Alexey Prazdnichnykh & Kari Liuhto
Can Russian companies innovate? – Views of some
250 Russian CEOs
Electronic Publications of Pan-European Institute 21/2010
ISSN 1795 - 5076
Can Russian companies innovate? – Views of some 250
Russian CEOs1
Alexey Prazdnichnykh, Bauman Innovation, Russia 2
and
Kari Liuhto, Pan-European Institute, University of Turku, Finland 3
21/2010
Electronic Publications of
Pan-European Institute
www.tse.fi/pei
1
The authors would like to acknowledge essential research assistance and data analysis by
Katerina Marandi, Nikita Popov, and Georgy Ribalchenko, Bauman Innovation.
2
Alexei Prazdnitchnykh is a partner of Strategy Partners Group, Moscow, Russia. He leads
Public Sector Practice and has participated in advisory engagements with focus on
competitiveness, economic development and public sector productivity issues. He has worked
with federal government organisations, domestically and abroad, leading business associations
and private companies. Additionally, he is a consultant of the World Bank. He holds a Ph.D.
(International Development) from the Russian Academy of Public Administration, Moscow,
Russia and M.Sc. (Aerospace and Mec. Eng.) with high honors from the Bauman Technical
University, Moscow, Russia.
3
Kari Liuhto is Professor in International Business (specialisation Russia) and Director of the
Pan-European Institute at the Turku School of Economics, University of Turku, Finland. His
research interests include EU-Russia economic relations, energy relations in particular, foreign
investments into Russia and the investments of Russian firms abroad, Russia's innovation
policy, and Russia’s economic policy measures of strategic significance. Liuhto has been
involved in several Russia-related projects funded by Finnish institutions and foreign ones, such
as the Prime Minister’s Office, several Finnish ministries and the Parliament of Finland, the
European Commission, the European Parliament, and the United Nations. Kari Liuhto
gratefully acknowledges the research funding of the Academy of Finland (grant 118338)
and the Paulo Foundation.
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Contents
PROLOGUE
2
1
INTRODUCTION
3
2
RESEARCH SETTING
6
3
EMPIRICAL RESULTS
9
4
SOME SURVEY-BASED POLICY RECOMMENDATIONS
EPILOGUE
16
24
List of figures
Figure 1.
Figure 2.
Figure 3.
Figure 4.
Figure 5.
Figure 6.
Figure 7.
Figure 8.
Figure 9.
Figure 10.
Figure 11.
Figure 12.
Expenditure on R&D
The state of innovation in Russia according to statistics
and WEF Executive Opinion 2009-2010
Sample characteristics (general)
Sample characteristics (innovation)
Priority of innovation
Obstacles to innovation
Barriers to innovation: human resources and education
Intellectual property protection
Incentives and resources for innovation in Russian industries
Cooperation with foreign companies in area of technology
and innovation
Companies' participation in government's programs
to support innovation
Policy priorities to foster innovation
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4
5
7
9
11
12
13
15
17
19
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Prologue
" … In the twenty-first century, our country once again needs to undergo
comprehensive modernisation. This will be our first ever experience of
modernisation based on democratic values and institutions. Instead of a
primitive raw materials economy we will create a smart economy producing
unique knowledge, new goods and technology of use to people.
Instead of an archaic society in which the leaders think and decide for everyone
we will become a society of clever, free and responsible people.
Instead of chaotic action dictated by nostalgia and prejudice, we will carry out an
intelligent domestic and foreign policy based on purely pragmatic aims.
Instead of the Russia of the past we will build the Russia of the present – a
modern and forward-looking young nation able to take a worthy place in the
global economy.
I published my proposal to reflect on how we can overcome our chronic
backwardness, dependence on raw materials exports, and corruption, how we
can prepare ourselves for the fierce competition on global markets, and create
the best possibilities for ensuring that each of us can make full use in practice of
our knowledge, opportunities, and experience without depending on higher-ups.
In other words, I proposed that we reflect on the steps we need to take right now
to improve the quality of life in Russia and make our country one of the world’s
leaders. …"
Dmitri Medvedev
The President of the Russian Federation
Presidential Address to the Federal Assembly of the Russian Federation
Moscow, November 12, 2009
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Introduction
Figure 1 summarises gross expenditures on R&D (GERD). In terms of GERD
relative to GDP, Russia is positioned in the club of such countries as Estonia,
Belarus, South Africa, and Ukraine. Russia slightly exceeds India, Turkey, and
Chile, but she is behind China and the Czech Republic. GERD, in the group of
countries to which Russia belongs, is less than a half that of such a group of
countries as the United States, Germany, France, and Canada and less than a
third of Japan, Finland, and South Korea. It is also visible that the scientific and
technological achievements of Israel have not cost that country cheap in the
literal sense of the term. Israel allocates 5% of her GDP to research and
development, and this amount is increasing.
Firm’s capacity for innovation can be thought of as a sum of three factors. First
is the ability to create new valuable technological knowledge to improve
products and processes. Second is the ability to adapt technology and knowhow from various external sources. Third is the level of technology employed by
the companies. The Russian firms do not rank high on any of these three
components (Figure 2).
