (SMEs) has been

addressed by the government since 2009 by engaging in an EUco-ordinated programme, Joint European Resources for Micro to Medium Enterprises (JEREMIE), and developing hybrid venture capital markets (Snieška and Venckuviene

. 2011). Nevertheless, doing business in Lithuania

is more complex than in other EU member states (World Bank 2013). In particular, long bureaucratic procedures when establishing and liquidating businesses are noted as barriers to development, although some advances were made by 2012, such as digitalizing the land registry, electronic tax administration and a new law on resolving the insolvency of private individuals (World Bank 2013: 140). Third, the national economy is dominated by SMEs which often have limited liability and do not publicly trade their stocks. The owner of a company is usually the general manager, hence shareholders’ control over professional managers is not the norm (Norkus 2008b: 70). On the one hand, this practice reduces the risk of hostile takeover and leads to high flexibility in decision-making and exit from the market (Kuokštis 2011). On the other hand, it impedes business development as the owners may lack professional and management skills. Overall, these arrangements hinder the development of mutually respectful and partnership-based relationships between employers and employees (Blaziene 2006). There are other peculiarities of the Lithuanian model of capitalism that are typical of other post-communist societies as well, such as low trust in public institutions (Aidukaite 2009; Pucˇ e

. taite

. et al. 2010; Sztompka 1999;

Ungvari-Zrinyi 2001) and patronage networks which distort competition (Norkus 2008a: 569; Rehn and Taalas 2004). A final observation is that the country’s accession to the EU in 2004 provided easier access to financial capital and opened opportunities for improving production facilities and reaching new markets with advanced technologies (in particular, electronics and laser products). Agricultural products are largely exported to the countries of the former Soviet Union, capitalizing on social connections from the Soviet times. In 2011, Russia remained Lithuania’s single most important trading partner although more than half of its national trade is dependent on the EU (Statistics Lithuania 2012: 373).