Imacs 2016 imecs 2016 Proceedings (Preliminary version) of the 4
INNOVATION-BASED MODEL OF ECONOMIC DEVELOPMENT AS A STRATEGY FOR SUSTAINABLE GROWTH IN RUSSIA
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- 276.Introduction
- The outline of the innovation-based economy
- The state’s role in innovation-based development
- 277.Conclusion
- 278.References
INNOVATION-BASED MODEL OF ECONOMIC DEVELOPMENT AS A STRATEGY FOR SUSTAINABLE GROWTH IN RUSSIA275.Ekatarina N. PanarinaAbstract The necessity of profound changes in many areas of innovation system is the primarily goal for a new economic model in Russia. For Russian reality the implementation of the tools of strategic innovation management, sustainable development, and entrepreneurship is highly important. However, lack of finance, the superimposed narrow strategic focus, the rigidities of local business networks, the weakness of external infrastructure for innovation and the absence of state support of innovative enterprises seriously impede attempts to implement radical changes. In this article we specify our understanding of innovation-based scenario of economic development where innovations are directly associated to the sustainability that moves from exploitation to exploration, from corporate environmental management to sustainable entrepreneurship, and from efficiency to innovation. We indicate the need for radical innovation via entrepreneurial start-ups or new ventures connected to science and educational institutions within existing corporations. Presenting conceptual research, this article addresses the theme of how we can create economic sustainability and produce innovative businesses. The article brings a broad discussion of the intersection of sustainability, innovation and entrepreneurship.
Looking at Russian innovative activity (Table 1.) one has to admit that it is obviously lagging behind the world's leading economies, relying upon imports of modern technology. Domestic manufacturers currently prefer to buy technologies that have been proven in the West, thus not being associated with high risks. Tab.1: Indicators of innovative activity, 2012
Source: HSE, 2014. Russia has spent on Research & Development in 2015 in per cent of GDP a mere than 1.4%; the percent of innovative products and services out of total exports was 3.8%; while the share of Russian companies involved in innovative activities did not exceed 9%. Russia put into 75th place among world economies by innovation and business sophistication factors (Table 2.) Tab. 2: The Global Competitiveness Index 2014–2015: Innovation and sophistication factors
Source: The Global Competitiveness Report 2014-2015 Currently, the innovation sector in Russia is extremely insignificant compared with the general scale of the economy. The key element of the innovation sector of the Russian economy is at present represented by research units of foreign corporations that rely on intellectual outsourcing. The main problem that hinders development of the innovation sector of the economy is the lack of demand for innovations in the domestic market. A paramount objective of Russia’s economic development is to modernise industrial capacities, which will promote demand for innovations. To Russia, development of an innovation-based economy is an urgent priority because in terms of its economic development Russia is 1-2 stages behind leading countries (stages 5-6 in developed countries and stages 3-4 in Russia). E.g., developed economies are dominated by biotechnologies, nanotechnologies, information technologies, etc., whereas the domestic economy is still in the industrial stage. If this situation continues the gap in economic development will inevitably widen and Russia will be fated to end up in secondary roles in the global labour distribution structure. At the same time, Russia positions itself as a peer in the group of developed countries (G8) and the innovation project is needed to secure this position. Already 75-90% of GDP increase in the developed countries of the world comes from growth in the innovation sector while in Russia this figure is still as low as 10%; this affects the overall efficiency of the economy. E.g., according to the existing estimates, Russia’s lost profits from the innovation gap amount to $1214 billion a year. The share of fuels and raw materials in global exports is on the decrease and is predicted to fall below 10% by 2020. Therefore, resource-based development means to Russia not only losing importance in the global economy but also having to compete very hard with other producing countries with much more favourable conditions for the extraction of minerals.
