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The [Re]-Emergence of Family Businesses in the Transforming Soviet Bloc: Family Contributions to Entrepreneurship Development in Romania David Pistrui, Harold P. Welsch, Joseph S. Roberts Through an intensive investigation of Romania, this study investigates various aspects of family businesses in the transforming Soviet Bloc. The study explores the relationships between entrepreneurship, family, and enterprise development. The objective of the paper is to probe societal elements impacting entrepreneurship, and to identify the level of family participation in the transforming economy of Romania. We find that family plays an important role in at least two ways: direct support of the business, and through the development of social, community, and economic networks.

Introduction The collapse of the Soviet empire and subsequent liberation of East Central European countries have created an opportunity for the rebirth of entrepreneurship and family business development. Lank (1993) pointed out that family farms and firms are a necessity for rebuilding these long-deprived and neglected nations. Although considerable research has been conducted concerning entrepreneurship in the transforming economies of East Central Europe, (Chmielelewski, Kaminsky, and Strazalkowski, 1990; Giamartino, 1991; and Welsch, 1992), very little is known about the role of the family. To control for cultural and country effects, we examined Romania, one country from the former Soviet Bloc. In this paper, we present a theoretical model of the Romanian Entrepreneurship Family Network System. We follow this with an empirical investigation based on a sample of 410 Romanian entrepreneurs. First, we develop a profile of the Romanian entrepreneur that includes entrepreneurial attitudes, beliefs, and motives. Second, we document family and enterprise relations, including ownership, investors, family participation, and sources of advice. Finally, we discuss the role of the family network system in entrepreneurship and enterprise development. FAMILY BUSINESS REVIEW, vol. 10, no.3, Fall 1997 © Family Firm Institute, Inc.

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The Modern Romanian Family The Romanian family is an important cultural element that is at the very center of most lives. As a result of social and economic conditions, it is common for at least two generations to live together and operate as a closely-knit group (Pistrui, 1993). Families also bond with other families developing networks of relationships (Cartina and Tone, 1994). The Romanian family household unit, kinship group, and alliance network represents one of the central components linking economic and cultural change. The modern Romanian family has a distinctive orientation that comprises both the domestic group and a larger kinship system. Research conducted by the Institute for the Quality of Life found that at the beginning of 1993, 50% of married couples between 18 and thirty years of age were living with their parents (Ghebrea and Tessier, 1994). The domestic family strives to work as a cohesive unit, shaping and organizing the group around both individual and group needs. Kinship groups are centered on deep alliance networks based on clan patronage. They work to provide mutual socioeconomic assistance and support.

Central Themes and Characteristics of Family and Personal Networks During Transition First and foremost, the family is at the center of life in Romania, representing the first unit of interaction with the community. The second noteworthy characteristic is the strong role of women (Stanoiu and Voinea, 1993; Welsch and Pistrui, 1994). Women play an important yet dichotomous role in Romanian society, maintaining the traditional Latin characteristics of homemaker while also working outside the home. Due to economic necessity, most balance family responsibilities with work. Third, Romanian society relies on family and personal networks for basic security and survival (Stoianovich, 1976). Together, the family pools its collective resources to meet basic needs and overcome the challenges of everyday life. The overall mistrust generated during communism and within the transition period encouraged families to bond with other families to develop personal networks. The modern Romanian family has a distinctive orientation that comprises both the domestic group and a larger kinship system (Ferreol, 1994). The family unit represents perhaps the only societal institution that emerged from communism intact and functional. As a tribute to its resiliency, the family is the engine driving transition in Romania (Cobianu-Bacanu, 1992). Thus, history and logic suggest that family businesses should be at the forefront of the socioeconomic transformation taking place in Romania.