The share of businesses’ expenditure on research and development (BERD) in
the Russian GDP is not very high (0.72%). This is more than in her CIS
neighbours, and more than in Turkey, Chile or Brazil, but it is clearly less than in
China. Regarding the ability to adapt technology and the present technological
level, the Russian executives provide exceptionally low rankings compared to
other countries. According to the World Economic Forum’s Executive Opinion
Survey, firms from Ukraine and Kazakhstan were more able to adapt
technology, as well as had a more sophisticated technology at their disposal
than enterprises from Russia.
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Figure 1
Expenditure on R&D
Gross expenditure on R&D as share of GDP in 2007
and relative change in 1997-2007, percentage points
(circle size corresponds to total GERD, USD mln.)
High 5%
Country’s share (%) of world’s GERD in 2007
USA
14,04%
Japan
7,88%
Germany
5,06%
France
4,43%
China
3,13%
South Korea
Russia 1,35%
India 0,88%
Finland 0,79%
Israel 0,72%
Turkey 0,43%
South Africa 0,25%
Israel
4%
Gross expenditure on R&D as share of GDP in 2007, %
Japan
Finland
South Korea
USA
3%
Germany
France
0%
Russia
Ukraine
Poland
Hungary
Belarus
Estonia
South Africa
India
Chile
Turkey
Kazakhstan
0%
-0,5%
30%
40%
Change of the country’s share in world’s
GERD between 1997 and 2007
Czech Rep. China
Low
20%
Canada
2%
1%
10%
34,13%
0,0%
0,5%
1,0%
1,5%
Change of the share of GERD in GDP between 1997 and 2007,
percentage points
2,0%
High
Low
China
Turkey
South Africa
Israel
South Korea
Finland
Japan
India
Germany
-5%
Russia
USA -9%
France -16%
-40%
Source: UNESCO Institute for Statistics, World Bank
4
103%
79%
40%
38%
23%
13%
5%
1%
0%
0%
40%
80%
120%
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Figure 2
The state of innovation in Russia according to statistics and WEF Executive Opinion
Survey 2009-2010
Business expenditures on R&D
as %of GDP, 2007
Israel
Japan
Korea, Rep.
Finland
United States
Germany
France
Australia
Canada
China
Czech Republic
Russia
Belarus
South Africa
Estonia
Hungary
Brazil
Ukraine
Turkey
Poland
India
Chile
Kazakhstan
3,73%
2,68%
2,65%
2,51%
1,92%
1,79%
1,33%
1,24%
1,13%
1,07%
1,01%
0,72%
0,60%
0,57%
0,53%
0,49%
0,48%
0,48%
0,29%
0,17%
0,16%
0,14%
0,09%
0%
1%
2%
3%
Production process sophistication,
WEF executive opinion survey, 2009
Firm-level technology absorption,
WEF executive opinion survey, 2009
4%
Japan
United States
Finland
Israel
Germany
Korea, Rep.
Australia
Canada
France
Estonia
India
Chile
South Africa
Czech Republic
Brazil
China
Turkey
Poland
Hungary
Kazakhstan
Ukraine
Russia
6,4
6,2
6,1
6,1
6,0
6,0
5,9
5,7
5,5
5,5
5,5
5,5
5,4
5,4
5,4
5,1
5,1
4,8
4,7
4,5
4,4
4,2
1
2
3
4
5
6
Japan
Germany
Finland
United States
France
Canada
Korea, Rep.
Israel
Australia
Czech Republic
Brazil
Chile
Estonia
South Africa
India
Poland
Turkey
China
Hungary
Kazakhstan
Ukraine
Russia
7
6,4
6,4
6,0
5,9
5,7
5,3
5,1
5,1
5,1
4,7
4,6
4,5
4,4
4,3
4,3
4,1
4,1
3,9
3,8
3,7
3,5
3,4
1
2
3
4
Source: World Economic Forum, World Bank, UNESCO Institute for Statistics
Why is the situation so distressing for a country that was first to launch a satellite
into the space? And what can be done to improve the situation?
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5
6
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Research setting
The data for our analysis were taken from the Russian Innovation Survey 20092010, which is a part of joint effort by Bauman Innovation and OPORA (the AllRussian association of SME unions) to evaluate the strengths and weaknesses
of the national innovation system in Russia.
The objective of the survey was to evaluate innovation activity and innovation
performance in Russia, as well as to identify the priorities of the government
policy to promote innovation.
Due to the research budget constraints it was decided to enrol a sample of 250
executives. To organise the sample we had a large contact database of more
than 3000 middle-sized and large companies from all over Russia, compiled in
earlier surveys conducted by Bauman Innovation. The initial sample was
organised via a random sampling from this database. Potential respondents
were contacted through telephone. The final sample was obtained via random
substitution whenever the initial contact was invalid or refused to answer the
survey. Personal interview was the preferred method to obtain the survey data.
The quality of the response was ensured by tightly analysing the answer
patterns and undertaking a telephone call check. The calls to the executives
revealed 3 false respondents, whereas answer pattern analysis showed that two
other respondents inappropriately treated scale questions as ‘yes’ or ‘no’
questions. One respondent did not fill a sufficient number of answers. Thus, out
of 251 surveys we received 6 were excluded, and therefore, 245 were employed
in the present analysis.
