Entrepreneurship and business in Uzbekistan: historical perspective and current obstacles

Abstract

Entrepreneurship has become one of the most researched areas in recent years. Its importance has increased further by the emergence of the ‘transition countries’, the countries of Eastern Europe and the Former Soviet Union. As the transition countries strived to overhaul their economic and political systems in order to bring them in line with the rest of the market based economies, entrepreneurship and private sector development became the focus of the transition debate among the scholars and policy makers. A major part of the scholarly interest centred on the factors that hindered the development of the entrepreneurial sector. Numerous surveys of entrepreneurs and business owners have highlighted extensive lists of the most common obstacles to the development of enterprises. While the international organizations have concentrated on these reported obstacles, some members of the scholarship community have identified much more fundamental issues that both stifle the entrepreneurship development and encourage rent seeking behaviour. This study has used the theory of the allocation of entrepreneurial talents to explore the roots of the most commonly reported obstacles that the entrepreneurs face in the context of economic and political transition in Uzbekistan. We use historical evidence in conjunction with the contemporary survey data and our own interview results to establish the relationship between the ‘rules of the game’ that determine the system of talent allocation and entrepreneurship development. Our conclusions support earlier claims made by Baumol (1990) regarding the importance of the system of incentives and punishments in the development of entrepreneurship.