Friday, July 18, 2014

Window on Eurasia: Only One Russian Firm in16 is Committed to Long-Term Innovation

Paul Goble


            Staunton, July 18 – Moscow leaders often talk about the need for Russian firms to innovate in order to grow and become competitive domestically and internationally, but only one firm in 16 is currently committed to doing so over the long term. And most say they feel no need or interest to do so.


             According to a survey of some 2,000 Russian businesses conducted by researchers at the Moscow Higher School of Economics, only ten percent of Russian industrial enterprises are engaged in the introduction of technological innovations and only a quarter of those believe that they have to do so to meet the competition (


            “The overwhelming majority of Russian firms do not see any need for creating innovative products or introducing new technologies,” the study finds. They don’t see it helping them to grow and compete. Only 9.5 percent say that innovations give them a competitive advantage, and only 17.5 percent say they feel pressure from their competitors to innovate.


            Moreover, and from the point of view of future development, this attitude is found across the board in all sectors of the economy. In short, there are no real islands of innovation that may grow as is the case in most countries but rather a negative attitude toward introducing innovative methods across the board. 


            Russian firms, the study found, are especially leery of any innovative effort that will require more than a few months to carry out and show a return.  Only six percent of all firms currently think about introducing innovative technologies over the course of more than twelve months.


            The major reason for this pattern, the study suggested, is that firms don’t consider innovation as “’legitimate’ and an effective long-term strategy for success.” Their competitors in the domestic marketplace are not engaging in innovation so why should they, and few of them see themselves competing in the international one.


             “About a third of Russian enterprises today function exclusively in local and regional markets where competition is restricted to local players,” and “more than 80 percent of companies do not link the prospects of their development to entering the international market not seeing practical opportunities for the achievement of a global level of competitiveness.”


            This study suggests at least three important conclusions.  First, despite much media hype, Russian firms are not that interested in innovation and are unlikely to become so anytime soon.  They do not feel pressured to do so by the domestic marketplace and are not directly exposed to the international  one.


            Second, the Russian economy is even less capable of shifting from its current rentier-based raw materials expert model than many had thought. If Russian sales of gas and oil abroad decline, for whatever reason, its other industries will not be able to pick up the slack, and the Russian economy will be in even deeper trouble than it is now.


            And third, Russia’s current dependence on oil and gas exports and the negative attitudes toward innovation among most Russian businesses are likely to be mutually reinforcing, providing business support for the Kremlin’s policies but condemning that country to long-term economic stagnation or worse.

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