Our sample included companies from the across Russian regions and aimed to
cover the largest cities in Russia (Figure 3). Around a half (51%) of the surveyed
companies were located in Moscow (including suburbs) and St. Petersburg,
while another half (49%) were located in the major cities of Privolzhskyi (Volga),
Sibirskyi (Siberia), South and Uralskyi (the Urals) Federal Districts, including
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Chelyabinsk, Nizhny Novgorod, Novosibirsk, Omsk, Perm, Rostov-on-Don,
Samara, Saratov, Togliatti, Tomsk, Yekaterinburg and other cities. The sample
did not include companies from the Far East of Russia since too few potential
contacts agreed to participate. Given that the Russian Far East is neither an
especially distinguished place for innovation nor it is a highly populated location,
this minor sample bias is not an obstacle to conclude that the employed sample
is rather representative of the Russian middle-to-large sized enterprise sector.
Figure 3
Sample characteristics (general), %
Location of companies,
by city or federal district
Uralskyi F.D.
10%
Target customers,
by customer type
South F.D.
2%
66%*
Private businesses (w/o govt. stake)
51%
Government bodies and orgs.
Sibirskyi F.D.
16%
Moscow
40%
46%
Individual customers
42%
Businesses with govt. stake
Privolzhskyi F.D.
20%
St. Petersburg
11%
* The sum exceeds 100%, since
multiple options were allowed
Size of companies:
number of persons employed (FTEs)
1 001-5 000
8%
501-1 000
6%
251-500
14%
5%
Other types of customers
0%
25%
50%
75%
100%
Regional coverage of sales
More than 5000
2%
99%*
Russia
43%
CIS
Less than 250
70%
Eastern Europe and Asia
16%
Other countries of the world
14%
* The sum exceeds 100%, since
multiple options were allowed
Source: Bauman Innovation and OPORA – Russian Innovation Survey 2009-2010
7
0%
25%
50%
75%
100%
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70% of the sample were middle-sized firms (up to 250 persons employed,
measured in full-time equivalents [FTEs]), while 14% were sized between 251
and 500 FTEs in employment. The remaining 16% of the corporations had more
than 500 employees. The sample included just 5 companies which employed
more than 5 000 persons each. Relative to the population distribution of
enterprises located in Russia, large companies are under-represented in the
sample. Nevertheless, the analyses were conducted without re-weighting the
data, which means that the results might be biased towards middle-sized
businesses.
The majority of the companies surveyed performed in several industries. The
most represented industries were manufacturing (73%), construction (20%) and
trade (19%). The Russian owners had stake in majority (92%) of sample
companies, while private foreign owners had stake in the remaining firms. The
Russian government had stake in 11% of the companies studied.
Regarding the geography of sales, all companies except one had sales in
Russia. Approximately a half of the companies were exporting some part of their
products to other countries. 43% of sample companies exported to the CIS
countries, 16% exported to Eastern Europe and neighbouring Asian countries,
while 14% had sales in all other countries (this group thus included Western
Europe, the Americas, Australia, Africa as well as countries of Asia, however
excluding the CIS, Mongolia, Japan and China).
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Empirical results
Approximately a half (51%) of the sample was companies with a dedicated R&D
department, or another department with R&D as a primary function. Only a
quarter of all the firms documented their innovation strategy either as a separate
publication or a part of corporate strategy. 51% reported to have innovation
strategy which was not documented (i.e. the innovation strategy existed only ‘in
the minds of top managers’), and 24% acknowledged that they do not have
innovation strategy at all (Figure 4).
Figure 4
Sample characteristics (innovation), %
Presence of R&D department
Main sources of innovation
47%*
Company's own R&D department
The company
doesn’t have
R&D department,
49%
Foreign companies - suppliers of
equipment or parts
The company has an
R&D department,
51%
38%
Russian companies - suppliers of
equipment or parts
28%
Company's own departments, except
R&D
25%
Russian engineering, design and other
specialized companies
Russian institution of science and
technology or university
Presence of innovation strategy
The company doesn't
have
innovationнет
strategy,
В компании
исследовательского 24%
подразделения,
49%
Innovation strategy
exists only in top
managers' minds,
51%
16%
Documented as a separate strategy,
5%
Documented as a part
of overall strategy,
20%
В компании существует
исследовательское
подразделение,
51%
Foreign engineering, design and other
specialized companies
Acquisition of patents, licenses and
know-how from Russian companies
Acquisition of patents, licenses and
know-how from foreign companies (with
or without Russian presence)
Foreign institution of science and
technology or university
15%
8%
6%
5%
3%
0% 10% 20% 30% 40% 50% 60%
* The sum exceeds 100%, since up to three options were allowed
Source: Bauman Innovation and OPORA – Russian Innovation Survey 2009-2010
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The major source of innovation for 47% companies in the sample was an own
R&D department. Foreign and Russian suppliers of equipment and parts, as well
as other functional departments were other three most frequently used sources
of innovation. Institutions of science and technology, dedicated design and
technology companies, as well as patenting and licensing were less frequently
cited among important sources of innovation.