The global competition is driven now by the factors of innovative systems, primarily, highly qualified human resources, investments into new knowledge, and technologies. Knowledge has become the driving force of economic growth, social development and the source of competitiveness in the world markets. The western economies have moved from resource-based economies to knowledge-based economies since the emergence of new information technology. Russia has to achieve this transition, to remain competitive in the long run. Essential tasks involved in this process are: creating a favourable business environment, improving the quality of human capital and business infrastructure, and increasing the efficiency of the innovation system radically. Boosting innovation in Russia is of utmost importance and it will require mobilising Russia’s most ill-used asset, the important stock of human capital with scientific expertise and engineering knowhow. Seeding innovation and technological breakthroughs inside the country has to become a major initiative of our national leadership. Innovation-based growth: signs of innovation potential and problems of innovation-based scenario of economic developmentThe fairly high potential of Russia’s innovation sector is witnessed by the fact that research centres of major international corporations have been actively set up in Russia in recent years. Many Russian innovation solutions are already widely used in the world; Russia has tangible advances in nanotechnologies and other promising innovation areas. There are many ideas and theories however very few practical applications. On the whole, there are quite a few promising developments and technologies that could be implemented into real innovation products. The main problem is the lack of skills for implementation and product launch. In this respect, there is a need to create a national innovation system within which innovation products would be created from the stage of ideas to the stage of practical implementation. To this end, it is necessary to establish links between enterprises in the innovation technological sector with educational institutions and scientific centres. There is a need to create science centres for consolidation and processing of innovation projects in corporations and at enterprises and bringing them to the production stage. During implementation of practically applied projects associated with launch of new products, there is a tremendous gap in comprehension of objectives and tasks by scientists and investors. E.g., while the business plan, commercial profit, etc. are top priority ideas to investors it is the scientific interest that is of primary importance to scientists. It is possible to try to remedy the situation by placing emphasis, in determining financing priorities, on the introduction of scientific developments in production; it is this approach that must become the indicator for financing by the state. The most relevant task is to develop such innovation technologies that can be brought to final use in Russian conditions. The state dominates in the structure of investments in science while in an innovation-based economy funds of private corporations must predominate, as witnessed by the experience of developed countries. In assessing the efficiency of funds allocated from the state budget for support of domestic science, many experts are of a negative opinion. The misfortune of academic science is that often to administrations of institutes, when spending funds, the important question is how to spend state funds rather than the result efficiency. An important role in the development of innovations is played by the human (personnel) factor, i.e., education, science, engineering staff. Russia has a high but extremely fragmented scientific potential. A significant obstacle to universal development of innovations is the collapse of the sectoral research and development complex. The personnel strength in industry research centres is consistently falling. On the whole, the scientific potential of Russia is quite low; Russian science is alienated from Western science; Russian scientists are not familiar with modern trends and cannot correctly choose the vector in the development of innovation technologies. Institutes of higher education do not graduate niche specialists that the economy needs. The situation will change if institutes of higher education will train specialists at the request of individual enterprises. There is a need to enhance the prestige of engineering professions as well. It is necessary to create large and up-to-date centres of science and education as the problem of the lack of personnel for continuing scientific traditions remains relevant and can even be aggravated. The situation in science and education must be taken seriously as at present, science, modernisation, education, health, etc. are moving to the forefront in the context of innovation-based economy. Currently, the USA and Europe are the main sources of demand for Russian innovations. It is major private corporations from these countries that are now actively establishing their research units in Russia, forming the backbone of Russia’s innovation sector of the economy. E.g., while in the past foreign companies for the most part invited domestic specialists to join their ‘home’ R&D units now, owing to development of communication facilities, it is cheaper to set up research units in Russia, which also does not complicate competition among specialists in their domestic market. Russia is becoming an intellectual outsourcer for developed countries. This negative tendency has to be solved by domestic manufacturers who would set up research units, being compelled to assure competitiveness of their own products. In this way the state must facilitate the emergence of innovations by special conditions for such businesses. E.g., obstacles to development of leaders in branches of the economy must be eliminated and for that the state must support exports and entry of domestic companies into the global market. The analysis of economic development mechanisms permits the statement that crises in the technological sphere of the Russian economy are unavoidable and in this scenario the will of the state, pressure from science and the interest on the part of business in innovations, together must yield a positive result. The state’s role in innovation-based developmentThe state must create incentives for the development of innovations. Development of