Edited by Friederike Welter and David Smallbone
Chapter 5: Mentalities and Mindsets: The Difficulties of Entrepreneurship Policies in the Latvian Context
Arnis Sauka and Friederike Welter INTRODUCTION Along with the economic and political processes prior to the collapse of the Soviet Union, entrepreneurship development in Latvia as well as other countries of Central and Eastern Europe started 20 years ago. This process of change from a centrally planned to market-oriented system is often referred to as ‘transition’ in entrepreneurship literature (Smallbone and Welter 2001). The fundamental transformation of the role of the state, along with the development of a suitable political structure and institutional change, in particular with regard to a framework shaping economic, financial and legal institutions underpinning the market economy, had to be achieved first in each and every country of Central and Eastern Europe (EBRD 1995). North (1990) refers to this framework, generally enforced by governments and relatively easily adaptable to the changing economic circumstances, as formal institutions. Due to the total collapse of the former system, the introduction of new formal institutions was not an easy task to carry out. In this context, ‘framework uncertainty’1 shaping the environment in the countries of transition is often mentioned amongst the major constraints in entrepreneurship literature (Van de Mortel 2002). As emphasized by North (1990), along with the development of formal institutions, informal institutions, for example invisible ‘rules of the game’, made up of norms, values, acceptable behaviour and codes of conduct in a society, also have to change while a country progresses towards a market economy. Such informal rules often evolve either to substitute or to complement formal rules...
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