Institutional Determinants of New Firm Entry in Russia: A Cross Regional Analysis

In this paper, we aim to empirically analyze the determinants of firm entry and exit in Russia using a regional-level panel data for the years of 2008-2014, with special emphasis on institutional failures and the politico-economic impact of external crises. We found that these two elements exhibit statistically significant and economically meaningful effects both on the creation and destruction of Russian firms, controlling for potentially explanatory factors. Our empirical results also suggest that the process of firm entry and exit is manifold across Russian regions due to their heterogeneity. Nevertheless, a surprisingly robust estimate of the world oil price (irrespective of the difference in target regions) suggests a possible high exposure of each Russian region to a global crisis. This comes from the importance of oil trade with the world and, accordingly, the ongoing crisis may bring a harmful influence to regeneration of Russian businesses.

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Vertical Integration and Sunk Capital in Transition Economies

Dvoracek¹

2009

Oxford Development Studies

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Agency problems in inter-firm trading relationships are severe in developing and transitional economies because of the limited decentralized information that can support contract enforcement and because the timing of intermediate goods production and payment differ. The consequences are derived for the equilibrium distribution of firm structures, production, prices, profits and trade in developing and transitional economies. Within a multi-market setting, equilibrium outcomes are characterized both for firms that are directly affected by contracting problems and for those that are not. The equilibrium features both excessive vertical integration and excessive development of small-scale retail enterprises, and insufficient, inefficient inter-firm trade. Average profits of vertically integrated firms are higher and those of small-scale retail enterprises and intermediate suppliers are lower than they would be were enduring trading relationships more easily established.

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Institutional Determinants of New Firm Entry in Russia: A Cross Regional Analysis

Cited by 6 publications

References 24 publications

A survey on institutions and new firm entry: How and why do entry rates differ in emerging markets?

A survey on institutions and new firm entry: How and why do entry rates differ in emerging markets?

Firm entry and exit during a crisis period: Evidence from Russian regions

Vertical Integration and Sunk Capital in Transition Economies

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