Cooperation in the Liberalization of Soviet-Western Trade? A Transaction-Cost Analysis of Soviet Joint Ventures With the West.

This study employs the method of transaction-cost analysis--the price of doing business between economic and political agents--to the study of Soviet-Western political economy (particularly Soviet joint ventures with the West). Its purpose is to determine: (1) if Soviet foreign economic policy in the Gorbachev era has reduced the transaction costs to Western firms engaging in joint ventures with the Soviet Union when compared to previous Western business options (e.g., co-production, licensing, turn-key projects), and (2) if the reduction is sufficient to encourage joint ventures to become a mechanism of greater cooperation and liberalization in Soviet-Western political economy and the international political economy (IPE). Survey data collected from 518 Western firms doing business in the Soviet Union supports the theoretical assumptions of the transaction-cost literature. Empirical analysis of the data demonstrates that the decision by a Western firm to engage or not engage in a joint venture is directly influenced by that firm\u27s perception of the level of transaction costs that would be incurred in such a venture. The study demonstrates that transaction-cost analysis provides greater empirical verisimilitude than any other existing IPE model for the study of Soviet-Western political economy