Innovation in centralized organizations: examining evidence from Soviet Russia
- 7 January 2014
- journal article
- Published by Emerald in Journal of Economic Studies
- Vol. 41 (1), 123-139
- https://doi.org/10.1108/jes-05-2011-0057
Abstract
Purpose – This study aims to examine the economic factors that determine innovation pattern in centralized and decentralized economies and organizations. Design/methodology/approach – Empirical evidence on innovation in the centralized economy of the Soviet Union is reviewed. Existing theoretical literature in this area relies on the incentives of decision-makers in centralized organizations and on the concept of soft budget constraint in centralized command economies and hard budget constraint in market economies. This study advocates applying the hierarchy/polyarchy model of innovation screening to explain the pattern of innovation in centralized economic systems. Findings – Screening and development of innovation projects can be organized in a centralized or decentralized fashion. The differences in innovation between centralized and decentralized economic systems may be explained by elements of the principal-agent theory, the soft budget constraint model, and the theory of decision-making in hierarchies and polyarchies. Empirical evidence shows a sharp slowdown in both innovation and economic growth in the Soviet economy following the economic decision-making reform of 1965. The theoretical explanation most consistent with this evidence is the hierarchy decision-making model. Originality/value – Comparisons of innovation in centralized and decentralized economies traditionally relied on decision-makers' incentives and the concept of soft budget constraint. Upon analysis of empirical evidence from the centralized Soviet economy, this study advocates explaining innovation patterns based on decision-making theory of hierarchy.Keywords
This publication has 31 references indexed in Scilit:
- M-form hierarchy with poorly-diversified divisions: A case of Khrushchev's reform in Soviet RussiaJournal of Public Economics, 2011
- Command Versus ‘Shadow’: The Conflicted Soul of the Soviet EconomyComparative Economic Studies, 2006
- Understanding the Soft Budget ConstraintJournal of Economic Literature, 2003
- The rise and decline of the Soviet economyCanadian Journal of Economics/Revue canadienne d'économique, 2001
- Pulling the Plug: Software Project Management and the Problem of Project EscalationMIS Quarterly, 1995
- The Influence of Central Planning on the Economic Slowdown in the Soviet Union and Eastern Europe: A Comparative Production Function AnalysisEconomica, 1985
- Plan fulfillment and growth in Soviet ministriesJournal of Comparative Economics, 1983
- Economic growth in the USSR, Hungary, and East and West GermanyJournal of Comparative Economics, 1981
- Decentralization in Recent Soviet Administrative PracticeSlavic Review, 1962
- The Structure and Organization of the Soviet EconomySlavic Review, 1962