Yuri Simachev

The Russian corporation: patterns of behaviour during the crisis

This article considers the behaviour patterns of Russian firms before and during the financial crisis of 2008–09. To facilitate comparison, we define three main groups of actors at the firm level in the Russian economy – large, politically connected companies; medium-size firms that expanded in the 2000s with the help of administrative support, and successful medium-size firms driven by market factors. Many of the large companies practised highly risky financial policies and experienced a decrease in efficiency before the crisis, and the managers and owners of some Russian firms have been engaging in opportunistic behaviour during the crisis; the forms and causes of this behaviour are analysed here. We conclude by proposing some policy implications with emphasis on supporting successful medium-size firms driven by market factors.

Fostering Innovation Performance of Russian Manufacturing Enterprises: New Opportunities and Limitations

Denis Ivanov - Researcher, Interdepartmental Analytical Centre. E-mail: ivanov@iacenter.ruMikhail Kuzyk - Discipline Leader, Interdepartmental Analytical Centre. E-mail: kuzyk@iacenter.ruYury Simachev - Deputy Managing Director, Interdepartmental Analytical Centre. E-mail: simachev@iacenter.ruAddress: 31/29, bld.2, Povarskaya str., Moscow, Russia 121069, p.o. box 35.Russian innovation policy has fostered considerable discussion: how to encourage innovation, what methods work best, and what institutional and resource bases are required, including a broad perception among decision-makers of the range of instruments commonly used. However, at the public level, by contrast with some local innovative projects, policy has not yet succeeded in finding an efficient way to leverage business innovation performance. This paper is based on an autumn 2011 survey of top managers of more than 600 Russian industrial enterprises. The authors analyze the success of current instruments for fostering business innovation and identify business demand for public policies. It focuses on factors hindering Russian firms’ innovation, including the instable business climate and internal bureaucratization of business processes, which limit openness to innovation, and factors promoting it, strengthening competitiveness, improving public procurement, and reinforcing industrial standards. More than half of the managers of innovative companies observed effects of policies promoting innovation, although this observation was mainly by champions rather than outsiders. According to the respondents the maximum policy outreach is attributable in the survey to tax incentives. In this sense, policy tools that were appreciated were those contributing to the expansion of innovation activity than to its start. The productivity of innovation naturally depends on management quality. The argument here is that policies that foster a stable regulatory environment attract innovation and investment, which helps augment the population of innovative firms. Such measures boost others more directly fostering innovation, especially new firms that need help in distributing risk. The tendency of respondents to appreciate importsubstitution policy is associated here with their lack of export orientation for the hi-tech products they produce. Policies restraining foreign trade, however, should be avoided as providing an adverse incentive to innovate as well as worsening conditions for technology adoption and adjustment.

Russian Financial Development Institutions: Are We on the Right Way?

The article considers the main stages in the evolution of the Russian financial development institutions in the past decade and a half, models and conditions for their activities, and the main results. The authors analyze features of the current development institutions system as a whole, its key changes and main trends. Particular attention is paid to the study of internal imbalances in the development institutions system, as well as external constraints to improve its effectiveness.

Impact of economic crisis on innovation behaviour of industrial firms in Russia

The paper focuses on empirical analysis of major factors that determine innovation activities of Russian manufacturing firms during the crisis. We presume that the crisis has ambiguous effects on firms’ behaviour, on one hand limiting their financial capabilities to invest into new products and/or technologies, and on the other hand – creating additional incentives to innovate and opportunities to enter new markets. We use micro-level data to reveal major determinants of changes in innovation activity of a firm, including structural characteristics (size, industry, etc.), competitive environment (intensity of competition and type of main competitors) , changes in financial position of a firm, it’s pre-crisis performance and innovation activity, the declared strategy of a firm and other factors. The empirical part of our research is based mostly on the results of two surveys of industrial firms conducted in August of 2008 (before the crisis) and in September 2009 (during the crisis). About 600 medium and large firms mostly in manufacturing industries have been surveyed using specially developed survey instruments. We show that while general impact of the crisis on innovation activity was strong and negative different industries have been damaged to different extent. The adjustment to the crisis led to sharp decrease in investment intensive innovations while R&D activity has diminished much less and for some groups of firms has even intensified. The drop in innovations is typical for firms pursuing the strategy of incremental improvements of technology and products or with the strategy of large-scale investments in enhancing the production of traditional goods, rather than for firms focused on the development of new products. We found further that about 30% of manufacturing firms during the crisis still pursued innovation based strategies and this behaviour does not is depend on industry or even financial position.

