Between petty corruption and criminal extortion: How entrepreneurs in Bulgaria and Romania operate within a devil’s circle

Abstract

This article examines the impact of corruption on entrepreneurship in transition economies. Utilising in-depth interviews with entrepreneurs in Sofia, Bulgaria, and Bucharest, Romania, the article finds that despite economic reforms, corruption occupies a pervasive space which impacts entrepreneurial strategy. In both countries, entrepreneurs operate within a 'devil's circle', in which they are unable to operate entirely independent of corruption. This is caused by a combination of weak formal institutions and a weak entrepreneurial culture leading to entrepreneurs either seeking to avoid the attention of government officials by hiding some or all of their activities with little prospect of sanction, limiting their growth aspirations, or engaging in corruption as a way of furthering their activities. The research contributes to understandings of corruption and its impact on entrepreneur strategies to avoid, minimise or benefit from it.

Corruption Perceptions and Entrepreneurial Intentions in a Transitional Context–the Case of Rural Bulgaria

“…Bulgaria was hard hit by the "shock therapy" and the institutional hiatus of the transition period and is plagued by rampant petty corruption (Manev and Manolova, 2010). Previous studies of corruption in Bulgaria paint a grim picture of stable entrenchment of bribing and bending the law practices (Stoyanov et al, 2014;Vorley and Williams, 2015). According to the Global Corruption Barometer, barely 15 percent of Bulgarians report it is socially acceptable to report acts of corruption, compared to 58 percent of the respondents in older EU member states (Pring, 2016).…”

The nature of corruption affecting entrepreneurship in transition economies: Some lessons from Montenegro

“…Moreover, even though most entrepreneurs do not experience corruption on a day-to-day basis, perceptions of corruption perpetuate corrupt practices and hinder the convergence of formal and informal institutions. In addition, corruption prevents safe and rational investment, both foreign and domestic; it slows down and hinders development and limits trade, leads to irrational and wasteful use of public funds, encourages the "gray" economy, and reduces tax sources (Vorley and Williams 2016).…”

“…Indeed, it is the interplay between formal and informal institutions which allows corruption to persist (Vorley and Williams, 2016). The process by which corruption is normalised is described by Ashforth and Anand (2003) in three steps: institutionalisation, rationalisation and socialisation, and is equally applicable to corruption in the public and private sector.…”

“…This paper finds that entrepreneurs in formerly centrally planned transition economies are frequently unable to operate beyond the realms of corruption. While this is the case in the larger transition economies of Eastern Europe (Vorley and Williams 2016), in the smaller, newly independent states corruption is common. Examining the nature of corruption affecting entrepreneurs in a transition economy, the paper demonstrates that part of what holds back entrepreneurship and its ability to contribute to economic development in these localities is partly the prevalence of corruption.…”

“…As their businesses grow, the nature of corruption is often more organised, involving kickbacks to political officials and/or extortion from more established 'tycoon' entrepreneurs. Some entrepreneurs use strategies to avoid corruption (Hudson et al 2012), some accept it as a normal aspect of the culture, while others engage in it as perpetrators (Vorley and Williams 2016). As such, the central research question in this article is: "How does the institutional environment impact the nature of corruption affecting entrepreneurs in transition economies?"…”