As a rule, the Russian companies do not regard innovation as the first strategic
priority. Only 13% of the sample indicated that innovation is the first priority for
the firm; most of these firms do business in the industries where the pace of
innovation is globally considered to be high. However, when compared to their
peers in other countries of the world, the Russian companies rate poorly.
According to the Innovation 2007 survey conducted by the Boston Consulting
Group in 58 countries, 23% of 2 500 executives recognise innovation as the first
priority. Our survey confirms the view that the Russian firms are in general less
innovative both by activity and intention (Figure 5).
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Figure 5
Priority of innovation
Priority of innovation in Russian companies
Not a priority
5%
Priority of innovation in the companies globally*
Not a priority
7%
First priority
13%
First priority
23%
Somewhat a
priority
70%
Somewhat a
priority
82%
* Results of the survey of 2 500 top managers in 58 countries
Source: Bauman Innovation and OPORA – Russian Innovation Survey 2009-2010; BCG Senior Management Survey ‘Innovation 2007’
The Russian Innovation Survey intended to reveal obstacles for innovation
activity. In one of the questions, the companies mentioned up to three obstacles
that limit the firm's ability to implement innovation. According to this survey
(Figure 6), the most common obstacle is a lack of funds for innovation (62% of
the respondents) followed by high cost of innovation in Russia (33%), as well as
low availability of financing from external sources (also 33%). The other
obstacles include the problems to forecast the demand for innovative products
on the consumer market (23%), as well as a lack of qualified personnel (19%),
and the scarcity of accessible information about available technologies and new
technological developments (12%).
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Figure 6
Obstacles to innovation
Main obstacles to innovation activities for mid-sized and large
companies in Russia
Lack of funds available within the
company
Rankings of obstacles to innovation for EU- companies
62% *
Non-innovative
companies*
Innovative companies*
Too large cost of innovation activity
33%
1
Lack of funds available within
the company
1
No demand for new products
and services
Difficult to get external financing
33%
2
Difficult to get external
financing
2
Lack of funds available within
the company
3
Uncertainty of demand for a
new product or service
3
Difficult to get external
financing
4
Difficult to find suppliers
4
Difficult to find suppliers
5
Too large cost of innovation
activity
5
Uncertainty of demand for a
new product or service
6
Lack of qualified human
resources
6
Too large cost of innovation
activity
Uncertainty of demand for a new product
or service
23%
19%
Lack of qualified human resources
12%
Lack of technology information
Lack of market information
8%
Difficult to find suppliers
6%
Restricting standards and industry
regulations
6%
7
7
No demand for new products and
services
No demand for new products
and services
Restricting standards and
industry regulations
5%
8
8
Lack of qualified human
resources
Ineffective innovation management
5%
Restricting standards and
industry regulations
9
Lack of market information
9
Lack of technology information
Board of Directors doesn't recognize
innovation as priority
4%
10 Lack of technology information
10 Lack of market information
0% 10% 20% 30% 40% 50% 60% 70%
* The sum exceeds 100%, since up to three options were allowed
* See Community Innovation Survey 2004-2006 for explanations
Source: Bauman Innovation and OPORA – Russian Innovation Survey 2009-2010; Community Innovation Survey 2004-2006, Central Statistics Office
When compared to the innovation surveys conducted among the EU firms, the
ranking of innovation barriers amongst the Russia enterprises reveal much
similarity. The companies in the EU report a lack of available funds and
difficulties with getting external financing among three most important obstacles.
However, it is important to bear in mind that too large cost of innovation activity
ranks the second largest obstacle for the Russian firms (33% of the companies
studied), whereas too large cost of innovation ranks only 5-6th in the EU. Thus,
this stresses the fact that innovation in Russia is considered relatively costly.
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When a lack of qualified human resources was analysed, about a half (47%) of
companies mention that it is not easy to find and hire a qualified engineer or
technician (Figure 7). And for the majority of the companies, this is a question of
availability, not a question of cost. Only 22% of the executives stated that the
level of salaries and remuneration expectations of engineers is too high and
inacceptable.
Figure 7
Barriers to innovation: human resources and education
Availability of engineers and technicians
8%
21%
18%
23%
17%
10% 3%
Low
Cost to hire engineers and technicians
High
2% 8% 12%
32%
20%
14%
13%
Too high, inacceptable
Education quality in vocational schools and
technical colleges
Quality of higher education in natural
sciences and engineering
Quality of math and science education in
school
8%
Acceptable
17%
26%
25%
16%
Low
4% 13%
High
18%
24%
18%
19%
Low
6% 11%
Low
Source: Bauman Innovation and OPORA – Russian Innovation Survey 2009-2010
13
6% 2%
4%
High
14%
24%
23%
18%
5%
High
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Another problem is the quality of education. The Russian CEOs see many gaps
in the knowledge of university graduates and major problems in vocational
education and general secondary schools. 35% regarded education quality of
today's university graduates as low, versus 41% of those who is inclined to say
that it is high. 51% evaluate vocational schools and college graduates as low
and inadequate to their companies' needs, whereas positive evaluations come
from only 23% of respondents. The education of the mathematics and sciences
at the Russian schools was evaluated as relatively poor by 31% of companies,
whereas 46% of the companies rated it as relatively good..