The [Re]-Emergence of Family Businesses in the Transforming Soviet Bloc

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Romanian Entrepreneurship Family Network System Grounded in the household and linked to a kinship network, the family operates as a system to support its own welfare. Bound by a set of patterned and predictable rules, the family system seeks to integrate individuals into a larger family social network. The key goal of the family network is to balance the internal needs of the family members with the external challenges found in the socioeconomic system. Figure 1 depicts the Romanian Entrepreneurship Family Network System (REFNS). The REFNS is comprised of three segments: the household, the kinship group, and the alliance network. Household. The Communist era program of systemization produced blocks of standardized living spaces where people were put to live in common. Within this common space, Romanians built their own personal living space out of the given space to live (Mihailescu, Mcolau, Gheorghiu, and Olaru, 1994). Consequently, the household served as special place that fostered common trust and group cohesiveness. There are two dominant characteristics common in the vast majority of Romanian homes. First is the large collection of reading materials. Reading represents perhaps the only element of freedom many Romanians have known. Even though Communists attempted to control reading materials, the majority of Romanians are well read. The second commonality is the presence of religious icons displayed throughout the home. For decades, the home was the only place people could express religious beliefs without fear of government persecution. Household chores and responsibilities have traditionally been shared. Meals are considered important family time. All members of the household participate in meal preparation and clean-up activities. Mealtime is used to discuss concerns, issues, and problems confronting both individuals and family members. The household has traditionally fostered values of respect for parents and elders. Important decisions are openly discussed, and advice from elders plays a significant role. Other values taught in Romanian households include love, respect, togetherness, and an ironic sense of humor. Kinship Group. The majority of Romanian families have been plagued by low incomes, increasing unemployment, and serious poverty (Voinea, 1994). Economic necessity requires extended families to work together. Consequently, the modern Romanian family extends well beyond the confines of the domestic household. The kinship group links a series of households together. Parents, siblings, uncles, aunts, and cousins merge into clans or larger extended families that operate as cohesive groups. Researchers Sandu (1996), Zamfir (1994), and Radulescu (1993) have identified and documented the strong presence of anomie and high levels of mistrust present during the political and economic transition. As a result, the kinship group serves as a trusted source of social and economic resources.

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The family group is the first societal unit which helps its members to settle down and to adapt to change, which in turn influences and molds transformation based on the conditions found in Romania today (Larionescu, 1994). The family network is viewed as a resource for community influence. In short, the family represents an “enclave of security” against both social and economic uncertainty. Alliance Network. Romanians face significant scarcity. The percentage of the population living in relative poverty (defined as 45% of the average wage) increased from 34% in 1989 to over 50% in 1992 (The Economist Intelligence Unit, 1995). Living on an average salary of no more than $100 per month with inflation of at least 150%, many struggle to survive. There is a general lack of civic confidence among Romanians. One reason for this is the history of political and economic corruption. The preliminary results of a study conducted by the Ministry of Domestic Affairs suggests that between 1988 and 1992, corruption increased by some 400% (Radulescu, 1993). The Alliance Network, comprised of work colleagues, close friends, neighbors, friends of other family members, and especially the godparents of children, works to help its members cope with the daily hardships of life. The Alliance Network represents a special form of social network combining family, neighborhood, kinship and work environment (Mihailescu, Nicolau, Gheorghiu, and Olaru, 1994). These personal relationships with trusted individuals who are linked to the family help people maneuver to meet the challenges of everyday life. In Romania the concept of “friend” or “relationship” is taken vary seriously as a central family resource.

Women in Romanian Society Women have traditionally played a very important role in Romanian culture. As the country struggled to transform from a primarily agrarian economy to an industrialized one, women worked side by side with men. Initially, this took place on the farms and in the service sectors. The Communist system of centralized economic control drew women into the areas of economic planning, engineering, and technical services as well as traditional retail, health services, and general labor positions. Beginning in the 1950s, women had greatly increased opportunities to engage in university studies in the fields of industrial engineering, medicine, and socialist economics. Romanian women have also played a strong role in family matters. Before the modern Western world ever envisioned the concept of a working woman, Romanian women were juggling the challenges of balancing job and family. The spirit of Romanian women is one of the strongest influences in shaping the unity of the family. Romanian women are both traditional yet progressive, and always command a respected position in society. In summary, it appears that the family is the engine driving transition in Romania. It is important to realize that entrepreneurship relies on the support


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of an extensive network of family-based relationships. With these concepts in mind, the question becomes: “What are the actual roles and relationships between the family network and entrepreneurship in Romania?”

