In the beginning, when joint ventures were the only possible form of foreign investment in Russia, Moscow was by far the most popular location. Since 1991 a more diverse pattern has started to emerge, with St. Petersburg becoming one of the favoured targets of foreign investors.
Of those companies which are operational the average level of investment has remained low as most of them operate in business services, consulting, tourism and the catering business.
It is not known exactly how many of the above companies are operational. In the former Soviet Union less than 40% of joint ventures actually started operating after registration.
Joint Ventures and Management Cultures
Despite all the adversities there are hundreds of jointly managed Russian-foreign enterprises operating in St. Petersburg. One of the problems these enterprises encounter is the clash between two different business cultures within the same organization. Managing joint ventures between western partners is often difficult due to differing national cultures and attitudes. In east-west cooperation the situation is further complicated by systemic differences the partners diverge not only in their cultural heritages but also in systemic backgrounds. Some of the alleged differences in values and working attitudes between western and eastern managers are shown in table below.
Differences in Value Systems Between Management in East and West
West East
Importance attached Wealth, informality, Equity,
completence status
Emphasis on motivation Individualism Group unity
Education as investment Personal development Prestige
success
Dealing with conflicts Creative energy to be To be
managed avoided
Approach to output Quality, sales marketing Quantity
production
Communication Horizontal/vertical open, Vertical
networking closed
Responsibility/risk Taking risks To be avoided
The features typical of the east date from the Soviet economic culture, which is proving to be more resilient than the corresponding structures, which to a large extent have been dismantled.
Empirical research has also confirmed that integrating eastern and western managerial cultures into properly functioning joint ventures is a difficult task. A pioneer Finnish study into Finnish-Russian joint ventures, made by the Finnish Government Institute for Economic Research, was conducted in Moscow in spring 1991 when the Soviet work culture was still strong and the mutual learning and adaptation process was in its infancy. It is understandable that views on marketing and management accounting were divergent as those functions had only limited relevance in the Soviet system. Wide differences also existed in management styles. The Russians were authoritative and stressed the importance of written orders. This style was accepted by subordinates, who were used to it, but the Finns bad different traditions. They were often criticized by the Russians for being too lenient towards subordinates.
Russian executives liked to emphasize their status by means of a wide power distance. This manifested itself not only in a clear division between management and executive staff but also in a desire to withhold information and make decisions alone. This did harm to cooperation with the Finns, who believed in the free flow of information and problem-solving in managerial teams.
A common grievance against the Russians was that they were full of ideas in the beginning but were unable to make them operative. An ad hoc, unsystematic approach was also common, while the Finns stressed the importance of planning activities.
The study concludes that "Soviet-Finnish joint ventures have found it difficult to combine the managerial attitudes of the partners into a coherent managerial culture. They have not been able to reach the synergistic opportunities and goals set and offered for it by the cooperation of the partners".
Much has happened since this study was performed to bring the disparate business cultures closer. Officially, Russia broke away from the Soviet legacy in January 1992 and committed itself to a market economy. The Russian business community has been actively acquiring skills needed in the new market environment, while western businessmen working in the country are showing more understanding of the Russian culture and way of life. Foreign investors have been very cautious about Russia, as in the past, but in many cases the performance of companies established in the country has improved. Much has been learned from the negative experience of shared Russian-western management in joint ventures. In many cases they have been transformed into joint stock or wholly western-owned companies, in which the main responsibility is in western hands.
Whatever the ownership form the differences in business cultures are relevant, as Russians are indispensable for the day-to-day running of any foreign firm in the country. A more optimistic picture of western firms operating in north-wester Russia is provided by a case study of four Finnish-Russian joint ventures, one of which operates in St. Petersburg. (Government Institute for Economic Research, Helsinki 1994). This company was founded in 1988, the Russians provided the facilities and most of the manpower and the Finns provided the management.
The Russians take care of 90% of the day-to-day operations as only they can cope with the local bureaucracy and understand the informal networks created under the old system, which still play an important part in the economy. Management is firmly in Finnish hands, especially the Financial management, as the Russians have had little grasp of costs, especially the cost of money (interest rates). The marketing concept is also unfamiliar to many of them. Independent activity and initiative are still rare among Russian employees, even in middle management, who are used to the authoritative style. Nepotism, the tradition of hiring one's relatives and friends, was common when the Russians had the major say in the selection of manpower. For these reasons the number of Finns has been increased in middle management, too.
On the whole the atmosphere in the company has improved since the first years, and mutual learning has brought the Finns and Russians closer to each other. The Russians are learning business skills, the Finns cultural skills, including modifying their formerly often condescending, even arrogant attitudes.
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