Chapter 4
East and West Come Together

This chapter looks in detail at the reasons why each party enters the strategic business alliance, what they expect to get out of the relationship, and the issues that may arise when these two sets of background expectations come together. It will also look at the sources of everyday difficulties experienced by the westerners charged with the task of running a business in this unknown environment.

The two sides of an east-west venture in Russia come together from very different backgrounds, carrying in their heads very different experiences that, crucially, can lead to very different expectations. Previous experiences in two mutually exclusive economic systems, together with a variety of possible expectations as to what the collaboration will bring for each side, create potential sources of tension in an east-west alliance in Russia, and indeed 'a lot of the joint ventures have come unstuck because the Russians and the western company have different goals as to what they hoped to achieve out of it' (expatriate deputy general director). Further, the practical challenges faced by westerners entering this new environment are considerable, with many accounts of 'culture shock' quite evident.

This chapter will set the scene for the following chapter, Chapter 5, which provides a detailed overview of the Moose case study. In both this and the next chapter, many of the issues that are to follow in Part III discussing the determinants of trust will show their true colours.

Russian Motives to Join a Strategic Alliance

Russian partners generally joined the strategic alliance in search of finance and investment in the form of access to new technology, machinery, materials, software etc; there was also an accompanying need for skills transfer - both in the form of technology skills, and business and management skills and expertise. Of course there was then the desire after all these efforts to gain and maintain access to existing and new markets for the product, and make a profit.

The motives for entering a strategic alliance, and the attendant enforced change process that many of the post-Soviet companies underwent, is vividly portrayed in the following account of a former Soviet enterprise director. This particular ex-director was acting as the deputy to the expatriate general director of a major western multinational that had taken over the enterprise's factories to form a wholly-owned subsidiary. Soon after the reform process, this Russian director had recognised the need to bring in western investment and expertise - a position in which many Russian enterprises at the time were finding themselves. The ex-Soviet director quoted below had actively sought western partners, courting a variety of potential investors in the early 1990s. This is what the change process meant for him:

'As socialist collapse began in the eastern European countries, we lost these markets, and after the Soviet Union we lost the markets in the former Soviet republics... Our country and our industry developed in quite a specific way, the consumer market was never completely fulfilled, there was always a deficit of everything, as far as consumer goods were concerned, there was no competition, or concept of it, very strict state control and regulation as far as production and distribution of goods was concerned.... [The Soviet Union] was divided into 140 regions, in every region there was a wholesaler, which received its limited amount of our products... we didn't know about marketing which existed throughout the world, we didn't know what sales are, we didn't know what is needed, these notions didn't exist for us, but they existed in the whole world for all those years. This is where the main differences lie. Certainly we didn't have a marketing department, no sales, this was the delivery department, we contacted only state companies, we didn't know what delayed payments are, we didn't know about false companies, we didn't have such things. But we had to face all of these problems, these are things we had to learn quite recently.

'When Gorbachov was in power, the first signs of democracy appeared, we had freedom and we were able to start travelling abroad. These first trips opened our eyes to many new things, it became clear how far away the west had become.'

{Are you happy with the changes?} 'A very difficult question to answer. The people who are starting work now in this new company are quite happy ... but to people like myself, and maybe a bit younger than me, say middle aged, it's very difficult for them to rebuild. It's very difficult to learn English, the older you are the more difficult it becomes. From the technical point of view there is a lot in common, but from the economic point of view there are very many different things. Legislation, economy, finance - there are great differences. For the people who work in these spheres it is very difficult, and certainly they can't be happy, even those who manage to find their place in the new system, they don't lose their positions but they are not promoted, they undergo great stress - physical and psychological - these people have great difficulties... It is that which spoils the "barrel of honey". All other aspects are more or less positive - high salary, conditions of work are good, the intensity of work has not increased, from this point of view we feel quite happy.

'A negative influence comes from redundancies, but this was caused not only because we are working with a foreign company, but by the economic changes that occurred in the country. But unfortunately they don't understand this in the lower positions, and they can attach it to the foreigners...

'My head, my reason understands that it is very good that we work for such a large company, that we are part of it, but my heart tells me otherwise. I am very honest with you, I am not afraid to talk about it because it's true - it's very difficult indeed.'

{Are you happy with your work now?} 'Not very. On the other hand I realise that I don't meet the requirements that exist in this company now. The main thing holding back my happiness is my lack of English, the reason is in myself, it is not that I am treated badly. I personally feel that I am not prepared to occupy the position that I used to occupy. Because of my age and my [?lost/last?] experience, it does not allow me to occupy this position' (Russian deputy general director).