Figure 1. Romanian Entrepreneurship Family Network System SOCIETY IN TRANSITION

ALLIANCE NETWORK Work Colleagues KINSHIP GROUP Godfather

Father

Mother HOUSEHOLD Sister

Brother

Other Family Members

Entrepreneur Spouse

Aunt

Daughter Uncle

Son Cousin

Close Friends

Godmother

Neighborhood

Direction and Research Question Entrepreneurship, enterprise development, and family business involves a complex interactive process among the entrepreneur, the family network system, and the external sociocultural environment. Handler (1989) suggested familybusiness research needs to incorporate a multilevel approach. To identify the link between family business and entrepreneurship development, we undertook an empirical investigation. To help investigate this link, we used the Entrepreneurial Profile Questionnaire (EPQ). The EPQ has been administered and validated successfully

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in Russia, Poland, the Czech Republic, Hungary, Lithuania, Estonia, South Africa, Mexico, and the United States (Welsch, 1992). The EPQ was professionally translated and edited into Romanian, pretested, and then revised to clear up ambiguities or idiosyncratic terminology. Utilizing information regarding private enterprise formation from local chambers of commerce in combination with the Small Business Development Centers at the Polytechnic Institute of Bucharest and the Academy of Economic Studies Bucharest, an extended series of survey interviews with entrepreneurs was administered during 1993. Other than the sources of participants, the sample was randomly selected. Sample Size, Scaling Technique, and Basic Objectives. Four hundred ten (410) entrepreneurs were surveyed, 75% in Bucharest and 25% in the remainder of the country. Other cities included were Brosov, Timi¸soara, ClujNapoca, Constanta, Arad, Craiova, and Gala¸ti. The aggregate population of these cities represents 20% of Romania’s population. The sample includes 292 males (71%) and 118 females (29%). We provided a five-point Likert-type scale ranging from strongly disagree (1) to strongly agree (5) next to all items except demographics. By using sample means as a method of comparison, the data presented here attempted to identify which type of activities and behavior occurred between entrepreneurs and the family network system. Starting with a basic approach of analyzing sample means, patterns can be identified that can be used to gain preliminary insight into complex phenomena. We use the results in three ways: To answer the research question, “What are the relationships and roles of the family network as it relates to entrepreneurship and enterprise development in Romania’s transforming economy?”; to develop some fundamental insights into the re-emergence of family business activities in the transforming former Soviet Bloc; and to utilize the results of this study to provide direction for further study and analysis related to family business development in transforming economies.

Romanian Entrepreneurial Motives Romanian entrepreneurial activity is based in the desire for security, freedom, and personal sense of accomplishment. Family security is a primary motive. Given the economic uncertainty and overall instability within Romania during the transition, entrepreneurs believe that the freedom to adopt and create a less centralized approach to work provides them with the best opportunity for family well-being and security. There is a strong drive to achieve a personal sense of accomplishment along with a desire to make better use of training and skills. A second theme in the ranking is the desire to develop new ideas for products or businesses. This represents the creative desires that motivate. Working for one’s self, creating new products and businesses, and gaining recognition


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reflect a somewhat romantic motivation, boosting both self esteem and societal recognition. Romanian entrepreneurs also sought to select with whom they worked. Given the generally high level of mistrust in Romanian society (Sandu, 1996; Zamfir, 1994; and Radulescu, 1993), it is not surprising that entrepreneurs want to choose people they like and trust. In other words, to further the security for the immediate family, the Romanian must have a reliable and trustworthy group of coworkers. In terms of reward for efforts, it is not financial incentive which motivates, but “access to fringe benefits” that can be used to reward employees, provide extras to the family, and to maneuver to get things accomplished amidst the political/bureaucratic corruption.

