Transition economics and trust building: a network perspective on E.U. enlargement

Hans van Ees and Reinhard Bachmann
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Reinhard Bachmann: Groningen University

No 03G06, Research Report from University of Groningen, Research Institute SOM (Systems, Organisations and Management)

Abstract: Many transition economies are characterised by a relatively rudimentary institutional framework. Weak legislative structures and the absence of effective market regulation and property right enforcement rules often prohibit mutually profitable business transactions and - more generally - restrict the chances for innovation and sustainable growth. Against this background, we analyse the extent to which more efficient governance mechanisms can contribute to a more favourable business environment. In doing so, we adopt a network perspective. We argue that both in developed market economies as well as in centrally planned economies much of economic exchange takes place in networks. However, the characteristics of these networks, in particular the concept of trust, can differ significantly. This implies that the real challenge of the process of economic transition is connected to building new economic exchange networks. In this paper, we discuss this argument and analyse how the current enlargement of the E.U. into Eastern Europe may favourably affect this process of institutional change in the accession countries.

Date: 2003
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