When asked about intellectual property protection, the business executives were
to acknowledge that the state of affairs is far from an ideal situation (Figure 8).
More than two thirds state that intellectual property is either not protected at all
(31%) or weakly protected (38%). The most problematic issues are copyright
and patent protection. The survey data shows that intellectual property is not
protected adequately in Russia.
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Figure 8
Intellectual property protection
14%
24%
31%
Intellectual property protection in general
10% 4%3%
14%
Weak
Intellectual property protection:
patents for invention and prototypes
Intellectual property protection:
registered trademarks
Intellectual property protection:
authors’ rights
Intellectual property protection:
business secrets and know-how
Strong
15%
21%
13%
24%
18%
Weak
Strong
18%
18%
22%
16%
8% 10%
Weak
13%
12%
27%
19%
18%
10% 2%
Strong
11%
Weak
Source: Bauman Innovation and OPORA – Russian Innovation Survey 2009-2010
15
7%
Strong
Weak
12%
7% 3%
18%
27%
13%
13% 4%
Strong
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Some survey-based policy recommendations
A. The government should take into account industry-specific characters,
when designing its innovation policy
The survey results provide a picture of importance of incentives for innovation
and abundance of resources for innovation activity. The industry matrix
represents a picture of external innovation drivers, averaged for driver types and
for each industry group. Both incentives and resources variable represent simple
averages of several factors and items shown in Figure 9.
The matrix shows that such industries as pharmaceuticals and medical
equipment, as well as aerospace and defence and oil and gas can boast of
relatively high incentives for innovation. Still, the availability of resources in
these industries is estimated to be less than the average. Such industries as
construction and trade demonstrate the highest level of resource availability for
innovation. Nevertheless, there are relatively weak incentives to innovate in
these industries. Only two industries, manufacturing of food and beverages and
telecommunication equipment (with the IT sector), have both adequate
resources and sufficient incentives for innovation.
Numerous other industries, including automotive, electronics, textiles and
clothing, as well as infrastructure-related industries, neither possess adequate
resources nor sufficient incentives to innovate. Our research reveals an
interesting fact that the oil and gas is very close to this lagging group, since the
level of incentives is just slightly above the average. One explanation might be
that the demand for innovative products in this raw material-based sector is
almost non-existent. Another explanation may be that high prices of oil and the
high crude oil export tax make it extremely profitable for the Russian oil
companies to possess refineries and do some processing, but the potential
return on investment in technological renovation and upgrade of refineries is
very low compared to other potential investments.
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Figure 9
Incentives and resources for innovation in Russian industries
Distribution of industries
Incentives for innovation in the industry
4,5
Strong
• Intensity of local competition
• Private sector demand for innovative
products
• Intellectual property protection
Pharmaceuticals
and medical equipment
4,4
Telecommunicati
on equipment
and IT
Incentives for innovation in the industry
Aerospace
and defence
Food and drinks
4,3
Extraction of oil
and gas
Wholesale and
retail trade
4,2
Resources for innovation in the industry
• Availability of funds for innovation
• Availability of human resources
• Quantity and quality of components suppliers
and equipment
• Opportunities to procure R&D externally
Electronics
Automotive and
transportation
equipment
Textiles and clothing
4,1
Construction
Other manufacturing
4
Electricity, gas and
water supply
Weak
3,9
3,7Weak
Source: Bauman Innovation and OPORA – Russian Innovation Survey 2009-2010
17
3,8
Abundance of resources for innovation in the industry
3,9
4
4,1
4,2
Strong4,3
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It is evident that applying the same policy for every industry is not a suitable
approach. For the telecommunication equipment sector and the food and
beverage industry capability gaps is the main weakness to address, whereas in
the electronics and the automotive industries more resources should be
provided to stimulate innovation activity. Yet pumping-in resources in the
aforementioned industries and other industries which belong to lagging group, it
will have no effect on innovation until incentives to innovate in these industries
are seriously improved.
B. Establish associations and specialised technology trade agents
between Russia and her key technology partners
How can the leading Russian innovators help themselves in the absence of
high-quality R&D in Russia? The answer is the internationalisation.
As far as we are concerned, the companies search for partners throughout the
globe, and the Russian firms are no exception. We asked the respondents a
number of questions regarding their technological cooperation with partners in
other countries, and the findings (Figure 10) allow us drawing several policyrelevant conclusions.
Approximately a half of Russian middle-sized and large corporations cooperate
with foreign partners in technology and innovation. The findings indicate that the
most frequent reason for cooperation is upgrading of existing products. Among
those companies that cooperate with some foreign partners, over half (53%)
mention product innovation among the purposes of cooperation.
The Russian firms often establish partnerships with companies in Western and
Central Europe. The overwhelming majority of the surveyed executives pointed
out to a European country as the location of their major technology partner,
whereas the USA is only 23%, while Japan is about 8%. A more detailed
analysis reveals a dominating role of Germany as a technology partner for
Russia (36%), which seems to confirm traditional views on the intensive Russia-
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Germany cooperation. The collaboration with Germany seems to be of more
importance compared to technological partnership with all other European
countries taken together, including France, the UK, Italy, Spain, the Nordic
countries and the Central East European countries, except the CIS.