Table 1. Reasons and Motives for Entrepreneurship Item

Mean Importance

1. To give myself, my husband/wife, and children security

4.49

2. To have considerable freedom to adopt my own approach to work

4.46

3. To achieve a personal sense of accomplishment

4.44

4. To make better use of my training and skills

4.30

5. To be my own boss, to work for myself

4.29

6. To be able to develop an idea for a product or business

4.27

7. To achieve something and get recognition for it

4.23

8. To be able to work for people I choose

4.20

9. To have access to fringe benefits

4.16

10. To be able to work with people I like

4.15

11. To increase the status and prestige of my family

4.12

12. To have greater flexibility in my personal and family life

4.06

13. To keep learning

4.03

14. To make a direct contribution to the success of a company

3.98

15. To be able to work in a desirable location for me

3.93

Range 1-5; N = 410

Driven by the motivations of increasing the security, status, and prestige of the family unit, these values reflect the strong cultural tradition of emphasizing the group over the individual. The underlying motivational factors suggest that entrepreneurship is greatly influenced by the need to improve the family’s well-being within the turmoil. This includes the motivation to enhance the family’s position in the eyes of society.

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Education and Experience The quality and level of education in Romania is quite high. The majority of the urban population attended a university. With an average of 15 years’ education, most Romanian entrepreneurs have had some training beyond high school. The Communist era emphasized rapid, heavy industrialization, which explains the technical focus of most entrepreneurs. The prominent status of engineers often included better job opportunities. Not surprisingly, Romania’s aspiring entrepreneurs had substantial work experience, an average of 14.5 years (Table 2). Perhaps many got their enterprise ideas as a result of observation and participation in the previous system. However, most Romanian entrepreneurs could have had only a limited amount of experience with private enterprise development (only 3.9 years, Table 2), since entrepreneurship was illegal until January of 1990.

Table 2. Level of Education and Experience Male and Female Entrepreneurs Category

Total

Male

Female

Years of education

15

15.6

14.7

Predominant area of study

Technical

Technical

Economics

Years of work experience

14.5

14.5

14.5

Years of business experience

3.9

4.3

3.2

Age

38.82

39.22

38.12

Total

410

292

118

Women Entrepreneurs According to the 1994 Romanian Statistical Yearbook, approximately 40% of the workforce is comprised of women (Anuarul Statistic Al Romaniei, 1994). Almost one third (29%) of entrepreneurs surveyed were women. They averaged approximately 15 years of education. Based on the Romanian system, this revealed that many female entrepreneurs had some advanced training, but not necessarily a university degree. Women gravitated toward economics since the centralized system of the Communists generated a large number of administrative positions. Under communism, women were fairly well integrated into the economic system (Fischer-Gala¸ti, 1970). Men tended to study in technical fields and to have completed one more year of education (Table 2). Women’s active partnership role in the socialist economic system is best demonstrated by their level of work experience. Averaging 14.5 years, equal to their male counterparts, women represented a key component of the pretransition socioeconomic system. By contrast, women lagged behind men by 1.1 years of business experience. Three reasons could account for this: Many


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women remained employed in their state sector positions, tending to work in more stable nontechnical fields during the early years of transition; many male Romanian entrepreneurs used their wife’s income as seed capital in establishing new enterprises; and many women turned to part-time employment in the private sector because of better wages and having more time for the family.

Entrepreneurship and Enterprise Formation Romania had one of the highest state-dominated economies in East Central Europe, with over 95% of businesses nationalized. For example, the pre-1990 private sector shops accounted for less than 1% of retail sales. Table 3 illustrates that the idea of owning one’s own business started to take root only in 1989, the same year President Ceausescu fell from power. As Romania began its social and economic transformation in 1990, news and information began to flow freely from the West (Gilberg, 1992). Under the illusion of a newfound freedom, Romanians’ interest in establishing their own businesses apparently began to grow. In 1990 over 50% of the sample indicated they wanted their own business. Another 27% seemed to require a year of observation and change to catch the entrepreneurial spirit.

Table 3. Spirit and Enterprise Formation Question 1: When did you first know you wanted to go in to your own business? Question 2: What year was your business started? Question

1988

1989

1990

1991

1992

Question 1

0.5

7.3

52.3

27.3

12.6

Question 2

0.2

0.2

35

35.1

29.5

Owning a business was forbidden by law until January 1990, when Decree Law No. 54 authorized the establishment of private small business. Table 3 shows that approximately one third of those who aspired to develop their own business did so in the first year it was possible. Approximately one third of the sample began in 1991 with the remaining 29.5% engaging in entrepreneurial activities by 1992.

