Demand by growing owner-run SMEs for specialized manage-ment knowledge is resolved primarily through the separation of ownership and control, using top management labor market and agency contracts. Under certain environmental institutional conditions, owners of Russian SMEs face difficulties separating ownership and control. Using a dataset of 500 companies from fast growing industries in St. Petersburg and Moscow, this study analyzes how various perceived characteristics of the institution-al environment influence the probability of separation of ownership and control. Executive summary is available at pp. 27.The work on this paper was supported by an individual grant ? R10-0702 from the Economics Education and Research Consortium, Inc. (EERC), with funds provided by the Global Development Network and the Swedish International Development Cooperation Agency (SIDA).