Figure 10
Cooperation with foreign companies in area of technology and innovation
Technological cooperation with partners
abroad (during last three years)
Location of main technology
partners
Areas of cooperation
36%**
Germany
Upgrading products and
services
53%
*
23%
USA
16%
China
CIS countries
Yes
No
Developing new
products and services
43%
48%
49%
Designing and
implementing new
production processes
42%
Finland
9%
Italy
8%
Japan
8%
France
5%
India
5%
5%
Sweden
Upgrading production
processes
42%
Other Europe
Other non-Europe
* The sum exceeds 100%, since multiple
options were allowed
Source: Bauman Innovation and OPORA – Russian Innovation Survey 2009-2010
19
10%
14%
5%
** The sum exceeds 100%, since up
to two options were allowed
Prazdnichnykh and Liuhto
PEI Electronic Publications 21/2010
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Finland holds the second place among the European countries as a
technological partner for Russia. Finland is twice more often mentioned as the
major technology partner for a Russian company than Sweden.
It is interesting to note that the technology cooperation between Russia and the
rest of the CIS countries is less frequent than with China. And although our
empirical results do not contain information about the direction of the technology
transfer, most partnerships with China are certainly bi-directional i.e. the
technology transfer occurs to both directions.
More efforts can be applied to streamline the international partnerships. One
way is establishing associations and specialised technology trade agents in the
most important countries. For example, special technological exchange offices
may be set up in Düsseldorf and Munich, Boston and San Francisco, Shanghai
and Beijing, Helsinki and Tampere / Turku.
C. The surveyed firms regard the R&D funding as well as policy steps to
increase effectiveness of the R&D-related institutions as the highest
priority measures in the Russian government’s innovation policy
The Russian government is not staying aside, although much more can be done
to improve innovation activity in companies. 16% of companies studied indicated
to have participated in some government-led innovation support programs at
least once (Figure 11).
The most widespread type of support is providing funds for R&D-based
innovation projects. 62% of those companies, which obtained support for
innovation, report to have used these funds. Financing and subsidising various
projects and activities, including innovation projects, purchasing of production
equipment
and
software,
construction
and
development
of
innovation
infrastructure and participation in international exhibitions, are the most common
forms of support, and this is in a direct correspondence to the major innovation
obstacles outlined by the executives.
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Figure 11
Companies’ participation in government’s programs to support innovation
Companies receiving support
via government’s innovation support programs
Forms of innovation support received
62% *
Financing of R&D-based innovation projects
Subsidies for purchasing production
equipment and software
33%
Financing of innovation projects not involving
R&D
Financing of participation in international
exhibitions
No
Yes
21%
18%
Subsidies for construction and development
of innovation infrastructure
15%
Initiating and supporting of connections to
universities and science and technology…
15%
Initiating and supporting of business
connections
13%
Tax rebates related to innovation activity
except R&D
13%
Supplying information about market demands,
conditions, new regulatory initiatives, etc.
10%
Tax rebates related to R&D activity
10%
0% 10% 20% 30% 40% 50% 60% 70%
* The sum exceeds 100%, since multiple options were allowed
Source: Bauman Innovation and OPORA – Russian Innovation Survey 2009-2010
Other forms of support such as tax rebates or supporting connections either with
universities and research institutions or with businesses are less common. Only
10-15% of executives, who obtained any government support for innovation,
reported to have used such forms.
The companies’ own potential to improve innovation is limited. Therefore, the
Russian government policy measures should be proactive and focused.
However, these characters do not describe current policy in Russia. In general,
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the enterprises consider government science, innovation and technology
policies to be ineffective. 65% of surveyed executives do not see positive results
of the government intervention at all. Just 11% consider that there are positive
results. Given that the government can take multiple roles and implement a
multitude of approaches, and therefore, we asked what should be the direction
of the governmental intervention (Figure 12).
According to the firms studied, tax rebates for R&D as well as co-financing and
other measures of direct and indirect funding of R&D in companies are the
priority instrument. This potential policy direction is supported by 57% of the
executives. This is of course not surprising if we take into account that these
types of funding are direct benefits for the businesses.
Among measures which do not directly presume giving money to companies,
41% consider enhancing the level and scale of education in natural sciences
and engineering (at all stages of education) as something that can effectively
improve innovation activity. Giving away more R&D funds for research institutes
and universities is the third most popular measure with 35% of the company
executives considering it as a priority. In addition, companies propose to the
government to support the commercialisation via grant systems, to reform the
existing system of the government research institutes to increase the R&D
effectiveness, and also to pay more attention to developing intellectual property
rights, industry regulation, technological standards, and the commercialisation
system.
Therefore, the Russian enterprises consider R&D funding, both in private and
public sectors, as well as policy steps to increase R&D effectiveness, as those
measures of innovation policy which should be of the highest priority for the
Russian government.