What Is the Ownership Profile and Size of the Firms’ On average, Romanian entrepreneurs own a 63% share in their firms. Only 33 % own the entire business, and 25 % own half. Two thirds of the Romanian entrepreneurs surveyed are engaged in enterprise development, and rely on the participation and involvement of others. As for the other investors, it seems likely that Romanian entrepreneurs rely heavily on family members, friends, and trusted colleagues. Based on the turbulent conditions associated with transition, entrepreneurship appears to be the result of close networks helping to

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establish and develop new enterprises: Relationships established in the workplace, neighborhood, and family surfaced in the data as the fundamental components of entrepreneurship networks during transition. The average number of employees was 11 per enterprise. Fifty-five percent had between one and five employees, while 23% had over ten. These employment figures indicate that most business development is on the micro level, in less labor-intensive fields. With no free enterprise permitted prior to 1990, combined with the general lack of capital, the idea of developing their own business was a completely new concept for the majority of Romanians, and only small businesses were created. Of the entrepreneurs surveyed, 88% took new ideas and developed their own enterprises. As the entrepreneurial spirit grew, a second entry mechanism evolved. The purchase of a private business became an option and 11% chose this path. Only 1% became second generation entrepreneurs through inheritance.

Business Type Commerce, trade, and the services segments represented the majority of industries entrepreneurs entered. These three indices represented 69.5% of all business activities. Table 4 provides a ranking and percentage breakdown of the various enterprises.

Table 4. Business Activities of Romanian Entrepreneurs Type of Activity

Percent of Total

Trade and commerce

49.1

Professional service

20.4

Distribution/wholesale

7.6

Manufacturing

7.1

Transportation

5.9

Service organization

5.1

Construction

2.3

Finance/insurance/real estate

2.0

Other

0.5

N = 410

The tendency for most business activities to go toward trade, commerce, and service was based on two criteria. The government allowed entrepreneurship in these sectors because there was a great demand for these services (Pistrui, 1993), and also because some tradition of entrepreneurial activities in these segments had existed in the past (Georgescu, 1991). Additionally, the dysfunctional centralized system did not possess the resources or know-how to engage in many of these industries, leaving pent-up demand. The remaining sectors, including transportation, construction, and financial services, are slowly evolv-


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ing to play support roles by providing enterprises with resources necessary for operations.

Family and Enterprise Relationships Culturally important, the family remains strong and vital during the transition’s difficult conditions. As Table 5 points out, the family plays an active role in enterprise formation and development. Of the total sample, 94% of enterprises had at least one family member as an investor. Over one third had two family investors. On the employment front, the family is active in enterprise development and operation. Almost 90% of all businesses in the sample have at least one family member working full time (see Table 5). One third have two full- time members. On the opposite end, only 9% of the enterprises have no family member employed on a full-time basis. Part-time employment plays an important, but less significant, role. Forty percent of the firms have at least one part-time family employee, while 58% have no part-time family employees. Family contributes both financial and human resources towards enterprise development.

Table 5. Family and Enterprise Relationships Investment and Employment Question 1: How many family members are investors in your enterprise? Question 2: How many family members are full-time employees in your firm? Question 3: How many family members are part-time employees in your firm? Question

0

1

2

3

Question 1

5%

52%

35%

7%

Question 2

9%

50%

33%

7%

Question 3

58%

26%

13%

1%

N = 410

Sources of Capital Family savings are the primary financial resource used to establish private enterprises. In fact, family members are the predominant sources of capital (see Table 6). Spouses, fathers, mothers, and siblings are all in the top ten sources of finance for start-up, with two and three generations working together to establish a business. From these data it is clear that investors are likely part of the extended family or network of friends. Extended personal relationship networks represent the second most common financial source. These included work colleagues, the entrepreneur’s closest friend, and other friends, all of which are in the top 10. Another important finding is that investors likely are part of the extended family or network of friends.

