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The Evolution of the Collective Forms of Interaction between Foreign Business and Government in Russia

The Evolution of the Collective Forms of Interaction between Foreign Business and Government in Russia

Journal of Institutional Studies, , Vol. 9 (no. 4),

The paper uses the evidence from Russia to analyze the arrangements for interaction between foreign firms and key national partners in the countries of their operations. We identify the main stages and factors that were driving the evolution of the two main channels of collective action for foreign firms in Russia over the last 25 years – the Foreign Investment Advisory Council under the Office of the Russian Prime Minister and foreign business associations. We also provide the comparative analysis of the effectiveness of these two main channels, as well as highlight the factors contributing to higher effectiveness of individual foreign business associations under the current Russia’s circumstances. We show that political rather than economic or institutional factors play a more significant role in explaining the changes in the effectiveness of collective efforts of foreign firms. Russia’s experience suggests that the mechanisms of interaction between foreign business and the authorities can work effectively only if there is mutual interest in such interaction. In Russia since the mid-2000s there have been relatively favorable political conditions for the dialogue between the Government and foreign firms, and the respective interaction mechanisms produced some positive effects regarding e.g. attraction of additional foreign investment inflows and modernization of the regulatory framework. However, with worsening the political situation in 2013, political priorities of the Russian Government became markedly more important than the economic ones, and thus, the effectiveness of the existing instruments for collective action of foreign firms significantly decreased. One consequence of this has been the greater willingness of foreign business associations to cooperate with Russian business in order to promote jointly a pragmatic reform agenda.

Keywords: foreign firms; business associations; collective action; lobbying channels; business climate; economic policy priorities; state-business relations

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