Endogenous Coordination. Multinational Companies and the Production of Collective Goods in Central and Eastern Europe

Most accounts of business coordination assume historically given conditionsfor this to emerge. Business coordination is therefore difficult, perhaps impossible,to construct endogenously. This paper examines a process of «endogenous coordination»through an analysis of reindustrialization and industrial upgrading in Central Europeduring the 2000s. Because of its recent post-communist history, during which existinginstitutions of economic governance were dismantled wholesale, Central Europe is aparticularly unlikely place for complex forms of business coordination to emerge.Demonstrating the empirical possibility of endogenous coordination, and identifyingconditions under which it has emerged, thus shifts the debate from pessimisticfatalism to a more optimistic world of possibility. The paper identifies the followingconditions for business coordination to emerge. One, a pattern of industrializationthat combines sophisticated skills and capital goods, leading to higher asset specificityand fixed costs; two, bottlenecks in the production of collective goods associatedwith these assets against the background of potentially high returns in investment;and, three, the existence of a third party, which provides a forum for deliberationand strategic coordination while holding effective sanctioning capacity.