Looking in the rear‐view mirror—A 35 year retrospective on the Russian automotive industry

Abstract

Drawing on foundational arguments from the literature on emerging market institutional strategies, and employing a realist historical analysis, we present a retrospective on the Russian automotive industry. We begin by tracing the origins of the sector and synthesizing salient post World War II developments. We then recount the subsequent expansionary decade of the 1960s, followed by the stagnation of the late 1980s, culminating in the eventual collapse of socialism and the breakup of the USSR. Attracted by both the rapid growth in the local market, and the preferential tax rates that accompanied investments, we then document the swift expansion of production facilities in Russia by major global manufacturers in the 2000s. We show how eventually an ensuing sharp halt in local market growth, and an accompanying rise in spare production capacity, saw most manufacturers pursue institutional strategies aimed at obtaining new tax concessions and leveraging intraindustry cooperation, rather than divesting their recently established production facilities. Overall, our retrospective, in particular, calls attention to how global manufacturers were not only to acquire able and rejuvenate existing production facilities or install new greenfield ones, but also to exercise their agency in shaping the broader policy framework and in fashioning new sectoral institutions designed to buttress and sustain the industry.