Former Soviet enterprises and organisations were generally clear on the need to upgrade and update their machinery and technology in order to compete in new markets. Many also recognised that new management and business skills were usually going to be required, either through new personnel or training, if the change process was to succeed and they were to become competitive - whatever exactly that might have meant to them. But the old Soviet businesses varied in their response to the challenges ahead. As one Russian deputy director put it: 'Some Russian companies do have marketing directors of course, more progressive, more advanced companies, they will have it of course, but here they are still using old methods, and they are not very good at organising properly their trade' (Russian deputy general director).

Western Motives for Market Entry

The motives for the western companies entering the post-Soviet market as posited by interviewees were various. For example, one company was 'flying the flag' maintaining a major contract that it had held with Russia since Soviet times; similarly another manufacturer had been there since the 1960s and was simply continuing operations in this new set of circumstances. One US organisation set up manufacturing operations and an office in Russia following a meeting at a dinner in Washington between the organisation's chairman and Gorbachov when he was in power, while another formed a manufacturing joint venture as part of its normal strategic activities - it could have chosen a factory anywhere in the world, the fact it was in Russia was immaterial. Other companies wanted to dip a toe in the water 'just watching what was happening' (expatriate director) and gradually establish a presence in the market.

However, most commonly, western investors saw a major opportunity that they wanted to 'get in on', and get in on early as a first mover - with worldwide markets for many products close to saturation point '[t]he emerging markets, particularly eastern Europe as it's opened up, is a prime opportunity for everybody' (expatriate financial controller). Indeed, as a major mining organisation described it, getting into Russia early could be a pre-requisite in years to come for competitive advantage: 'Russia is unquestionably one of the few areas in the world which has what we call large reserves... the big boys call it a giant... Frankly we've learned over the years that you have got to be somewhere early to establish relationships etc so we can hope to do business long term... You pretty much have to be in Russia if you are anticipating exploration, production over the next 10, 20, 30 years, you pretty much have to be here, because it's one of the last vestiges of known reserves' (expatriate general director). Another organisation saw a chance to develop their export activities in an enormous potential market through setting up a wholly-owned subsidiary: 'We have exported our products to Russia for many years, and obviously when everything was opened up, here was a market of potentially 150 million people... it seemed an ideal opportunity not only to help Russia and sell our goods here, but also a chance to develop a market which was emerging' (expatriate general director).

Setting Compatible Contributions and Goals

As suggested in the above section on Russian motives, the western partners would be expected to contribute to a venture finance, machinery, skills to use the machinery, and market-based expertise. In return, the western investors may expect to receive from their local partners a physical contribution and/or presence in the form of, eg an office building, factory, retail outlet, along with personnel, access to local suppliers and a local customer base on which to build.

The western side at this stage would be at the very beginning of the learning curve of investing and operating in Russia, therefore an important further contribution of the Russian partners at this stage is their knowledge of how to get things done, in the form of local contacts and suppliers for running the business, setting up contracts, political knowledge and connections, dealing with Russian bureaucratic and legal requirements, domestic infrastructure etc. This is because 'you are never wholly foreign, you rely tremendously on underpinnings from certain relationships and agreements and contracts, so the main advantage is it locks you in with a local partner, especially if you've got the right one, it locks you into, as much as one can be, into the legal framework in a way that is comprehensible to you' (expatriate deputy general director). Another interviewee describes this as 'the typical way joint ventures tend to work, where the local partners are providing accommodation, are providing local expertise, manpower, and the western people are providing their services, and providing marketing, business, finance support... our Russian partners, what they're bringing is their contacts in the mayor's office and whatever, so they tend to sort things' (expatriate deputy general director).

To make this collaboration work, investors recognise that it is important to make what is to emerge as a result of the respective contributions as clear as possible from the start in the form of 'shared goals, or a common direction where each partner is getting something out of the operations of the venture' (expatriate deputy general director). However, achieving this can inevitably be difficult, particularly in the joint venture form which brings its own special issues to overcome: 'we're at the easy stage now, we're at the building stage, there haven't been discussions about how is everyone ever going to make money out of this. But when the moment comes, I know it's going to be very, very tough, because the western side is going to be saying OK boys, this is the time for the payout, or the beginning of the payout, and the partners here are going to say hold on' (expatriate deputy general director).

