Comment: In the Balkans, investors operate within a 'devil’s circle'

— 17.12.15

by Simon Spode

Promoting entrepreneurship is often viewed as a key component for generating growth in the transition economies of eastern Europe, but in the Balkans businesspeople face the additional challenges of dealing with often systemic corruption.

The Management School’s Tim Vorley and Nick Williams write on the London School of Economics’ (LSE) Politics and Policy blog, that tackling corruption has an important role in this process. Drawing on recent research in Bulgaria and Romania, they have assessed the challenges posed by corruption for entrepreneurs in the region, noting that the issue must be understood and tackled effectively if entrepreneurship is to have a positive and productive impact on national economies.

Currently, investors cannot break out of a ‘devil’s circle’ in which they are forced to engage in corrupt practices themselves, if they are to get anything done.

In many transition and post-conflict environments, the nature of corruption is systemic and permeates many spheres of everyday life. It ranges from petty bureaucratic corruption to more organised corruption in the upper echelons of big business and politics, and undermines productivity and governance.

“Since corruption is an everyday feature of the economic landscape… it is regarded as inevitable rather than extraordinary or unusual.”

Tim Vorley & Nick Williams, Management School

For entrepreneurs trying to establish themselves across the Balkans, corruption has become an aspect of their business activities that needs to be considered and managed if they are to survive, let alone grow.

Since corruption is an everyday feature of the economic landscape, our research has found that it is factored into the decision making and business planning of entrepreneurs in much the same way as paying tax. It is regarded as inevitable rather than extraordinary or unusual. In many respects the expectation of corruption enables entrepreneurs to be prepared, a notion that would be alien to the average entrepreneur in the UK.

However the prospect and practice of corruption is something that needs to be understood, as well as better understanding the implications for the individual entrepreneur and wider socio-economic impacts.

Read the full article on the LSE Politics and Policy blog.