The concept of relational
capital can be used to revise the spatial representation
of the Russian transition economy. There are now two
state variables that describe the nature of an
enterprise. In addition to the dimension of market
distance, enterprises can be arrayed in terms of their
level of relational capital. The initial conditions of
an enterprise can thus be described by a two-dimensional
space, r-d space, in which each enterprise has
its own location.
Whether one views the enterprise sector in a single
(d) dimension or in the two dimensions of
r-d space is critical for how reform policy is
understood. The conventional, unidimensional, view
assumes that economic reform measures will have the
greatest impact on those enterprises that have the
highest level of d. According to this
assumption, for example, if budget constraints are
tightened, enterprises that are farthest from the
market will be under greatest competitive pressure.
Similarly, it is assumed that if the economy is opened
to international competition, the greatest impact will
be on those enterprises that are most in need of
restructuring. In the two-dimensional r-d space
environment, the effects of market-type reforms need
not have this property at all. Tightening the budget
constraint will not necessarily put the most pressure
on the enterprise that is most inefficient (has the
highest d). If the enterprise has been endowed
with high r, it may be insulated against the
impact of this policy; it can use relations to evade
the budget constraint. And if tight budget constraints
are enforced against enterprises that are lower in
r, then the policy may, in fact, have greater
impact on low-d enterprises than high-d
It is not just the initial
levels of either r or d that matter, of
course. An enterprise’s location in r-d space is
not the immutable relic of its past. It depends on the
path of enterprise investment decisions. If the
enterprise has invested in r, it will improve its
resistance to policies of tight budget constraints. The
enterprise director’s problem is to decide how much to
invest in reducing distance and how much to invest in
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Causes of the Low Rate of Tax Collection (Nonpayments in
the Fiscal System), General Causes of the ‘Payments
Crisis’, and the Possibility of Restoring the Solvency
of Russian Enterprises.” Report of the Inter-Agency
Balance-Sheet Commission, chaired by P. A. Karpov.
Moscow (December). [In Russian].
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