Russian industrial firms: Absorptive Capacity and State
Innovation Policy VI Knowledge Economy Forum: Technology
Acquisition and Knowledge Networks VI Knowledge Economy Forum:
Technology Acquisition and Knowledge Networks 17-19 April 2007,
Cambridge, UK Boris Kuznetsov, Yuri Simachev Higher School of
Economics, Interdepartmental Analytical Center, Moscow Slide 2 2
Main issues: Technology transfer and innovation policy in Russia:
short historical background Russia now: R&D, innovation,
productivity:quiet crisis of manufacturing against the background
of economic growth Innovation activity of Russian industrial firms:
Why dont they innovate? Options for innovation policy: What can the
State do? Technology transfer and innovation policy in Russia:
short historical background Russia now: R&D, innovation,
productivity:quiet crisis of manufacturing against the background
of economic growth Innovation activity of Russian industrial firms:
Why dont they innovate? Options for innovation policy: What can the
State do? Slide 3 3 Data sources Survey of competitiveness of
large&medium manufacturing industrial firms: 1000 manufacturing
firms, 49 regions, Higher School of Economics and World Bank
2005-2006; Survey of R&D organizations: 180 R&D institutes,
Moscow, Interdepartmental Analytical Center, 2006; Survey of
innovation activity of large&medium industrial firms: 570
industrial firms, All-Russia representative sample,
Interdepartmental Analytical Center, Institute for Economi of
Transition 2005; Survey of competitiveness of large&medium
manufacturing industrial firms: 1000 manufacturing firms, 49
regions, Higher School of Economics and World Bank 2005-2006;
Survey of R&D organizations: 180 R&D institutes, Moscow,
Interdepartmental Analytical Center, 2006; Survey of innovation
activity of large&medium industrial firms: 570 industrial
firms, All-Russia representative sample, Interdepartmental
Analytical Center, Institute for Economi of Transition 2005; Slide
4 4 Specific features of Russian innovation system Soviet time
inheritance Large-scale R&D sphere, separated from industry
Applied research and development concentrated in a few high- tech
sectors Both industry and R&D sector isolated from the rest of
the World Industrial enterprises functioned in non-competitive
environment and had no in-build innovation incentives 1990-ies
inheritance Privatization by itself in the monopolized economy did
not created incentives to innovate Changes in the States priorities
led to deep crisis of applied research and of high-tech sectors
Growth of the 2000-ies was based on better management of the
existing resources (capacities, labor) and oil revenues not on
innovations Soviet time inheritance Large-scale R&D sphere,
separated from industry Applied research and development
concentrated in a few high- tech sectors Both industry and R&D
sector isolated from the rest of the World Industrial enterprises
functioned in non-competitive environment and had no in-build
innovation incentives 1990-ies inheritance Privatization by itself
in the monopolized economy did not created incentives to innovate
Changes in the States priorities led to deep crisis of applied
research and of high-tech sectors Growth of the 2000-ies was based
on better management of the existing resources (capacities, labor)
and oil revenues not on innovations Slide 5 5 Total factor
productivity in manufacturing: Russia versus other countries
(Russia=100) Slide 6 6 Export: volume and structure Slide 7 7 Share
of manufacturing industries in total industrial VA Slide 8 8
Russian manufacturing industry is loosing competitive battle not
only to other countries but to other sectors of Russian economy as
well. Russian industry is very much segmented: along with highly
efficient firms each industry includes a significant share of
highly inefficient ones. The inefficient enterprises are being
protected by high entry barriers: Large territory and isolated
regional markets A lot of specific niche markets Cheap energy Cheap
accumulated fixed capital Unfavorable investment climate Russian
manufacturing industry is loosing competitive battle not only to
other countries but to other sectors of Russian economy as well.
Russian industry is very much segmented: along with highly
efficient firms each industry includes a significant share of
highly inefficient ones. The inefficient enterprises are being
protected by high entry barriers: Large territory and isolated
regional markets A lot of specific niche markets Cheap energy Cheap
accumulated fixed capital Unfavorable investment climate All those
factors are of transient nature and cannot provide for sustainable
growth Slide 9 9 Innovation activity: Russia vs. EU Slide 10 10
Innovation and investment activity of firms 26% of firms had
neither R&D nor investments Slide 11 11 Factors of innovation
activity Competitive pressure Globalization: Export Import of
materials and details FDI Strategy Financial situation Competitive
pressure Globalization: Export Import of materials and details FDI
Strategy Financial situation Slide 12 12 Regression result
(industry controlled) Slide 13 13 Conclusions from empirical
testing The lack of competition has strong negative influence on
innovation. Competition with other national producers has a
positive impact only on some innovations mostly concerned with
lowering costs of production. Strong competition with foreign
producers significantly and positively influence innovations.
International trade has a positive impact on innovation activity of
a firm. Influence is strong for export and positive while weak for
purchasing imported materials and details. FDI has no or
insignificant impact on innovations in general and negative impact
on R&D activity. Firms with strategy oriented on new markets
and integration into global economy are more active in innovations.
Size of a firm do matter: additional efforts needed for
facilitating innovations at medium-sized and small firms. The lack
of competition has strong negative influence on innovation.
Competition with other national producers has a positive impact
only on some innovations mostly concerned with lowering costs of
production. Strong competition with foreign producers significantly
and positively influence innovations. International trade has a
positive impact on innovation activity of a firm. Influence is
strong for export and positive while weak for purchasing imported
materials and details. FDI has no or insignificant impact on
innovations in general and negative impact on R&D activity.