The Need for Serious Investment

Russians look for evidence of serious investment from their business partners. As one Russian respondent describes it: 'I wanted to join a big and serious company that came here not for a matter of a year, but to work here.' This particular Russian deputy goes on: 'to have a joint venture, you should have the right company for the Russian partner, some of them do not quite meet requirements, perhaps some international companies, they think they will make profit immediately, they are not prepared for a long cooperation.' But he admits that, despite a perception of western companies being in the country to make 'quick money - this attitude has been helped by locals in some regards. This attitude has now changed - through big companies - especially those doing manufacturing here, providing jobs.'

Significant investment - although expensive, and requiring a long-term outlook - is a practical necessity given the contributions required by local partners. However, the previous interviewee shows how long-term investment is also important as a way for western investors to signal their commitment to the Russian market - something Russian partners often seek evidence of, as they often, although not always, tend to be wary of western investors, wanting reassurance that their partners are there for more than a 'quick buck'.

For westerners, this may come as something of a surprise, to have their integrity questioned, given some of the 'horror stories' of western investors being pushed out of joint ventures by their Russian partners after the investment has been made, and the need for the foreign partner has decreased. One respondent western organisation needed to retire the previous general director from their partner company in order to make any progress - this is a not uncommon situation in which Russian organisations want nothing more than money, without any kind of skills transfer or market expertise. The Russians too know that untrustworthy partners represent a risk for western investors - as one Russian general director puts it, some Russian partners think 'why do we need this big American company - we can do it ourselves' (Russian general director).

Russians, recognising both the risks to western partners and the fact that they expect a long-term commitment from them, are at least prepared to acknolwedge that 'everything goes on not the way it goes in the west. The railways... the aircraft, the customs, the accounts, the laws, the banks, everything is upside down from the western point of view, so they should be very, very patient' (Russian general director). But do they really understand the culture shock experienced by their expatriate partners? This is discussed next.

Expatriate Staff

A western company entering Russia - whether dipping a toe in the market or putting in place a major strategic commitment - will send in one or a number of western managers and/or staff to manage that process. Western managers entering Russia in the 1990s arrived via a variety of routes - sometimes going to Russia as an adventure in a new culture, but more often in the data sample they came to the market as a professional expatriate secondee, or as a member of/manager from the western organisation entrusted with the task of running or taking part in operations there, or by accident, perhaps as part of a 'headquarters' team seconded to set up the deal. Two of the western respondents had decades of experience working in Russia in pre-perestroika days, but most had been there for between two and five years.

Irrespective of why or how they came to be working in Russia, such staff had to be ready to take on a challenge in an environment that would make heavy demands on both their personal and business skills. Both Russian and western respondents generally agreed that, as many of the everyday contingencies of setting up operations in Russia could not be anticipated or understood at a distance: '[T]he necessary thing for any western company that wants to work here is to have someone on a permanent basis here, with somebody from the west living here and working here, getting to know the situation, because some difficulties may be explained by having nobody here on the western side' (Russian general director). These sentiments were expressed by the enterprise director of an east-west joint venture in St Petersburg that did not have a permanent expatriate presence. Such sentiments resonate well with those of other respondents - in this very different environment and market, as one western enterprise director put it 'I don't think you can manage by remote control' (expatriate general director).

However, this could be true of setting up operations anywhere in the world: 'People who pass through, they're never going to get an idea, people who just stay in a hotel a week or two weeks or whatever, they can never understand, never be part of it, they can never form associations, they can never understand the attitude, what people's ambitions are, what they expect of life, how they work, how they think' (expatriate financial controller). But there was a feeling amongst interviewees that there was a pressing business need to send permanent, experienced professionals: 'Russia is a place where you have to bring people that are what I call seasoned veterans, people that have seen a lot of different things in life in terms of the business perspective, because it is so new in terms of their business practices that caution is not the right word - experience, having a gut feeling for what you think is right or wrong, or having been here and experiencing things and understanding what the repercussions could be if you do something' (expatriate general director).

The extreme difficulties greeting expatriate secondees is eloquently evidenced in the next extract from an interview with an expatriate project director describing his experience of setting up an agreement:

'The plant went from being the Soviet Union s centre of the universe, to a disastrous [series of catastrophes]1 and the market in turmoil - volumes were dropping like a stone - to about one-fifth of previous levels. We have no idea how they survived financially - financial accounting is 'loose'! ... There was no coordination of any projects within their company, parts didn't fit and different professionals didn't talk to each other. There was no delegation, nothing was decided until it was approved at the top. It was a series of triangles none of whom talked to each other. It was enormously frustrating dealing with people, smoke and mirrors stuff. We expected the organisation to be like a western one, none of which applied.