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Figure 12
Policy priorities to foster innovation
Policy measures to foster innovation, designated as priority by companies
*
57%
Financial support for company R&D (via tax rebates and co-financing schemes)
41%
Raise standards of education in natural sciences and technology
35%
Increase financing of R&D in universities and laboratories
25%
Reform public R&D sector to raise effectiveness
Provide financial support of commercialization
22%
20%
Upgrade commercialization infrastructure
Improve effectiveness of technological and industry regulations
18%
Strengthen intellectual property protection
18%
0%
20%
40%
60%
* The sum exceeds 100%, since up to three options were allowed
Source: Bauman Innovation and OPORA – Russian Innovation Survey 2009-2010
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Epilogue
“… there is nothing more difficult to carry out, nor more doubtful of success, nor
more dangerous to handle, than to initiate a new order of things. For the
reformer has enemies in all those who profit by the old order, and only lukewarm
defenders in all those who would profit by the new order … arising partly from
fear of adversaries … and partly from the incredulity of mankind, who do not
truly believe in anything new until they have actually experience of it.”
Nicolo Machiavelli
Philosopher
The Prince (1532)
Modern Library College Editions, Random House (1950), p. 21
“You'll miss 100 per cent of the shots you never take.”
Wayne Gretzky
NHL ice hockey player (1979-1999)
Canada
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Electronic publications of the Pan-European Institute in 2007-2010
ISSN 1795-5076
Freely available at http://www.tse.fi/pei
2010
20/2010
Mäkinen, Hanna
Energy efficiency – a new energy resource for Russia?
19/2010
Christie, Edward Hunter
The Russian gas price reform and its impact on Russian gas consumption
18/2010
Shadrina, Elena
Russia’s foreign energy policy: norms, ideas and driving dynamics
17/2010
Christie, Edward Hunter
EU natural gas demand: uncertainty, dependence and bargaining power
16/2010
Tsachevsky, Venelin
Bulgaria’s EU membership: the adaptation to the new status is not over
15/2010
Panibratov, Andrei
Russian multinationals: entry strategies and post-entry operations
14/2010
Laaksonen, Eini
Political risks of foreign direct investment in the Russian gas industry – The
Shtokman gas field project in the Arctic Ocean
13/2010
Shashnov, Serguei – Prihodko, Serguei
Selection of priorities for innovation development of the region: Russian
experience
12/2010
Prihodko, Serguei
Обследование инвестиционной активности предприятий в период
экономического роста в России (2001-2005 гг.)
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11/2010
Vahtra, Peeter
The Rusnano Corporation and internationalisation of Russia's nanotech industry
10/2010
Liuhto, Kari
Energy in Russia’s foreign policy
9/2010
Mäkinen, Hanna
The future of natural gas as the European Union’s energy source – risks and
possibilities
8/2010
Zashev, Peter – Dezhina, Irina
Internationalisation of Russian small innovation companies: motives and
limitations
7/2010
Kuznetsov, Alexey
Industrial and geographical diversification of Russian foreign direct investments
6/2010
Bogomolov, Oleg
Global economic crisis: lessons for the world and Russia
5/2010
Vahtra, Peeter
A dawn for outward R&D investments from Russia?
4/2010
Luukkanen, Arto
”…Miksi Neuvostoliitto laahaa teknologisesti USA:ta jäljessä?” – Tutkimuksen,
kehityksen ja modernisaatioprosessien merkitys nyky-Venäjällä
3/2010
Hägerström, Markus
Arvio Venäjän valtionyhtiöiden toiminnasta
2/2010
Zasimova, Liudmila
Public policy and access to new drugs: evidence from Russian pharmaceutical
market
1/2010
Heikkilä, Marika
Suomalaisinvestointien poliittis-hallinnolliset riskit Venäjällä, Ukrainassa ja
Valko-Venäjällä
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2009
24/2009
Mäkinen, Hanna (ed.)
Baltic Rim Economies Expert Articles 2009
23/2009
Yeremeyeva, Irina
The impact of the global economic crisis on Belarusian economy
22/2009
Kaartemo, Valtteri
Russian innovation system in international comparison – the BRIC countries in
focus
21/2009
Usanov, Artur
External trade of the Kaliningrad Oblast
20/2009
Vahtra, Peeter
Expansion or Exodus? Russian TNCs amidst the global economic crisis
19/2009
Dezhina, Irina – Kaartemo, Valtteri
All quiet on the innovation front – the Russian reaction to the economic crisis
18/2009
Liuhto, Kari – Heikkilä, Marika – Laaksonen, Eini
Political risk for foreign firms in the Western CIS: An analysis on Belarus,
Moldova, Russia and Ukraine
17/2009
Blyakha, Nataliya
Investment potential of the Crimea region
15/2009
Braghiroli, Stefano – Carta, Caterina
An index of friendliness toward Russia: An analysis of the member states and
Member of the European Parliament's positions
14/2009
Kaartemo, Valtteri – Lisitsyn, Nikita – Peltola, Kaisa-Kerttu
Innovation infrastructure in St. Petersburg – Attractiveness from the Finnish
managerial perspective
13/2009
Yeremeyeva, Irina
Russian investments in Belarus
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12/2009
Liuhto, Kari – Vahtra, Peeter
Who governs the Russian economy? A cross-section of Russia’s largest
corporations
11/2009
Mau, Vladimir
The drama of 2008: from economic miracle to economic crisis
10/2009
Prikhodko, Sergey
Development of Russian foreign trade
9/2009
Izryadnova, Olga
Investments in real sector of the Russian economy
8/2009
Liuhto, Kari (ed.)