Russia's Innovation Promotion Policies: Their Evolution, Achievements, Problems and Lessons

Innovations, science and technology, and innovation policies represent the limited range of fields where, as believed by a majority of eminent contemporary economists and analysts, it can be possible and even reasonable for the government to interfere. The only arguable aspects are, in the main, the scale, forms and limits of government interference and the experts also discuss and explore the worlds best practices and the principles underlying each specific policy . The necessity of government interference in order to promote innovations is pro-claimed (explicitly or implicitly) by two basic concepts of economic development – the neo-classical and evolution theories.

Import Dependence and Import Substitution in Russian Manufacturing: A Business Viewpoint

This study evaluates the import dependence of Russian industrial firms and analyzes the ‘switch’ to using Russian products and technologies in the context of their availability and firms’ interest in them. The main information source for the study was a survey of company executives conducted in September-October 2015. The obtained results suggest that in quantitative terms the import consumption levels for manufacturing industries in Russia are relatively small, especially compared with the corresponding levels of Western European countries. At the same time, about two thirds of the surveyed companies are significantly dependent on imports, primarily imports of machinery and equipment. The main reason for the use of imports is the absence of Russian analogues. If they are present, there are problems with the low quality of those Russian analogues and the fact that they are not in line with the client’s technological requirements. In general, a higher level of import dependence is typical of high-tech and successful companies, which means that these companies are the most vulnerable to any import restrictions. The current import dependency level does not satisfy many companies which forces them to try to reduce this dependency: mostly it takes the form of switching to national suppliers, slightly less often — import diversification. The Russian import substitution policy is associated with an attempt to revive, modernize or create the missing production elements in the national economy, i.e., it is essentially vertical. However, in the absence of close work with the horizontal measures, such as the development of certain critical technologies, the formation of new areas of knowledge and filling previously missing science competences, such a policy is characterized by a ‘limited shelf life’, constant lag, with a focus primarily on the price competitiveness. All this generates an expansion of an economy that is highly sensitive to currency fluctuations. A proactive import substitution policy linked to new emerging markets is needed.

Partnering Universities and Companies in Russia: Effects of New Government Initiative

The paper presents the results of 2-year survey conducted in 2011-2012 among Russian universities and companies who jointly implement RD primary effects and side-effects of such initiative; changes that may be introduced to the government regulations concerning matching grants. Total 38 teams were surveyed. Our findings show that major motivations from side of universities were access to new practical research tasks from companies, selection of most competitive teams of researchers capable to work with companies, and strengthening reputation in business environment. Companies were interested in getting government funding in order to solve their technological problems; to strengthen, due cooperation with universities, their research capacity, and to use modern research infrastructure located at universities. The analysis allowed identification of the major effects of the matching grants mechanism. They included: strengthening of university orientation towards solving practical tasks which are of interest to business; institutionalization of relations between universities and business in the sphere of innovation activity; broadening of research cooperation and the formation of research consortiums; harmonization of research and educational tasks in universities, and orientation of the parties towards continuing cooperation in the innovation sphere.

Industrial and Innovation Policy

Industrial policy has always attracted significant attention among the political class, business people and technical specialists of Russia. Much of this interest, of course, is driven by the basic redistribution of rents driven by national industrial policy, that is, the very real prospect of different economic sectors and players receiving direct material and political advantages in the near and long term.

Industrial Development, Structural Changes, and Industrial Policy in Russia

Abstract The chapter is devoted to the analysis of industrial development in Russia since 2005. Characteristic features of the Russian industry are considered. It is shown that the Russian industry is specific both by its structure and its high heterogeneity. The mining and quarrying sector and related manufacturing industries play a significant role in the Russian economy and major role in industrial production. In the foreseeable future, these sectors can strengthen their leading positions. Considerable attention is paid to the analysis of the industrial policy of the Russian government, which has traditionally been one of the leading actors of industrial development. The main directions of industrial policy are singled out: compensation of negative changes, catching-up, and advance development. It is noted that the role of the government is ambivalent: on the one hand, it seeks to develop high-performing companies, including new and fast-growing ones, and on the other hand, it often supports large, low-performing enterprises. With the declared continuous emphasis of industrial policy on innovation and modernization, low innovativeness of Russian companies remains. Based on the analysis of modern conditions, as well as new objects and instruments of industrial policy, some prospects for future industrial development have been revealed.

The impact of state development institutions on the innovative behavior of firms: Qualitative effects

Basing on a series of in-depth interviews with top executives of Russian innovation companies, the paper analyzes qualitative effects generated by the support from the state development institutions. Non-financial impacts, in particular, changes in firms’ innovation behavior, turned out to be quite significant. At the same time, tightening of formal control of the development institutions increases the risks and costs faced by the supported companies. We have identified two models of firms’ innovation behavior associated with different demand for public support instruments. These models are conditioned not so much to firms’ characteristics, but rather by the values of top managers and their views on appropriate forms of state intervention in innovation processes.