'There was no frame of reference for the discussions we were having - we spent two days arguing about debt:equity ratios - then found out they didn't know what 'debt:equity ratio' means. Equity costs nothing but debt is expensive! These are highly educated, bright people, but you have to feel around for their knowledge. It took about six months to get pieces of paper out of them on anything.

'Meetings were preceded by huge philosophical preambles - pontificating on the way it should be, they didn't come with figures, although they had data everywhere it was not in an informational way. A political stance was taken prior to meetings - each side came with a very different agenda - we took the cautious, rational investment approach, not so our partners who saw investment as just another tranche of state funding; they wanted big investment to recreate their former glory. They wanted the biggest and best of everything, rather than upgrade what they had in-house, they wanted the cutting edge from wherever.

'There was no sales department, no market research department. There was no dialogue between departments. There was no marketing department involved in the drawing up of production plans, the engineering department thought they knew what the customer wants...

'The chap at the top is a visionary and took on board what was required... this benefited greatly from a good relationship between the chap at the top of our company and the head of our Russian partners... they were three months behind with paying the wages. You become a fruitcake after a few weeks there.'

The next section sets out the challenges as perceived by western managers that they faced both within the workplace on an everyday basis and in the wider business environment.

Challenges Within the Workplace

Consistent with the expectations of the Russian side coming into the alliance that they would acquire the appropriate skills to run a western-style business, expatriate managers anticipated being in charge of a change process that would bring their local partners 'up to speed' with western business practices and technology transfer. As one interviewee put it: 'things that have gone well have been the things on the technical side, because the technology is relatively straightforward and black and white, so it's an angle that is understood by the Russians as well as by us... Where you start getting problems is when you then move into the commercial, into the political business' (expatriate deputy general director).

Indeed, there was a learning curve on both sides regarding these less 'black and white' aspects: 'we've both been learning... in terms of the foibles of westerners and Russians in terms of business and business processes, and they've come on a lot over the past three to four years from being, when we first started talking to them, working with them, a state monopoly to now being a privatised entity with shareholders rattling their cage, and investors questioning their judgement, and competition. So they've had to change quite a lot and they've become more western in their outlook' (expatriate deputy general director).

There is more to the transfer of knowledge of business practices than western staff simply flooding market concepts and techniques into the eagerly awaiting hands and minds of their partners. While technology may be transferred and installed with reasonable ease, to change attitudes and behaviour towards western-style business practices proved to be a very different matter. One US respondent, in a familiar explanation amongst interviewees, believed he had figured out exactly what the problem was, and what needed to be done about it: 'the workplace for 70 years was a place that people came to socialise, there may or may not have been a job there, they just came to socialise, everybody's equal, they all made basically the same thing, and they all had the same place to live, they were the same, that's basically what communism was. And then here come these westerners in here, after perestroika, glasnost, and all that kind of stuff, and we come in here and we start talking about work ethics, be here at 9, don't leave until 5.30, and work while you're here by the way, and by the way have you ever heard of goals and objectives, and we run a merit programme, and...! So things that we just grew up with, and kind of have an expectation around' (expatriate general director).

The attitude of key individuals proved to be important. For example, the head of one respondent company, an ex-Soviet telecoms organisation in partnership with a major US organisation, aimed from the start to become a western-style company: 'it's come from the top, it's come from Igor, who has said we're going to be a western-style company, we're going to be a Russian western-style company, and it's leadership from him. If you've got someone who is manifestly trying to do that at the very top then it trickles down' (expatriate deputy general director). Indeed, Igor, with typical pride, states: 'we have combined the Russian willingness to work and Russian knowledge, and the western style of management and the western style of work, we have developed our company to such a level now that we can be proud of our business.' Igor was running a venture that had changed from 'just one existing customer base... And now... the quantity of our subscribers is ... several thousand' (Russian general director).

This was perhaps the 'ideal' set of conditions for developing a business that could succeed in Russia's evolving market economy. But not all post-Soviet directors and their businesses were like this. One western organisation found itself dealing with a joint venture partner who 'treated everybody as being serfs, nobody had any opinion but him.' In fact, the western partners felt he only wanted their money and nothing else - a situation that the westerners believed made the business unviable as long as he remained in charge: 'he didn't allow anything to happen, anything we tried to do, he countermanded as soon as we had gone' (expatriate general director). The western company finally retired the individual and appointed a new Russian director in his place, who had formerly been the chief accountant.

