RUSSIAN-AMERICAN BUSINESS PARTNERSHIPS This res

RUSSIAN-AMERICAN BUSINESS PARTNERSHIPS

This research paper discusses the evolution of business partnerships between Russians and Americans as vehicles for doing business in the Russian Federation, including their potential and problems. From a business standpoint, the terms business partnerships, joint ventures and strategic alliances can be used interchangeably but the term joint ventures is the term most commonly used in the Russian context because of its special legal meaning and is therefore used in this paper. Joint ventures have become the most common vehicle for carrying out American business investment in Russia since 1987. Enormous difficulties stand in the way of their becoming successful financially, but a few thousand hardy investors, American and Russian, have persevered in the face of truly awesome obstacles. Success or failure depends on a variety of factors, some of which are external to the venture itself and others which relate to the difficulties of managing and operating such organizations in the Russian environment.

Attractions of the Post-Soviet Union Market

Joint ventures, Russian companies jointly owned by foreign and Russian investors, were not uncommon in the late 19th and early 20th century and were briefly permitted in the 1920s under Vladimir Lenin's New Economic Policy. For all practical purposes, foreign investment disappeared from the Soviet scene during the Stalinist era and until Russian-foreign joint ventures were authorized again by

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ing for the taking. He said "the climate for international joint ventures has never been better" (1994, March-April, p. 62). Lawrence & Vlachoutsicos said "the possible gains from investing in Russia today far outweigh the hazards" (1993, Jan.-Feb., p. 44). There were, however, critics even then who pointed out that the new Russia was politically unstable and that its new found prosperity was lopsided benefitting a few at the expense of the many. Lacking broad public support, the regime relied too much on a narrow tax base and basically survived by printing money which produced domestic inflation and led to a steady decline in the ruble which in 1998 became official. Most foreign joint ventures focused on industries where earnings could be rapidly translated into repatriatable hard currency such as oil and gas and hotels and other tourist related businesses. Those who invested hard currency in the Russian domestic economy suffered substantial losses due to the decline in the ruble. Not all American investors were taken in by the propaganda. Harvard economist Goldman warned in 1994 that "with ever- increasing crime and corruption, it is even more difficult to start a joint venture than it was in 1990" (1994, May-June, p. 35). G

Category: Business - R