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Bank loans play a visible role in start-up. Unfortunately, this often proves to be extremely costly. Funds borrowed at 25% interest in 1993 grew to a rate of 75% to 80% based on inflation (The Economist Intelligence Unit, 1994).

Table 6. Source of Financing for Startup Category

Mean Importance

1. Family savings

3.67

2. Bank loan

2.61

3. Spouse

2.52

4. Someone you work with

2.06

5. Investor

1.89

6. Closest friend

1.76

7. Father

1.68

8. Mother

1.59

9. Brother/sister

1.59

10. Other friend

1.54

11. Daughter

1.36

12. Son

1.35

13. Other family member

1.28

14. Uncle/aunt

1.22

1 5. Cousin

1.21

Range 1-5; N = 410

What becomes clear in start-up financing is the importance of the family. These findings parallel the research of Cobian-Bacanu (1992), Stanoiu and Voinea (1993), and Pistrui (1993), which suggests that entrepreneurs rely on family and personal networks for resources. In most cases, both husband and wife work. One family member worked full-time on developing the business, while the other worked with an established enterprise. This is common practice. Table 6 identifies that out of 15 sources of capital listed, the family accounts for ten. Table 6 also indicates the involvement of multiple generations as sources of start-up capital. Given the lack of financial markets combined with the overall level of mistrust and uncertainty, it became evident that entrepreneurs relied primarily on the family, with some assistance from personal networks, for start-up financing. Given the apparent lack of a trusted functional financial sector, this practice is likely to continue in the future.

Advice While the family is critical for start-up financing, it plays a less important role in providing advice. Although the entrepreneurs surveyed rely heavily on their spouse for advice (Table 7), other family members appear to play a much less


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significant role. However, based on the families’ roles as human resources and capital providers, we could surmise that many entrepreneurs also recognize the dual roles (of business associates and someone they work with) that family members play.

Table 7. Sources of Advice Category

Mean Importance

1. Business associate

3.14

2. Spouse

2.80

3. Partners

2.66

4. Someone I work with

2.63

5. Closest friend

2.43

6. Suppliers

2.18

7. Bank

1.96

8. Employer

1.93

9. Investor

1.87

10. Other friend

1.84

11. Father

1.76

12. Small Business Administration

1.64

13. Mother

1.63

14. Brother/sister

1.60

15. Former owner

1.51

Range 1-5; N = 410

It appears that Romanian entrepreneurs may have developed and depended on a systematic network comprised of family members, trusted colleagues, and a few support institutions. Several economic institutions also appeared as sources of advice. These were most likely a result of necessity and tied to personal relationships. Suppliers, banks, and even the entrepreneurs’ previous or ongoing work in state industries also appeared in the top 10 sources of advice.

The Family and Economic Development Family firms have three distinct advantages within the environment of socioeconomic transition. First, they have the resources of the family network, which include the household and extended family. This network represents a source of critical support services, including sources of financing, business connections, personal relationships, and human resources, including a pool of labor. Firms use kinship networks as foundational resources in family-firm development and growth particularly in the developing or less stable economies (Benedict, 1991). Second, family firms are better equipped for risk-taking which is essential in transitional climates. According to Benedict (1991), family firms have five

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advantages that help minimize socioeconomic risk: 1. Control of information (business/family secrets) 2. Incentives for effort (short/long term) 3. Liquid resources, living/working together 4. Capital and manpower generation 5. Swiftness of action, internal focus As a unit, the family shares in the burden of enterprise development. The interpersonal relationships create a dynamic flexibility that helps the family firm organization adapt more rapidly. Nepotism and paternalism, especially during the conception and development of new enterprises, does not necessarily foster inefficiency. This appears to be particularly important in unstable economic environments or dynamic business segments (Benedict, 1991). The third significant advantage family firms have is their adaptability. Family firms provide a motivating force for both economic activity and social learning. Their flexibility allows them to evolve and help shape the socioeconomic environment. The advantages family firms have can be illustrated through transactional analysis (Barth, 1966; Benedict, 1991), which represents an advancement over the equilibrium theories of social structure associated with Radcliffe-Brown (1952). Transactional analysis examines the individuals involved instead of the external sanctions. Family roles demonstrate the type of transactions that take place in family firms. Beginning as simple household chores, family tasks evolve into economic responsibility. As the family and the firm mature, siblings evolve from family members cooperating to get household work done to business associates. The familial transactions process thus provide a socioeconomic platform for learning economic activities. These transactions often involve sacrifices of time, energy, and money devoted to the entrepreneurial endeavor. Such sacrifices help encourage a strong and ongoing attachment to the enterprise. Family firms eventually build commercial networks that support family prosperity and economic growth. Family firms are not ideal for all types of enterprise, but can be of critical importance for socioeconomic development in unstable or low income economies. Research conducted in Lebanon (Khalaf and Shwayri, 1966) and Pakistan (Papanek, 1962) indicates that family firms exert a positive effect on industrialization and economic development. In economic terms, the family firm is well placed to take on risk and to spread entrepreneurial sacrifices across the family support network.

