From Communists to Foreign Capitalists: The Social Foundations of Foreign Direct Investment in Postsocialist Europe

Notes

NOTES CHAPTER 1 SOCIAL FOUNDATIONS OF THE ECONOMY 1. Throughout the book I use Central and Eastern Europe as a geopolitical term to include the following eleven countries: Bulgaria, Croatia, the Czech Republic , Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia, and Slovenia. This is also the sample of countries included in empirical analyses. 2. The 10 percent cutoff is defined by the international organizations that collect information on FDI, including International Monetary Fund (IMF), Organization for Economic Cooperation and Development (OECD), and United Nations Conference on Trade and Development (UNCTAD), and accepted by most national accounting systems that abide by these international standards. 3. Scholars have claimed that the last two decades of the twentieth century saw rising support on a global scale for economic policies that encourage market deregulation, privatization, and liberalization, often referred to as neoliberal reforms or neoliberalism (Lash and Urry 1987; Albert 1993; Przeworski 1995; Gore 2000; Campbell and Pedersen 2001). Neoliberals welcome such economic changes because they believe a market released from government intervention will select the most efficient policies. 4. References to socialism and capitalism used here are ideal-typical. As I discuss in further detail, (a) the actual experienced socialism varied across countries (chapter 2), and (b) the capitalist economic organization consolidating in postsocialist countries shows within-regional variation (chapter 7). 5. Karl Polanyi (1957, 148) used the term embeddedness to indicate that actually existing market economies are not analytically autonomous but “embedded and enmeshed in institutions, economic and noneconomic. The inclusion of the noneconomic is vital. For religion or government may be as important for the structure and functioning of the economy as monetary institutions or the availability of tools and machines that lighten the toil of labor.” This notion of economic embeddedness has been used in later work to examine the variety of social organization of capitalist systems (e.g., Hollingsworth and Boyer 1997; cf. Barber 1995; Block 2003). Since the publication of Mark Granovetter’s influential article “Economic Action and Social Structure: The Problem of Embeddedness” (1985), the term embeddedness has been often (narrowly) associated with the influence of social networks on economic activity. Close to Polanyi’s original statement, I adopt a “thicker,” “substantivist,” notion of embeddedness, which covers the in- fluence of all social forces on the economy, not only networks. 6. In their delineation of forces that structure economic life, Zukin and DiMaggio (1990) also include cognition. Since I am primarily interested in social forces, I subsume the category of social cognition under culture, assuming that shared cultural understandings manifest themselves for each individual as cognitive sche- NOTES TO CHAPTER 1 244 mata, mental models, or typifications that help individuals to perceive, interpret, and act upon the phenomena around them (Berger and Luckmann 1967; DiMaggio and Powell 1991; DiMaggio 1997). 7. Ann Swidler (1986) has distinguished between settled and unsettled lives (periods) to differentiate between times perturbed by social change and those characterized by stability. 8. The claim that social forces constitute economic behavior does not imply an oversocialized conception of action (critiqued by Wrong 1961; Granovetter 1985) because it maintains a strong focus of human agency. Social forces structure how economic actors engage in transactions because they provide resources that actors use to compose strategies of action rather than because they provide ultimate values that unilaterally determine individuals’ behavior, like puppets on a string (cf. Swidler 1986). 9. Representative research in this subfield includes Granovetter 1974, 1985; White 1981a, 1981b, 2002; Baker 1984, 1990; Burt 1992; Podolny 1993; Portes and Sensenbrenner 1993; Powell, Koput, and Smith-Doerr 1996; Uzzi 1996, 1997, 1999; DiMaggio and Louch 1998; Gulati and Gargiulo 1999, Fernández, Castilla, and Moore 2000; Yakubovich 2005; for review see Smith-Doerr and Powell 2005. The network approach adopted in this research is often equated with the embeddedness perspective. But the focus on just networks leads to a thin version of embeddedness in which economic processes seem to operate autonomously in the context of networks and social ties. The social constructivist view I am adopting here leads to a thick conception of embeddedness in which social interaction is treated as constitutive of economic activity. 10. In fact, economist Michael Piore characterized economic sociology as “an enormous hodge-podge of ideas and insights, existing at all sorts of different levels of abstraction, possibly just incommensurate, without a basic theory or structure to sort them out, or order them” (1996, 742). 11. A notable exception here is the work of Neil...