Abstract: Central and Eastern European (CEE) economies have been undergoing the transition from central planning to free market economy and capitalism. There is, however, a significant variation across these economies in terms of institutions to support private enterprises. Scholars argue that the CEE countries are prime examples of historical path dependence. This paper provides empirical documentation to this argument by comparing the development of formal institutions in two groups of CEE economies: the Orthodox group and the Latin group. Our data come from The World Bank Group’s World Business Environment Survey, which was administered to enterprises in 80 countries in late 1999 and early 2000. We found that private businesses perceive the state more favorably in terms of regulatory roles, participatory roles and supportive roles in the Latin group than in the Orthodox group.

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