Abstract: Siemens and the Soviet State: A Matter of Trust?

Martin Lutz

Abstract

Communism is Soviet power plus electrification of the whole country, as Lenin famously argued in 1920. Ten years later, at the height of the World Economic Crisis, the Soviet Union became one of Siemens's most important customers. Siemens technology and machinery played a vital role in the first Five-Year Plan. What is even more surprising is that this was not a recent development. The company started negotiating with the Bolsheviks as early as February 1918, barely four months after the October Revolution. Two years later, during the Russian Civil War, Siemens signed its first Soviet business deal. This paper addresses two questions. First, why would one of the largest capitalist companies in Europe start business relations with the Soviet state so shortly after the October Revolution? Second, how can one explain the quantitative development of Siemens's Soviet business? I apply actor-centered institutional theory to answer these questions. I argue that the development of Siemens's Soviet business depended on mutual trust; or rather, that the absence of trust required the intervention of the German government to provide incentives for Siemens to do business with the Soviet state.