Competing for the Future Today: A New Innovation Policy for Russia

IMGXYZ3082IMGZYXThe report Competing for the Future Today by Opora Rossii is the product of a large-scale study examining and ranking the competitiveness of Russia’s national innovation strategy in comparison to the innovation strategies of other countries. The goal of the report was to develop recommendations for a Russian innovation policy in partnership with key stakeholders, including Sberbank and Rusnano. Sergey Borisov, president of Opora Rossii, and Alexey N. Prazdnichnykh of Strategy Partners Group discussed the findings, and Carnegie’s Ambassador James F. Collins moderated.

Ranking Russia’s Innovation System

To determine the competitiveness of Russia’s innovation system, the study examined how different nations foster innovation, determined factors that promote and support innovation, and developed an index of competitiveness of national innovation systems (NIS). The study analyzed data from sources like the World Economic Forum and the World Bank, as well as surveys of key players in Russia’s innovation system (including leading Russian scientists and company executives). Russia’s NIS ranked 38 of 50 countries examined. The index included 83 indicators, organized in six categories:

• Commercialization: the availability of financial resources for innovation and the availability of infrastructure for innovation;
   
• Conditions of demand: access to the consumer market and government procurement;
   
• Talented people and investment in ideas: the availability of resources for government-funded research and development, labor-market mobility, and the quality of higher education;
   
• Innovative potential of companies: the technological level of production and capacity to generate new knowledge;
   
• Technological infrastructure and clusters: protection for intellectual property rights and the extent to which information and communication technology is developed;
   
• Institutions and effectiveness of state policy: the existence of independent courts and quality of government administration.

Challenges to Innovation

Borisov and Prazdnichnykh summarized the report’s findings and outlined the challenges Russia faces in making its NIS more competitive.   

• Government-financed R&D: Russia must reform the financing system for government-funded research and development, which is out-of-date and allocates funds inefficiently. Government funding should be targeted at the most promising research areas; spreading government funding to all areas means that no one program has sufficient funding to make any real progress. The current system of financing scientific research is on average viewed negatively by Russian scientists, the report showed: 59% reported insufficient grant amounts, and 52% think that the rules for distributing resources in grants are illogical and hinder research progress. 
   
• Entrepreneurial Activity: Persistent low levels of entrepreneurial activity, which the report attributes to the barriers to starting and operating a small business and the lack of examples of positive reinforcement of entrepreneurship, pose an obstacle to innovation.
   
• Declining Population: Russia faces a declining population and the emigration of many highly skilled, educated professionals to other countries. The report showed a shortage of specialists in science, mathematics, and engineering, especially among researchers under 35. Careers in engineering and science have become less lucrative and, consequently, less attractive, the report noted.
   
• Education: Russia’s higher education system—especially in the areas of science, engineering, and math—is in decline, as illustrated by falling international university rankings and a drop in scientific literacy among the population. Without an overhaul, the education system will continue to degrade. 
   
• Resources and Funding: Russia has yet to reach a critical mass of resources and funding to support R&D in a broad range of directions, the report showed. Its innovation efforts are hampered by factors like low accessibility of financing, specialized services, and real estate for new innovative companies.
   
• Technology: Russia ranked low on companies’ assessment of obligatory and voluntary national technology regulation standards (in a 2009 World Economic Forum survey, Russia scored 3.76, while Germany scored 6.34 and Japan—5.97, on a scale from 1 to 7), as well as on companies’ ability to adopt and perfect new technology and production methods, according to the report.

Fostering Innovation in Russia

Russia will not achieve success by maintaining the status quo—it needs effective policies to promote innovation, Borisov said. A successful NIS should encompass several areas and incorporate a mechanism to coordinate those efforts, Prazdnichnykh added. Borisov and Prazdnichnykh discussed the potential for fostering innovation in Russia and emphasized the importance of clear mechanisms for coordinating innovation policy on the national level. 

• Government Procurement: Government procurement must be designed in a way that fosters innovation. Public procurement can be a strong driver for innovation by fostering competition, especially among small- and medium-sized companies. Procurement related to defense, security, and space, in particular, can act as a stimulus for scientific research, development, and innovative production.   
   
• Educated Population: Despite Russia’s problems with higher education and the loss of many of its best-educated professionals to other countries, Russia’s education system still has significant potential when compared to the world average or the other BRIC countries. The proportion of Russians with secondary and university education is comparably high, and higher still among young people. The proportion of engineers and scientists, although decreasing, is still high.
   
• Infrastructure: There is a strong demand and opportunity for innovation in modernizing Russia’s infrastructure, including roads and railroads, airports, and housing and utilities.
   
• Clusters: Borisov emphasized the importance of developing “innovation clusters”—high-tech companies surrounded by related organizations, specialized suppliers, and infrastructure. So far, clusters exist in only a handful of regions, including Tatarstan. Factors such as adequate financial resources and access to quality human capital, infrastructure, and a supply network are key to successfully developing innovation clusters.
   
• Small- and Medium-sized Companies: An effective innovation policy must incorporate small and medium-sized companies as full-fledged players, Borisov said. At the moment, large companies tend to rely on their own resources rather than outsourcing subcontracts to smaller companies, which would improve efficiency. Often such small companies do not exist, and the process of fostering them is slow. Borisov also mentioned the potential for developing small innovative companies affiliated with universities to work on innovative projects. Approximately 1,000 small companies have been created since a recent federal law was passed to allow partnerships between small companies and universities.