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Business Support Centres in the transition economies: progress with the wrong model?

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During the 1990s, networks of independent Business Support Centres (BSCs) were promoted in the transition economies of Central and Eastern Europe, aimed at supporting business start-ups and microenterprises. The funding came from Western governments and donor agencies, which were largely unconvinced by the networks of business support structures that had been established by the most forward-looking local governments under late communism.

This chapter shows how the neo-liberal ideology guiding macroeconomic policy in the transition economies also very much underpinned microeconomic interventions such as the BSCs. Accordingly, the donors’ preference was for market-driven BSCs that were supposed eventually to ‘earn their keep on the market’. The article points out some of the main drawbacks and opportunity costs that followed from this approach. Far from ensuring their strength and sustainability, the market-driven approach has instead ensured that the BSC networks have contributed very little additionality, and most have ended up collapsing because of a lack of fee-paying clients, being privatized and abandoning their original mandate, or opportunistically converting into a new institutional format – such as a Regional Development Agency (RDA) – in order to tap into further donor funding. It is argued that many previous reconstruction and development episodes could have provided examples of local state intermediation very successfully supporting SME development structures under chaotic and post-conflict conditions similar to those experienced in the transition economies from 1990 onwards. These examples in practice were ideologically anathema to the western governments and donor agencies, but would have been a much more appropriate template to use in Central and Eastern Europe than the market-driven BSC model adopted instead.
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Document Type: Research Article

Publication date: December 15, 2005

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