Szociológiai Szemle 22. (2012)

2012 / 4. szám - STUDIES - Sík Endre: Trust, Network Capital, and informality – Cross-Border Entrepreneurship in the First Two Decades of Post-Communism

Endre SÍK: Trust, Network Capital, and Informality 53 REVIEW OF SOCIOLOGY 2012/4: 53-72. Trust, Network Capital, and Informality - Cross-Border Entrepreneurship in the First Two Decades of Post-Communism1 Endre SIK sik@tarki.hu ABSTRACT: The paper addresses two of the manifold forms of transformation-specific cross-border entrepreneurial activities and shows the role of particularistic trust and network capital as embedded in these processes. The two case studies illustrate that these activities are "borderline” cases in three senses: [a] using national borders as an opportunity structure, (b) using ethnicity as a resource to gain trust, and as a defensive mechanism, and (c) creating a semi-permeable zone between the formal and in­formal economy. The first one is about old/new form of urban informal trade: the combination of cross­­border trade, street vending, and COMECON-marketplace in Mongolian cities in 2000. The second case study is about inter-regional form of informal trade, i.e. the so-called cross-border junk trade, which is a particularly "high-trust" and network capital-intensive form of cross-border entrepreneurship. Introduction Social scientists usually agree that generalized trust is a key element of economic development (Fukuyama 1995; Knack - Keefer 1997). This approach considers trust2 as the "oil" of smooth cooperation reducing the costs of market transac­tions. We would add that above these general processes, informality3 forces (and/ or create advantageous conditions for) economic actors to invest in particularistic trust and network capital4. The role of particularistic trust and network capital is especially strong in a network capital/particularistic trust-sensitive environment, and such an institutional setting will not easily change (Sik 2010). The starting point of our analysis is that in the first phase of post-socialist transfor­mation, uncertainty has significantly increased, the pace of changes has speeded 1 The articles have arisen from cooperative research between 2007 and 2010, within the network entitled 'Social Capital in European Societies in Transition - Communities, Families, Generations', operated under the German Federal Ministry of Educa­tion and Research's Project TP3 on 'Informality, Trust and Distrust in Societies in Transition'. The head of the research was Ina Dietzsh (The Institute of European Ethnology) 2 Trust in our understanding is "a relational response, not a result of blind loyalty that permits people to take risks in dealing with each other" (Rose-Akerman 2001: 543). 3 The transformation-specific form of informal economy, the so-called "second-to-informal economy" (Sik 1994a) consists of activities, which used to fall outside the direct control of the socialist state, and in the course of the shift towards capitalism have been (partially) transformed into the informal economy. 4 We talk about network as capital if it meets the following conditions: It is necessary for the production; in the course of production it remains unchanged; it is invested (or its already existing form is converted into capital) for the sake of profit (Sik 2010).

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