Workplace behaviours, legacies and difficulties are inevitably a reflection in part of difficulties in the wider business environment. The challenges of operating in Russia at the macro level are considered next.

Challenges of the External Environment

Interviewees agreed on a number of key challenges that the Russian business environment presented, but they all stemmed from the fact that working in post-perestroika Russia was 'such a shock' (expatriate deputy general director). As one hardened veteran put it: 'this is an exciting place to be and to work, and my goodness we see quite a lot of life through this office. You can imagine, I think this is Russia in general, but the traffic through this office is quite extraordinary, and then of course our time spent in [far flung places]2 which ... [are] as close to being the end of the earth as I think I'll ever be... We know the president and get ferried around, with big blue lights flashing down the middle of the road, Stalin is alive and well in these places... This is the wild west, and it's happening very fast' (expatriate general director).

The wild west - or east - is a frequently cited metaphor. Interviewees often refer to 'the times really when one should have left, should have run away' (expatriate deputy general director), on account of 'the sheer hassle factor of doing business here... of importing products and getting all the customs clearance issues out of the way, get all the invoicing issues, the collection of monies issues - at every turn there was a barrier to try to stop you doing business, and it requires a lot of time and lateral thinking to find a way round these things' (expatriate deputy general manager). But time, energy, and lateral thinking were all put in to keep the business going.

Customs

The previous interviewee mentions customs - this represented a major problem for those importing products: 'We've had numerous problems with customs men, purely bringing things in, it will sit there, they won't clear it' (expatriate deputy general manager). His Russian general director explained how: 'customs here is a separate entity, it's like a state within a state, you've got to know how to deal with them, that it takes so long, and because it's so much simpler in the UK, people couldn't realise that it could take so much time here'. Difficulties with customs created considerable uncertainty for western investors: 'it's very hard for me to tell expatriates or our Russian staff, "here is a way we can bring something into the country", and next week say "no, forget it". So what that has done is make me take that type of information with a grain of salt and figure out, is it really going to be applied, is it really going to happen, is it a fad?' (Russian general director).

Financial Risk in an Unstable Environment

For western market entrants in the 1990s, Russia was a high-risk environment: 'One of the problems... is recognising all the risks - it's a highly changeable environment. So all you can recognise is what are the situations at the moment and try and anticipate what they could be in the future. It's almost impossible to anticipate what the political situation will be, that brings its own risks; whatever political policies are introduced will influence financial policies, will influence investment. You can anticipate them, but you don't know which way they are going to go - so you seek to mitigate the risk, to insure the risk' (expatriate financial controller).

As the interviewee implies, to safeguard their financial interests, investors might look to institutional guarantors to lessen the risk. However, in the mid-1990s there were certain institutions present in a western business environment that did not act in the Russian environment in the way one might expect. Banks, for example, did not instil confidence in their operation: 'banking, of course, is another area which is great fun. It doesn't exist as we know banking, you just can't go in there, write a cheque and get some cash, everything is transferred by pieces of paper. So we have money going through here, which has to be transferred from dollars into roubles, the bank can sit on it for a while - one extra night, that means they're using the money, and we know very well they are... Our bank will sit there and tell us they haven't received it, even though we have telegraphic evidence that it is there, but they'll say "sorry, we haven't got it". Two days later they'll find it and that means they've been using it in the market place' (expatriate general director).

Such was the impact of the banks on everyday working life. However, what really set many investment horizons in Russia was the default of the Russian state bank in the early 1990s: 'after the default of the Russian state bank in 1991, Russia became off-cover, so all exporters were in a position where they were trading with a government that had defaulted on its major debts - previously they had been a very good credit risk, they'd always paid their debts, what we didn't know was how, what sort of funds they were using to pay those debts. It eventually caught up with them and the bank defaulted on multi-, multi-millions of hard currency debts, in fact it illegally confiscated every hard currency bank account in Russia - a considerable loss. All that background set everyone's investment perspective, their risks increased, but by that time our joint venture was operating... we had invested in it' (expatriate financial controller).

Despite this distinctly shaky background to the activities and general trustworthiness of Russia's financial institutions, there was a further risk factor in the form of the need to work on credit - most western companies assumed the credit risk in Russia as interest rates were much lower for them at that time, but it made for enormous potential exposure: 'you could easily lose a few hundred thousand dollars if a big distributor disappears, and these things do happen' (expatriate general director).