innovations must be stimulated by a national innovation system that, unfortunately, does not exist yet. An innovation infrastructure must be formed in the context of the national innovation system: organisations that facilitate the establishment and development of innovation companies (business incubators, technoparks, coaching centres, special zones, etc.); consulting organisations (market reviews, preparation of business plans, strategies of development, patent research, competitive advantage studies, audit, legal matters, etc.); technology transfer centres; hi-tech stock exchanges. The state must stimulate (also by taxes) those targets of the innovation system that do not need or do not imply commercial investments, e.g., patenting. The state must perform primarily the strategic function of planning and stimulation of innovations. So far, Russia has no scientific and technological programs and no centre of decision-making on innovations at the state level, no clear understanding as to what trends in the innovation sector must be developed. For example, there is no clear understanding as to why emphasis was placed on nanotechnologies. There must be a minister of innovation-based development in the government who would coordinate the totality of matters relating to innovation-based development. The state must determine priority development trends in the innovation-based economy and support them. The main criterion of expediency of innovation projects must be their profitability, which will ultimately make this sector attractive for investors in the context of the extractive industries and solve the problem of asymmetry in redistribution of investments between the innovation sector and ‘classical’ branches of the economy. In determining state priorities in development trends of the economy (innovation-based economy), there is need to clearly understand what place in the global labour distribution system Russia lays claim to. The state must develop the private-state partnership, which will permit the sharing of existing risks in projects with business and the attraction of additional investments. The state can exercise technological regulation of the activities of private companies by adopting appropriate laws. The state must determine the necessary trends in innovations development for business, e.g., by obliging oil companies to spend certain funds on bioethanol research. For successful innovation-based growth, a state strategy encompassing the totality of objectives, mechanisms for the implementation of plans and financing is needed. At the same time, a system of market incentives, including differentiated taxation, is required. It is necessary because enterprises are in unequal conditions: innovation enterprises are less stable and face more risks. The state must provide privileges to those who implement the breakthrough strategy. The state must support liberal values and freedoms as the prerequisite an efficient innovation-based economy where environment of freedom implies freedom of creativity, enterprise and competition. In Russia, there is need for the development of the culture of trust, personal competition, which will stimulate people to achieve success through creativeness and innovations. Providing sustainable development of economics in many ways is connected to establishment of small business which allows providing more profound usage of entrepreneurial potential on new basis – basis of innovative activity. The current economic situation in Russia prevents innovations’ mechanism from starting up within structure of small business. There are factors restrict innovative enterprises from developing and effective functioning: deficit of own funds; shortage of skilled staff; lack of informational support and paucity of guidance papers which regulate functioning of innovative enterprises; full or partial absence of production and technological infrastructure; high level of economic and legal risk; imperfection of Russian legislation. In this way the state must be in charge of creating an favourable environment for small innovative enterprises including fundraising and improving the law.
The new model should focus on knowledge and high technologies, innovations and creating favorable business environment. Science and education together with commercialization of innovations have to be considered as new sources of economic growth and welfare gain. Russia’s world leadership can be achieved only through innovation-based growth. 278.ReferencesDevelopment of the Innovation Component of Russia’s Economy: the Prospects and Role of Economic Policy. The analytical study by the Interfax Center for Economic Analysis (the Interfax-CEA) and the Shell Group, 2007 A.N. Dmitrievskii, A.M. Mastepanov, V.V. Bushuev. Resource-Innovative Strategy of Russia’s Economic Development // Herald of the Russian Academy of Sciences, Vol. 84, No. 5, 2014, pp. 329–334. Russia: Focus on Innovation. Public analytical report on the implementation of the Strategy for Innovative Development of the Russian Federation for the period until the year of 2020, Release I, the Ministry of Economic Development of the Russian Federation, Moscow, 2013, 122 p. P.Krott The Russian National Innovation System - an International Perspective Lappeenranta, 2008, 106 p. S.Valdaytsev & A.Sergeyev Technological innovations in Russia, electronic Publications of Pan-European Institute, www.tse.fi/pei, April 2011. The Global Competitiveness Report 2014–2015: Full Data Edition, Geneva: World Economic Forum, 2015 http://www.weforum.org/issues/global-competitiveness Indicators of Innovation in the Russian Federation: Data Book: 2014. National Research University-Higher School of Economics, Moscow, Russia, 2014. Russia 2015: Shaping Russia’s Future, Ernst & Young’s Attractiveness Survey, 2015 www.ey.com/attractiveness E. Yasin, N. Akindinova, L. Jakobson, A. Yakovlev Is the new model of economic growth feasible for Russia? National Research University - Higher School of Economics, Moscow, 2013 https://www.hse.ru/data/2013/05/27/1298704586/paper_en.pdf A.Kudrin, E. Gurvich: A new growth model for the Russian economy // Policy Brief No.1 (2015), BOFIT – Institute for Economies in Transition, Helsinki, Finland, 2015 Contact Ekaterina Panarina, Ph.D., Associate Professor Perm National Research Polytechnic University, Management and Marketing Department Komsomolsky prosp. 29, 614099, Perm, Russia Mail: panarina.class@gmail.com
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