EU-Russia gas connection: Pipes, politics and problems
7/2009
Blyakha, Nataliya
Russian foreign direct investment in Ukraine
6/2009
Barauskaite, Laura
Chinese Foreign Investments and Economic Relations with the Baltic Sea
Region Countries
5/2009
Charushina, Oxana
Some remarks on the impact of European Union membership on the economies
of Austria and Finland – some lessons for Croatia
4/2009
Sutyrin, Sergei
Internationalization of Russian Economy: threats and opportunities in time of
crises
3/2009
Efimova, Elena G. – Tsenzharik, Maria K.
Electronic Logistics Services in Russia: the Bridge to United Europe
2/2009
Liuhto, Kari
Special Economic Zones in Russia – What do the zones offer for foreign firms?
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1/2009
Ehrstedt, Stefan – Zashev, Peter
Belarus for Finnish investors
2008
18/2008
Tuominen, Karita – Lamminen, Eero
Russian special economic zones
17/2008
Lamminen, Eero – Tuominen, Karita
Relocation of headquarters to Saint Petersburg – Public discussion from Russia
16/2008
Vahtra, Peeter – Lorentz, Harri
Analysis on Krasnodar and Rostov regions – Opportunities for foreign food
manufacturers
15/2008
Purica, Ionut – Iordan, Marioara
EU and the new century’s energy conflicts
14/2008
Vahtra, Peeter – Ehrstedt, Stefan
Russian energy supplies and the Baltic Sea region
13/2008
Baltic Rim Economies Expert Articles 2004-2008
12/2008
Kaartemo, Valtteri
Döner Ekonomi – Analysis of Turkish Economy
11/2008
Peltola, Kaisa-Kerttu
Russian innovation system in international comparison - Opportunities and
challenges for the future of innovation development in Russia
10/2008
Dezhina, Irina – Peltola, Kaisa-Kerttu
International Learning in Innovation Area: Finnish Experience for Russia
9/2008
Usanov, Artur
Special Economic Zone in Kaliningrad as a Tool of Industrial Development: The
Case of the Consumer Electronics Manufacturing
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8/2008
Zashev, Peter
Current state and development potential of Russian Special Economic Zones –
Case study on the example of Saint Petersburg SEZ
7/2008
Vahtra, Peeter – Zashev, Peter
Russian automotive manufacturing sector – an industry snapshot for foreign
component manufacturers
6/2008
Cameron, Fraser – Matta, Aaron
Prospects for EU-Russia relations
5/2008
Krushynska, Tetiana
Ukrainian-Russian economic relations, eurointegration of Ukraine: problems,
role, perspectives
4/2008
Ehrstedt, Stefan – Vahtra, Peeter
Russian energy investments in Europe
3/2008
Liuhto, Kari
Genesis of Economic Nationalism in Russia
2/2008
Vahtra, Peeter – Kaartemo, Valtteri
Energiaturvallisuus ja ympäristö Euroopan Unionissa - suomalaisyritysten
energianäkökulmia
1/2008
Nirkkonen, Tuomas
Chinese Energy Security and the Unipolar World – Integration or confrontation?
2007
19/2007
Nojonen, Matti
The Dragon and the Bear ‘facing a storm in common boat’ – an overview of
Sino-Russian relationship
18/2007
Kaartemo, Valtteri (ed.)
New role of Russian enterprises in international business
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17/2007
Vahtra, Peeter
Suurimmat venäläisyritykset Suomessa
16/2007
Jaakkola, Jenni
Income convergence in the enlarged European Union
15/2007
Brunat, Eric
Issues of professional development of labour resources in the Kaliningrad region
14/2007
Dezhina, Irina – Zashev. Peeter
Linkages in innovation system in Russia – Current status and opportunities for
Russian-Finnish collaboration
13/2007
Vahtra, Peeter
Expansion or Exodus? The new leaders among the Russian TNCs
12/2007
Kärnä, Veikko
The Russian mining industry in transition
11/2007
Männistö, Marika
Venäjän uudet erityistalousalueet – Odotukset ja mahdollisuudet
10/2007
Kuznetsov, Alexei V.
Prospects of various types of Russian transnational corporations (TNCs)
9/2007
Uiboupin, Janek
Cross-border cooperation and economic development in border regions of
Western Ukraine
8/2007
Liuhto, Kari (ed.)
External economic relations of Belarus
7/2007
Kaartemo, Valtteri
The motives of Chinese foreign investments in the Baltic sea region
6/2007
Vahtra, Peeter - Pelto, Elina (eds)
The Future Competitiveness of the EU and Its Eastern Neighbours
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5/2007
Lorentz, Harri
Finnish industrial companies’ supply network cooperation and performance in
Russia
4/2007
Liuhto, Kari
A future role of foreign firms in Russia’s strategic industries
3/2007
Lisitsyn, Nikita
Technological cooperation between Finland and Russia: Example of technology
parks in St. Petersburg
2/2007
Avdasheva, Svetlana
Is optimal industrial policy possible for Russia? Implications from value chain
concept
1/2007
Liuhto, Kari
Kaliningrad, an attractive location for EU Investors
32