ABSTRACT
Chapter 2 explores the development of business institutions and the evolution of entrepreneurship after the collapse of the Soviet Union. It pays particular attention to government failures and administrative problems which have affected entrepreneurial development over the course of the last 25 years. The chapter argues that entrepreneurs became particularly vulnerable to administrative corruption under Putin’s regime. In the post-perestroika period, capture of key state institutions by informal clientelistic groups led to the corrosion of the public administration system and the destruction of its ability to provide the security of property rights. Since 2000, another trend became especially apparent in Russia, with the ruling elite monopolizing wealth redistribution in the national economy. In this context, “market capture” refers to the predatory nature of the Russian political elite actively engaged in seizing economic resources and businesses through the use of quasi-legal and illegal instruments. The resulting hostile business environment creates a considerable drag on entrepreneurial activity, amounting to a tremendous reduction in the number of entrepreneurs. Based on several international rankings, such as the Global Entrepreneurship Monitor, the Global Entrepreneurship Index, and the Female Entrepreneurship Index, this chapter provides evidence that Russia is lagging in terms of entrepreneurial development not only behind the developed economies, but also behind the other post-communist countries of the former Eastern Bloc.