In fact, for one joint venture, the western partner's refusal to extend credit in Russia's volatile environment was a major bone of contention between the parties:

[Russian partner] 'I would note two major problems as delivery and financial trust. We are a subsidiary of the western company working in Russia, we work on the basis of advance payments with them. First we pay and then we get delivery of the equipment. Other companies from other countries work in Russia on the basis of delivery first - post-payment. Many Russian companies working with German or French or US, other western companies, work on the basis of first delivery and then payment.'

[UK partner] 'I think that one of the things that doesn't help is the understanding of Russian law and limitation of Russian laws, which is a bit frightening for investors. It does make them very cautious, well British companies at least. But it's changing very rapidly and it's very difficult to keep up.'

[Russian partner] 'I think that maybe it's a matter of trust, a problem of trust. For example, if you want to increase your volumes of sales you have to increase first of all your working capital. And if you want to take credit in Russia, then you are paying 36% interest per year. In the west, it is possible, eg for our western partners to have credit at 5-7%. Many other western companies take credit overseas and use it for their operations in Russia. They gain benefits - they increase their volumes and they pay less back. And they use two benefits - very cheap credit in the west and very high profitability in Russia.'

[UK partner] 'I'm not being personal, but I can see the looks from my colleagues in the UK if I said "give them three months' credit". To be fair they have problems in Moscow on credits. Breaking down that trust - we're partners, we work together. In general terms, on the western side we are very strict on our payments, pay money and we will deliver; that's a fact. To make more business you have to have strong trust between your partners. The law is difficult, if you have a good partner, they will help you through these problems. Generally speaking, we take a tough line.'

[The Russian partner agreed that the process of building trust is 'absolutely important', and then went on:] 'It's been a step back in the relationship. If they are waiting for things to settle in Russia, it won't happen, ever' (expatriate general manager and Russian deputy general manager).

In the end, most western companies did extend credit, but tried to set up the operation as a 'managed risk... the real exposure here is currency risk, bad debt risk, and inventory risk in the sense that your stock might be stolen or burnt down' (expatriate deputy general director).

Summary

Two sides come together in a 'financial' partnership in Russia. It appears that both sides are looking to make and receive certain 'hard' contributions to the venture, and in tandem with this are seeking 'softer' evidence of genuine integrity and commitment from their partners.

On the practical, business front, the Russians seek investment, and are in need of equipment and expertise. The westerners want to gain a foothold in the market, and may be looking for office space or a production facility, along with 'local' inroads - connections, dealing with bureaucratic and legal requirements, access to suppliers and markets.

The westerners also want to know that their Russian partners are after more than just their cheque book, while the Russian parties want to see signs of commitment both to the joint venture and to operating in Russia, whatever the difficulties. For the western investing partners, the need for an expensive, long-term commitment puts them at risk: 'Russia is, I think, a market only for the larger enterprises who can afford to have accidents and burn the odd finger - off in some cases... it's a very high risk place, we've had to write off a lot of debt, we've burnt our fingers on many fronts. It's not for the faint hearted' (expatriate country manager). With this level of investment going on, and despite all of the problems involved, exit from the market becomes an increasingly difficult and expensive decision: 'It's going to be very expensive, a long-term investment, and the trouble is, once you spend that kind of money, you can't go, you're there for ever more!' (expatriate general director).

In addition to all of the foregoing, during the mid-1990s, heavy demands were placed on the personal and professional skills of westerners implementing the change process in an east-west enterprise in Russia, and they needed to be there managing these day-to-day problems on a permanent basis. With these incredible changes and difficulties presenting themselves both within and external to the workplace, a steep learning curve confronted each side of the partnership, requiring much mutual adaptation.

Within the workplace, westerners were often finding a work culture that was not all that they had hoped: skills transfer could be held up through a number of obstacles to implementation, and the attitudes of partners were an important key to the success of such endeavours. In the external business environment, Russia was high-risk, lacking reliable institutional guarantors. Despite the risk, significant investment was being committed to the market. Indeed, these large investment sums were forcing many western investors to weather storms that would otherwise have had them beating a sharp retreat in other markets.

Chapter 5 will take a very detailed look at how these various business realities played out in the day-to-day environment through the experience of the Moose joint venture.

1 Actual events deleted to protect confidentiality.

2 Location names withheld for confidentiality purposes.

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