Firms with strategy oriented on new markets and integration into
global economy are more active in innovations. Size of a firm do
matter: additional efforts needed for facilitating innovations at
medium-sized and small firms. Slide 14 14 Why Industry and Science
do not see each other: Low demand for R&D services and results
is very much due to the lack of innovation infrastructure Both
sides would like more stimulus from the state and more information
about the available opportunities. Industrial firms with experience
of outsourcing of R&D services are more pessimistic than those
without the experience: 29% against 18% complain about low quality,
29% against 15% complain about the lack of complex services R&D
institutions agree with lack of complex services but note also the
problem of Intellectual Property Rights. 1 No obstacles 2- Imported
technologies are better and cheaper 3- R&D organizations are
not oriented on clients needs 4- R&D organizations do not
provide all the necessary services 5- Low quality of results 6-
High prices of R&D services 7 No state policy facilitating the
purchase of technologies 8 Lack of information about R&D
results and new technologies 9 IPR belong to the state 10 Negative
and unjust picture of Russian R&D in the media Slide 15 15
Obstacles for cooperation with R&D sphere Slide 16 16 State
dominance in R&D support lead to lower incentive to
commercialize and restructure Slide 17 17 What can the Government
do? Current trends in policy Special zones type of innovation
policy: Creating high-tech production zones and technological parks
Special state programs for high-tech industries (aircraft,
shipbuilding, etc.) State programs for specific technologies
(nanotechnology, biotechnology) Creating innovation institutes for
commercialization of technology (State Venture company) Tax-related
measures to facilitate R&D in industry Current trends in policy
Special zones type of innovation policy: Creating high-tech
production zones and technological parks Special state programs for
high-tech industries (aircraft, shipbuilding, etc.) State programs
for specific technologies (nanotechnology, biotechnology) Creating
innovation institutes for commercialization of technology (State
Venture company) Tax-related measures to facilitate R&D in
industry Slide 18 18 Testing efficiency of innovation policy
measures 3 to 2 years period to depreciate R&D 100% of
unsuccessful R&D depreciation profit tax-base down by 30-40% of
surplus R&D subsidies for contracts between industrial firms
and Russian R&D organization up to 30% of the contract;
co-financing by the state (up to 50%) the large-scale R&D
project on the principle of risk and profits sharing; subsidies of
patenting and (keeping valid) patents abroad; investment premium up
to 10% of investments into fixed assets state loans or state
guarantees for importing new technologies from abroad 3 to 2 years
period to depreciate R&D 100% of unsuccessful R&D
depreciation profit tax-base down by 30-40% of surplus R&D
subsidies for contracts between industrial firms and Russian
R&D organization up to 30% of the contract; co-financing by the
state (up to 50%) the large-scale R&D project on the principle
of risk and profits sharing; subsidies of patenting and (keeping
valid) patents abroad; investment premium up to 10% of investments
into fixed assets state loans or state guarantees for importing new
technologies from abroad Slide 19 19 Response rate for different
incentives Slide 20 20 Conclusions (1) Firms work in competitive
environment. BUT: Firms oriented on internal market and competing
with compatriots do not differ much in their innovation strategies
from monopolistic firms. Integration into the world economy and
orientation on expansion to new markets corresponds with higher
innovation activity. Any kind of active protectionist policy would
only facilitate the conservation of the current situation.
Financially bad-off firms are mostly passive both in investments
and innovation. This group should be stimulated to go out of
markets. Firms work in competitive environment. BUT: Firms oriented
on internal market and competing with compatriots do not differ
much in their innovation strategies from monopolistic firms.
Integration into the world economy and orientation on expansion to
new markets corresponds with higher innovation activity. Any kind
of active protectionist policy would only facilitate the
conservation of the current situation. Financially bad-off firms
are mostly passive both in investments and innovation. This group
should be stimulated to go out of markets. Slide 21 21 Conclusions
(2) The major obstacles in relatively low co- operation between
national R&D system and industrial firms concerns low level of
information (i.e. R&D institution should be pushed to more
active commercialization of their results) and no state policy to
low risks of large innovation projects. Considering responses of
different groups to incentives the State policy should be aimed at
solving two tasks: to create more incentives for leaders to be more
innovative; and to involve more firms from the group oriented
exclusively on imitation strategy into active innovations of
conducting R&D to create new products and new technologies. The
major obstacles in relatively low co- operation between national
R&D system and industrial firms concerns low level of
information (i.e. R&D institution should be pushed to more
active commercialization of their results) and no state policy to
low risks of large innovation projects. Considering responses of
different groups to incentives the State policy should be aimed at
solving two tasks: to create more incentives for leaders to be more
innovative; and to involve more firms from the group oriented
exclusively on imitation strategy into active innovations of
conducting R&D to create new products and new technologies.
Slide 22 22 Conclusions (3) Russian state policy towards
innovations suffers not so much from the lack of resources but
rather from the lack of institutions and instruments that would
stimulate demand for innovations and R&D on the side of
business. The most demanded changes in innovation policy are tax
R&D-related measures: lowering tax base in case of increase of
R&D expenditures and depreciation of R&D expenditures for
unsuccessful R&D. Also, high demand is for lowing innovation
risks through state co-financing of large-scale innovation
projects. The last measure is important, in particular, for firms
not currently active in their own R&D. Russian state policy
towards innovations suffers not so much from the lack of resources
but rather from the lack of institutions and instruments that would
stimulate demand for innovations and R&D on the side of
business. The most demanded changes in innovation policy are tax
R&D-related measures: lowering tax base in case of increase of
R&D expenditures and depreciation of R&D expenditures for
unsuccessful R&D. Also, high demand is for lowing innovation
risks through state co-financing of large-scale innovation
projects. The last measure is important, in particular, for firms
not currently active in their own R&D. Slide 23 23 Thank you
for attention