Executive summary:
In May 2010, PricewaterhouseCoopers, the New Economic School, the Russian Venture Company, and the Russian Corporation of Nanotechnologies conducted a survey of 100 large companies operating in Russia in order to assess the level of innovation among large corporations. The survey was also designed to explore the key factors which determine the level of innovation and the key barriers to innovation (both for the companies themselves and for the economy in general). Finally, the survey seeks to identify government policies which would, in the opinion of large business, be most effective in fostering innovation in Russia.
The survey results show that companies who innovate most actively are the largest ones, especially foreign and those Russian companies that are present on global markets. More than one-third of respondents (39%) reported that their companies launched new products in 2008-2010. However, the shares of respondents who said that they implemented new technologies and business processes were twice as high (73% and 66% of respondents, respectively).
Products, technologies, and processes that are new to global markets account for a significant share of innovation activity: the shares of respondents implementing products, technologies, and processes, which are new to global markets, were 14%, 17% and 18% (of all respondents), respectively.
However, twice more respondents admit that their innovative products, technologies and business processes were new only to their companies (26%, 27% and 35%, respectively) and not to the global or even Russian markets. Thus, adaptation of existing innovative products, technologies and processes represents a substantial segment of corporate innovations in Russia. According to recent economic studies, imitation and adaptation can be the main source of rapid efficiency improvements for countries that are below the technological frontier.
Companies implementing technologies or introducing products that are new to the global, post-Soviet, Russian, and regional markets, are 18%, 31%, 49% and 53% of all innovators, respectively. Innovation activity of companies in Russia on the domestic market is comparable with respective indicators on national markets world-wide. But companies in Russia are at least three times less active than their peers in developed countries in terms of global innovation.
Levels of innovation depend to a large extent on characteristics of companies. The survey found that large private companies operating beyond their domestic markets are most likely to be active innovators. In 2008-2010, the probability of launching a new product was four times higher for private companies thanfor companies in state ownership (companies in partial or full state ownership, which took part in the survey, did not report a single instance of introducing products that are new to global markets in the relevant period). The effects of private ownership are mostly confirmed by econometric analysis, controlling for differences in industry, company size, and the presence of international capital (though the scale of the effect is significantly smaller).
The survey results also show that international companies operating in Russia are more active innovators than Russian companies, and that Russian companies which have entered global markets are more active innovators than Russian companies, which operate only on the domestic market.
It is also notable that the largest companies are much more likely to introduce new technologies and new business processes. Other things being equal, companies with annual sales of over USD 1 billion are 30% more likely to introduce new technologies than companies with sales of USD 100-500 million. The largest companies (with sales of over USD 1 billion) were, ceteris paribus, 46% more likely to introduce new business processes than companies with sales of USD 100-500 million.
The greater intensity of innovation among the largest companies can be explained by the fact that companies are developing innovations internally, without using external intellectual or financial resources. New products and technologies are commonly developed within the companies that ultimately implement them (almost 80% of the companies surveyed reported that they develop their innovations internally). Only a small share of companies (less than 20%) employed external Russian contractors for development purposes, and just a handful of companies employed foreign contractors.
The most common way for companies to finance development of new products is to use their own capital (87% of the respondents). Nearly one fifth (18%) of respondents used funding provided by Russian Venture Company and RUSNANO, and a mere 10% of the companies used foreign investments.
The biggest barriers to innovation activity, according to companies, are difficulties in financing development of new products and bureaucratic obstacles. Respondents said that the most useful actions by government to stimulate innovation would be improvement of higher education, increased state financing of R&D, tax incentives for innovation, and improvements to legislation.
Most company respondents believe that the innovative component of the Russian economy will expand significantly by 2020. Companies that have already implemented globally innovative technologies are much more optimistic in this respect.