How to Do Business in Romania and the East Many emerging business in the former Soviet Bloc, and in particular in Romania, are very interested in developing relations with businesses in the West. Internationalization and regional strategic alliances are of a top priority for


235

many Romanian enterprises. What is critical for both sides is the establishment of a trusting relationship. In the Romanian context, this requires a multidimensional approach needing patience. Trust is sacred to the Romanian people. Consequently, those interested in establishing successful business relationships should focus on building trust on three levels: with the individual, the family, and the community. On the individual level, those who wish to do business in Romania should visit the country and get to know the people and culture. There is a lot of information available to help source potential business partners. For example, governmental agencies such as the Romanian Development Agency and the Chamber of Commerce and Industry can provide direction. Western banks such as Citibank, Chemical Bank, and ABN-AMRO can also be helpful. Ultimately, the best starting point is through a personal reference from a mutual friend or trusted business associate. Once relationships are established, they need to be nurtured and developed. This takes an investment of time and money. Regular communication and meetings in both countries will foster trust and increase the chance for understanding and success. An important part of this process is to get to know the family and kinship network. Romanians are fond of bringing family and close friends together for celebrations. Family dinners and special occasions such as birthdays, baptisms, graduation parties, and public socialization are ideal ways to build understanding and trust. Indeed, any activity that helps support family development will help build trust and thus business credibility. With your own personal network of Romanian families and entrepreneurs you will be well equipped to activity network the entrepreneurial community. There are a number of trade fairs worth attending, regional trade associations worth perusing, and public officials to meet. By working together with established and respected Romanian entrepreneurs, you will be able to bring together new combinations of resources and capabilities. There are never any guarantees of success. Remember, there is a reasonably high level of risk. What is certain is that the speed of environmental change found in transitional Romania is intense. Trust is a valued commodity and an essential ingredient for success.

Conclusion Romania emerged from communism as a nation of uncertainty, social mistrust, and economic hardship, with families and their networks being perhaps the only safe haven of trusted relationships. Paralyzed by years of social and economic mismanagement, people are still struggling to transform a crippled society. The cultural tradition that emphasizes the group over the individual remained evident during transition. The family represents what is probably

236


the only societal institution that remains intact and functional. This study illustrates that throughout history, the family has developed networks based on kinship and friendship, which banded together to offer socioeconomic support. The family network system plays a dominant role in supporting entrepreneurship and enterprise development. Entrepreneurs rely on family and friends to both start and operate their businesses. Findings indicate that 90% of new enterprises started during transition can be considered family businesses, and that personal networks of trusted friends and colleagues support entrepreneurship and enterprise development. Representing one of the first studies devoted to Eastern Europe, this investigation provides preliminary insights on the role and relationships between entrepreneurship, family, and enterprise development in the transforming Soviet Bloc.

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David Pistrui is the coordinator of the Music Business Program at DePaul University, Chicago; Associate Professor, University of Bucharest, Romania; and a doctoral candidate at the Universitat Autònoma de Barcelona, Spain. Harold P. Welsch holds the Coleman Foundation Chair in Entrepreneurship at DePaul University, Chicago. Joseph Roberts is a part-time faculty member in the Entrepreneurship Program at DePaul University, Chicago.

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